Important Things To Consider When You Want To Add Value To Your Business So You Can Sell It For A Premium Price And Terms

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Nine questions Sunbelt Midwest's business brokers recommend that business owners should ponder before selling in order to add value and sell for a premium price.

Is selling your business top of mind? Maybe selling your business is a few years away. No matter the time frame business owners who keep informed on what today's buyers are looking for, can better position their company for sale. Business owners should have a clear grasp of what buyers evaluate when they consider buying. Often this knowledge alone helps the business owner sell for a premium price. Sunbelt Midwest business brokers recommend that business owners who are interested in selling or will be ready to sell in a few years consider these 9 questions.

1.    Is your business profitable? Buyers look for enough cash flow to service the debt, owners should draw a salary and hopefully the business can pay for itself in 3-7 years. Serious buyers will want to see the last 3 years of financial information and a business that shows declining cash flow can negatively impact a premium offer.
2.    Does your business have a competitive advantage or an industry niche? Buyers commonly will be more attracted to a business that has carved a niche market and can service a specific need or group of people.
3.    Do you have more than one customer? It is recommended that businesses have a well rounded customer base. If one customer makes up more than 10% of your annual revenues it can indicate a higher risk to a buyer if the business were to loose that customer.
4.    Can you prove your business has a steady purchase history from customers?    How frequently customers purchase your products and or services especially how many long-term contracts are in place, can up the sale price. The more consistent the sales and revenues the more attractive the business is for a buyer.
5.    Does your business depend on one person to operate? Solid management and employee structure can add tremendous value to a business. How much is the owner involved and needed to run the daily business operations? Business owners should be able to take off for two weeks and their business still function. Self-functioning business models normally command a higher sale price.
6.    Can your financial records prove the business has a solid cash flow? Business owners should work to make financial records as neat as possible. Business owners who run personal expenses through the business and do not drive profits to the bottom line can cripple the valuation.
7.    How well are your policy and procedures documented? A well run business will oftentimes impress buyers. It is to the business owners’ advantage to make sure operation procedures, office manuals, employee records, lease agreements, customer and vendor contracts and job descriptions are well documented.
8.    Does your business have the ability to grow and how quickly and how much capital will it take to grow? A businesses ability to grow can be a significant impact on the overall offer they will get.
9.    How does your business show? Similar to preparing a home or a car for sale a business owner should examine the appearance of their business to a buyer. Is there any necessary improvements needed to the interior or the exterior? Does your business look inviting and cared for?

In addition, Sunbelt Midwest's business brokers also advise business owners to be forthright with buyers. Trust can be very important when forming buyer and seller relationships. A business owner can increase their credibility with buyers by staying positive when discussing their business and addressing any flaws early on.

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Vanessa Mason
Sunbelt of Milwaukee
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