6 Tips for Boosting the Value of Your Business
Whether you’re preparing to sell your business in two years or ten, you’re likely already thinking about its value. How can you increase your company’s worth and ensure you get the best price when it’s time to exit?
Our team of brokers believes that every owner should get top dollar for their business. You’ve poured your blood, sweat, and tears into building a company – and you deserve to be compensated fully.
That’s why we’ve compiled a list of six tried-and-true ways to increase the value of your business. As you start preparing to sell, or even think about the possibility, these tips will boost your chance of scoring a high sales price.
1. Start Lowering Your Risk Profile
Our first tip is to heavily assess your business’s risks. Buyers hate risk – and they’re certainly not going to pay top dollar for a company that’s littered with potential drawbacks or failings.
You might know and understand your risks, but it’s a whole different thing to present them to a buyer. So, what can you do to minimize your risks?
✓ Diversify Your Portfolio
It doesn’t matter if we’re talking about customers or products – the more you diversify your revenue streams, the lower your business’s risk becomes. If you’re currently relying on a single product, customer type, or vendor to make your revenue, that’s a huge risk to potential buyers.
✓ Hire Great People
When assessing businesses to acquire, buyers tend to look for companies that are already stocked with experienced, competent employees. The shortage of skilled workers was one of the leading business risks across the globe in 2022 – so if you can showcase your team of great employees, buyers are less likely to view purchasing your business as a gamble.
Even better: give your employees incentives to stay, even after the sale is completed and ownership is transferred. These incentives could include equity ownership with vesting over time, bonus plans, or other financial motives.
✓ Improve Your Cash Flow
No buyer will be interested in your business if your cash flow is weak. Conversely, buyers are willing to pay more for companies that generate profits quickly and have a heavy cash flow. If you can improve your margins, you can likely score a better price when you eventually decide to sell.
2. Establish More Recurring Revenue
Speaking of making your business low-risk, buyers love to see easy recurring revenue that they know can be a gold mine. Unlike one-off sales, recurring revenues are predictable, stable, and extremely attractive to potential investors.
If your business doesn’t currently have many recurring streams of revenue, you may want to experiment with a few to see what works. Many small businesses opt for:
- Monthly or yearly membership programs
- Affiliate opportunities
- Service or retainer plans
Another way to establish recurring revenue is to focus on retaining loyal customers. Returning customers spend roughly 67% more than new customers. Therefore, if you can keep your current clientele coming back for more, you’ll increase your sales and set up a more predictable stream of revenue.
3. Clean Up Your Books
Messy books will not help you fetch a high price for your business. No one wants to buy a company with disorganized spreadsheets and loose financial documents.
If you’re going to set a high asking price when you sell your business, your books need to speak to your high value and revenue. Now’s the time to:
- Standardize your accounting
- Clean up your profit and loss statements
- Categorize your operating expenses
- Organize your miscellaneous and personal expenses
- Demonstrate any possible cuts in expenses
- Make your cash flow transparent
- Fully demonstrate your profitability
Even if you’re not preparing to sell your business soon, treat your books as though you may want to sell at any time. You don’t want to wind up with a trail of messy books that’s impossible to clean up in ten years’ time.
Furthermore, disorganized financial records significantly increase your chances of an accounting error. Keeping extremely accurate records is one of the best ways to sell your business for what it’s actually worth.
4. Re-Assess Your Curb Appeal
If your business is going to sell, it needs to stand out – in a good way. Any company with a brick-and-mortar location should ensure it shines before they list it as “for sale.”
Research indicates that up to 95% of customers feel a store’s exterior influences their decision on where to shop. If your customers care about your curb appeal, then so do your potential buyers.
How can you improve your business’s curb appeal? Start with the basics. Fix any broken walkways, stairs, and appliances. Add additional lighting and clean the windows. Make the physical location feel welcoming and safe, and if possible, dedicate a little money to spiffing up your landscaping.
At the end of the day, if a buyer is evaluating two businesses for sale, they’re going to opt for the company with a better physical appearance. Don’t risk losing a great buyer simply because your business’s building is lacking.
5. Give Your Website a Facelift
Your business’s physical presence isn’t the only thing that affects its price tag. If you’ve been using the same (likely outdated) website for years, you could be lowering the potential sales price of your company.
You want buyers to have an excellent first impression of your business, and nowadays, that starts with your digital presence. Make sure you refresh its content regularly, update it with the correct contact information, and match it to your branding standards.
It’s estimated that up to 95% of sales will be conducted via e-commerce by 2040. So, would you buy a business with a weak online website and/or store? Probably not.
To increase the value of your business, your digital presence needs to be just as strong as (if not stronger than) your business’s physical presence.
6. Establish Authority in Your Industry
Lastly, we recommend boosting your company’s value by establishing its place within its respective field.
You’ve been doing this for a long time. As you start preparing to sell your business, solidify your position as a leader within your particular industry. Buyers are definitely inclined to spend more on a business if it holds a position of power and influence amongst its competitors.
Of course, credibility and authority cannot be built overnight. The sooner you begin your efforts, the better. We recommend beginning by:
- Writing blog posts on relevant topics
- Sharing your expertise on podcasts or video interviews
- Offering courses to growing professionals in your industry
- Hosting workshops and other events
When a business dominates its niche, it sells for top dollar. Demonstrate your respected position to buyers and continuously work to stand out amongst your competitors.
Bonus Tip: Get a Business Valuation
Although all of these tips can help you boost your profit when you sell your business, one of the best things you can do is understand what it’s worth now. After all, you can’t improve what you can’t measure.
That’s where our experienced M&A advisors come into the picture. We’ll determine your business’s value, then help you get paid exactly what it’s worth when it’s time to sell.
If you’re preparing to sell your business, contact our brokers today. We’ll ensure you get paid what you’re owed – and that your company winds up in the right hands.