17 Ways to Increase Business Value: A Guide for Sellers

Making the decision to sell your company is only the first step. You’ll need to implement several methods to increase business value to ensure you don’t undersell your venture. 

Because of this, it’s important to allocate as much time as you can to making your business as attractive as possible to buyers. Once the initial decision to sell has been made, it’s common for business owners to want to secure a deal as quickly as possible. This can be a mistake, though. By rushing through the selling process, you could be leaving significant money on the table in any negotiations. Spending a little extra time to enhance your company can attract even more interested parties and allow you to command a much higher price. 

Check over the points below to make sure that your business looks its best for potential suitors. 

 

 

Organise your paperwork 

Your company could be doing amazingly well, but if your records are difficult to navigate, your successes can get lost in a maze of confusion. Worse still, if your books are disorganised, it casts a poor light on your company.  

It can appear to outsiders that you maybe have something to hide, and that any obfuscation is deliberate. Beyond this, it simply begs the question, ‘if they’ve handled something as crucial as their books so badly, how has the rest of the business been run?’ 

 

Retain key staff 

Buyers will be hoping that any transaction will be as seamless as possible, and the retention of key staff members is crucial to this.  

Some industries find it difficult to hire skilled workers too, so any qualified or skilled employees should be treated as an asset that your business can use as a selling point. One of the last things that a new owner wants to handle is the sourcing and hiring of new talent, so having great staff already in place is a simple way to increase business value. 

 

Improve your cash flow processes 

If each new bill leads you to check your unpaid invoices, then your cash flow processes are well overdue a review. 

While adding extra funds to your reserves will undoubtedly help, these can soon be whittled down by a poorly managed cash flow process. It’s difficult to slow down the speed in which money has to come out of your company, but there are several ways in which you can affect how quickly it comes in. One such method is by shortening the payment terms on the invoices you send to your clients. 

 

 

Demonstrate autonomy 

Interested buyers will want to see signs that your business can run efficiently without your involvement. Some companies are dependent on their owners to the point that they become unviable when they leave.  

This autonomy should extend to staff members too. If a business will struggle without certain employees, they find themselves overexposed to the risk of them leaving. Even if they stay, a crucial employee that realises how essential they are will have a strong bargaining chip for any wage negotiations. 

 

Have formal agreements in place 

Any buyer of your company will usually be taking on all your contracts alongside it. This includes any contracts you have in place with suppliers, staff, and clients. As such, any competitive rates you’ve negotiated will be looked upon favourably by potential buyers. 

If any of these are informal or merely verbal agreements however, they become far less valuable. In fact, the lack of any formal contract could be a concern to any new owner. This is especially true if a supplier’s rates are based on a strong relationship you have with them. Without any written documentation, a buyer will have no idea how much they will be charged once they’re in place. 

This applies to staff and clients too. While you may enjoy a good relationship with them that provides you with some assurance, any new buyer will not. They can quickly find themselves vulnerable to changes and differences of opinion.  

 

Improve your margins 

You’ll have no doubt tried plenty of strategies already to improve your profit margins, but it’s worth reviewing these before selling just to eke out the last bit of value to catch the eye of buyers. 

Improving the efficiency of your processes is a good way to either trim costs or increase productivity. From the lofty vantagepoint of a director, however, such changes may not be obvious to make. Being closer to the action, it’s sometimes a good idea to ask employees for their ideas on how to streamline operations.  

Our own business reviews *LINK* can help owners to identify areas for improvement too. Often a fresh pair of eyes can highlight issues that those involved with the business have missed. 

If you haven’t done so recently, be sure to take a look at your pricing too. Even a small increase can make a big difference to your margins over the course of a year. 

 

Show growth 

It’s possible that a buyer may be happy buying a business that shows a steady but safe income, such as a laundrette, but many are looking for growth. 

Showing that your business has grown consistently over the course of a few years is a great indicator that further growth could follow, and thus increase business value. 

 

Create strong sales projections 

Even small pricing increases can have the effect of beefing up your sales projections. These projections will have a strong hand to play in selling your business to interested parties, so it’s worth spending time on improving them. 

While it can be tempting to inflate your projections somewhat, experienced buyers will be far happier to receive realistic and accurate projections. These provide them with room to think about how they could possibly improve upon it, rather than dealing with unrealistic figures that are difficult to get near.  

 

 

Don’t slow down on marketing 

Once you’ve decided to sell your business, it can almost seem like a waste to carry on advertising a firm that you’re planning to exit.  

The opposite is true, however. By stepping up your marketing efforts instead, potential buyers are far more likely to have heard of your company. This not only provides a professional impression of your firm, but also demonstrates that the business has already built up a public identity. 

Don’t forget that you’re trying to attract buyers that are interested in existing businesses. Often, they choose these because they don’t have to put in the time and effort to build a company from scratch. Establishing a business in the minds of the public is one of the first things a new business is tasked with. If this has already been done to an extent, investors are much more inclined to make an offer. 

 

Encourage your clients to leave reviews

A recent Dixa survey found that 93% of customers look for reviews before buying a product. A strong review rating online can be one of the strongest marketing tools a business can have. If you don’t have many reviews online yet, you should start asking your customers now. A simple link to TrustPilot or Google Reviews is all you need to send over in order to start building potential clients’ confidence in your firm.

 

Provide relevant IP documentation 

Intellectual property rights can be paramount for a successful business sale. After all, if you don’t own the patent for the product you’ve built your company around, what’s to stop somebody else simply copying it for less? Similarly, geographical restrictions or exclusive rights can have a bearing on how attractive a buyer finds your company. 

While not having a patent or particular rights can hurt the value of your business, obtaining them can seriously increase business value. Make sure that any documentation is secured for these before sale. 

 

Share any growth plans you may have 

Before deciding to sell, you may have looked at different strategies that would enable the business to grow. Depending on how up-to-date and viable these plans are, such strategies could be of great interest to any potential buyers. 

By sharing these plans with interested parties, you’re providing them with extra value. They could look at the strategies you share and use it to inform their own business strategy moving forward. If you can show how the company can grow even stronger, then this can increase business value even further. 

 

Review your expenses

Your business may have several expenses that aren’t essential to its running. Look over your outgoings to check that you’re not still paying for lapsed software packages or unused mobile phones for instance.

Some offices will also have non-essential expenses such as magazine subscriptions for waiting rooms, fruit deliveries, or even fresh flowers. It’s best to cut these costs before selling to make your profits slightly higher. Potential buyers may not be interested in flowers or fruit, but you can bet they’ll be looking at the company’s expenses closely.

 

Check that you’re not overexposed 

Companies that rely on the business of just one or two clients can undoubtedly generate good enough revenues to trade, but they’re also incredibly vulnerable to failure. 

Should just one of your big clients leave, your business will suddenly find itself without its main source of income. If this sounds similar to your situation, the acquisition of more clients will dramatically increase business value. 

The same applies when it comes to suppliers too. If your business is reliant on one particular supplier, you’re powerless if they decide to hike their prices, or worse, fold altogether. While strong working relationships are useful with your supplier, it’s worth having a similar relationship with any rivals they may have, just in case. Scope out other potential suppliers before any trouble arises and share this information with interested buyers to put their mind at ease. 

 

Diversify your offerings 

Similarly, businesses can become overexposed to risk by focusing on just one offering. For example, a business that only manufactures suncream may struggle during a wet summer. 

Look at what else your customers purchase and try to identify adjacent offerings to your own which you could provide. A company selling football boots may be able to sell freestanding goals too. 

Your processes may already lend themselves well to a different service or product. The aforementioned suncream manufacturer, for example, may find that their formulation is similar to that of a moisturiser, and look to make inroads in that sector too. One sure way to increase business value is by diversifying and making your company a safer purchase. 

 

Wrap up any outstanding legal issues 

It doesn’t matter how small the matter is, or how unlikely your business is to lose, any outstanding legal issues will cast a cloud of doubt over your company. 

Make sure any legal issues are resolved before you start looking for a buyer. Investors will be spooked by the chance, however small, that the business could be liable for a large payout. 

 

Get a professional valuation

While not technically a method to increase business value, receiving a professional valuation can certainly help to sell your company.

Valuing a business is a complex affair, and one that you shouldn’t do yourself. There are several methods for valuing a company, with some more suited for certain industries than others. It’s important that you offer your business for the right price. Too high, and you’ll scare off any interest. Too low, and you walk away with less money than you deserve.

 

 

Let us ease the stress of selling your business 

We specialise in helping sellers to achieve the best possible price for their businesses. 

As business sales specialists, we navigate the complexities of company sales for our clients to ensure that the right buyers are put in front of their businesses. Call us on 0800 975 0380, or email [email protected] for a free consultation.