Tuesday, 26 February 2013

5 Ways to Sell Your Business Faster and for More Money

It’s no secret that some businesses are in greater demand than others. The trick is to understand why, and model your business around those characteristics.

When a business is more marketable it means they will typically sell more quickly and the seller will receive a better price. 

Most business do not possess all of the characteristics of a marketable business since you could probably create a list of 50 or more items to consider.  The key is to focus on those characteristics that have the greatest impact.  Here 5 keys to marketability:

1.    3 Years of Growth.  Not only is it important to have financial records that are up-to-date and accurate; a key indicator of success is the most recent trend of sales and profitability.  If one or both are not trending up, you’ll need to put steps in place to turn that around, or you’ll likely find low interest and downward pressure on your business value.

2.    Too dependent on the owner. The more customers need you and ask for you personally, the harder it is to grow your business and less valuable your company will be. Business owners who do not delegate need to make a strong effort to have experienced people in place before they ever try to sell their companies. 

3.    Your equipment is in good condition. There is little question that buyers of businesses are looking for good, positive cash flowing businesses.  They also realize that in order to sustain a level of cash flow a business has historically achieved they will likely need to continue to maintain and invest in Equipment.  Businesses that require an immediate investment to improve and upgrade Equipment will find Buyers looking to discount value to compensate for that investment.

4.    Diversification of Customers.  Any 1 customer representing more than 10% of sale increases instability which increases risk in the Buyers eyes.  Buying businesses is risky and that risk is exaggerated if there is fear that a failed transition with one customer could result in a drop in sales of greater than 10% of the overall sales. The better you are able to diversify your client base the more like you can mitigate the risks associated with buying your business.

5.    Size Matters.  The “Small Company Discount” is the perception that smaller companies are riskier than larger businesses because they have not found a way to grow beyond the efforts of the owner and therefore are reliant on the owner. While growing for the sake of growth is not wise, finding ways to either develop more customers, or sell more things to your existing client base will improve marketability.

When selling a business it must look good in as many areas as possible.  Although preparation might seem time-consuming, many owners find that working on the above keys to marketability not only improves the desirability and value of their business, it can improve their management practices as well. Plus, when a buyer makes an accepted offer, the aforementioned preparation can help the deal close quicker.

Do you have a small business question you would like answered about this article or others?
Bill Sivell is a salesperson with VR Windsor Inc. [www.vrwindsor.com] 519-903-7807, which sells businesses to buyers across Canada and around the world. His 14-year career includes diverse senior management positions in marketing, advertising, sales management and operations management. His blog appears every Tuesday.


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