How to Increase the Value of Your Business Before Selling It

How to Increase the Value of Your Business Before Selling It

They say that approximately 96% of all businesses fail within 10 years and there are numerous factors that contribute to such a high rate of failure.

One of the most significant issues is the lack of a clearly defined exit plan, particularly in instances where smaller businesses can be easily replicated or quickly swamped with a competitive market.

In this respect, scaling your venture successfully before selling it can offer a well-trodden path towards commercial success.

To underline this, you just need to take a look at the high-value acquisitions that were completed in 2016, with SoftBank procuring Cambridge-based chipmakers ARM for an impressive £25 billion and Verizon buying Yahoo Inc. for a total of £3.6 billion.

If you are going to sell your small business for a viable profit, it is important that you do this as part of a clearly-defined exit plan and optimise the value of your venture ahead of time. Here are some steps to help you achieve this:

1. Strive to Boost Profitability

Perhaps the easiest way to boost the value of your business is to increase its profitability. After all, it is only the most profitable businesses that benefit from high-value acquisitions, while no corporation will ever be interesting in a loss-making venture or one that is barely breaking even. Being aware and capitalising on market volatility is a good way to boost profitability.

This not only requires optimising your pricing policy, but it also demands that you reduce operational costs without compromising on the quality or speed of delivery of your product. This delivers an automatic boost to your bottom line profits, with small and incremental changes delivering the most efficient results.

This is also particularly important for small businesses, which lack the resources of larger ventures.

2. Focus on Generating Repeatable Processes and Repeat Business

When optimising the value of your business, you need to focus on repeatable processes and the type of return business that can drive long-term gains.

In terms of process (both operation and strategic), you must ensure that these are repeatable and teachable. This appeals to buyers, as it means creates ventures that can function without its identifiable leader and eases the transitional process that will ensue when new owners come on board.

Repeat business is also a key driver of long-term commercial success for small businesses, while it lends itself to a more affordable business model in the future. In fact, it is five times cheaper to retain existing customers than acquire new ones, so this is something that acquiring firms will appraise when striking a deal.

3. Optimise the Human Value That Exists Within Your Business

Every contributing element within your business has an underlying cost base, but entrepreneurs often lose sight of this when looking to sell their independent ventures. More specifically, they fail to identify the costs and values associated with human assets, the majority of which are likely to be retained in the event of a sale.

With this in mind, establishing a cost base for each employee makes it relatively easy to invest in individuals, as you look to develop the skill-sets that can take your business forward. Make no mistake; training your employees and empowering their professional development adds tangible value to your small business, so long as the skills acquired are relevant and capable of boosting profitability.

The same principle applies to optimising productivity, as this is key to enhancing individual employee value and the price that can be applied to your business as a whole.