Many factors go into the valuation of a business. From industry type, to revenue and EBITDA totals, to longevity of the company. As a result, it can be an arduous process to get to the final number where both buyer and seller will be satisfied. Below are a few steps to consider that would help the cause:
1. Reduce Risk Through Semi Absentee Operation
Many businesses rely heavily on the owner’s skill set for their success and require full time hours from the owner to operate. Buyers may consider this situation more of buying a job than a business. Companies that do not need an owner to run the day to day operations will demand a higher price since they already have management in place.
2. Aligning the Financials
Consider having the financials completed by a professional CPA. This will clean up the statements and provide peace of mind to the potential buyer. Sellers should also ensure that only costs associated with operating the business are accounted for while Selling a Business. Many companies may include personal expenses on their Income statements and personal possessions on the balance sheet. While these adjustments can be made prior to due diligence, it is advisable to have these separated prior to the sale to help paint a better picture from the beginning.
3. Target Ideal Buyers Through Potential Synergies
Some buyers will find more value in a business than others. For example, if the company compliments a service that the potential buyer already offers they may find it much easier to buy a turn key operation than to start from scratch. Sellers may also want to target their competitors for a potential sale. When buying a business as a competitor not only are you increasing your client base for a service you already offer, but you are also getting rid of the competition, thus increasing your market share.
Valuing a business can be a complex task that requires deeper knowledge and insight of the company as well as the industry it is in. The above are just three small examples of things owners should consider when trying to maximize the value of their business.