When you are selling your home a realtor usually comes in and stages it so that the house looks its best for potential buyers, but most of the time entrepreneurs do next to nothing to make their business more attractive to potential buyers. This could be because they have a lot of time money and energy invested into the business and they want to save time and money and move on. However in this competitive world is this the best thing for your business?
Many business owners, brokers and CEOs were asked what they would do to prepare for a sale. We found that there were many simple and practical tips you can use to increase your profits. In the article “5 Steps to Increasing the Value of Your Small Business,” in the Entrepreneurs section of About.com, in order to sell your business and make a good profit you should make some plans.
Can your business show a potential buyer the following:
Returning revenue: This is not only the bottom line but if you have been reporting yearly. Business are much high in value when they have repeat customers that come back again and again. This will give buyers confidence for the future of the business. For this to happen and for you to have a loyal customer base you may consider a “loss leader” service or product, something that is consumable and needs to be replaced regularly. An example of this is if you were to sell printers or other business machines, it would be a good idea to become known as a place that sells cheap cartridges for printers.
Revenue growth track record: A potential buyer will want to see the top line of revenue growth since it can help them project the future size of the business. This information is more important than the how much your profit has grown. It is easy to fake the profitability of a product but it is almost impossible to duplicate the magic that makes people initially buy the product.
Flow of Cash: put it this way when you company earns more money than that which it spends a potential buyer will pay more for it. They are trained to look for opportunities when calculating the rates of return based on the money they will invest. The more money your company makes, the less money the potential buyer will have to put in to fund the daily operations. They will be keeping more of their money means they are getting a better return on their investment, this is big for most entrepreneurs.
Creating a better Mousetrap: Doing a good job differentiating your services and products will make your business sell for more money. It lets the buyers see the value of purchasing their business over other in the same industry. They can also estimate the potential profit if they were to take ownership.
Multiplier focus: Valuation of your business is dependent on some key calculations, therefore it is important that you understand how it works. Some industries use standard multipliers to find the fair market price. But you can put in some effort and drive those up. You can be surprised at the value you can make by taking these approaches now.
Giving buyers more confidence is the most important way to add value to a business. It can be done by differentiated products, improving cash flow or many other benefits which enhance value. Buyers will be willing to pay more money for a business that has more profit potential. Finding a qualified buyer is easier if you list in an online business directory.