Is Your Business Ready to Sell?
– 8 Tips to Improve the Marketability of Your Company –
There is a well-known business adage that says “every company is for sale at the right price.” Whether you’re actively selling your business or just mildly interested, preparing your business for sale will help improve current efficiency and bottom-line profit by exposing ineffective processes and operational deficits.
To enhance the value of your business, it’s important to work every day to upgrade its marketability. Here are eight essential tips to help increase the intrinsic value of your business, so it appeals to prospective buyers.
1) Increase Revenue: Buyers look for businesses with a consistent increase in top-line revenue of at least five percent annually over the prior three years. Strategies to improve revenue include evaluating pricing, product diversification, and target marketing.
2) Assemble a Complete set of Financials: The ability to demonstrate a dependable pattern of verifiable cash flow is essential to attract serious buyers. You’ll secure the best price for your business when you can produce complete financial records for the prior three years that include:
a) Federal Tax Returns
b) Income Statements
c) Balance Sheets
d) Sales Tax Returns
e) Payroll Records
f) Accounts Payable
g) Accounts Receivable
3) Continuity of Ownership: Potential buyers like stability, so it’s important to provide a 5-year history of ownership that includes an explanation for any disruptions or unusual circumstances.
4) Favorable Long-Term Lease Agreements: Buyers typically look for a business with a lease that has at least 10 years remaining on the term. Rent increases of no more than three percent annually are preferred with an accompanying revenue-to-rent ratio of 6-8 percent. Long-term leases are especially attractive to businesses in a valuable retail location or those that utilize heavy equipment in production processes.
5) Pricing: Price is the single biggest factor that determines how quickly your business will sell. No matter how well positioned your company may be relative to its competitors, an overpriced business could remain on the market in perpetuity, while attracting minimal buyer attention.
6) Terms of Sale: As stated above, pricing is always the most important element in the deal, but the terms of sale are also a critical component that affects the marketability of a business. Specifically, if a superior buyer is unable to secure financing to close the deal, you may want to consider financing 60-70 percent of the sale price.
7) Condition of the Premises: The condition of the facility where your business operates will have a substantial impact on buyer interest. This is particularly important if the business deals directly with the public. When the exterior or interior of a building is neglected, it conveys a sense of disorganization and inefficiency. The buyer may pursue a different opportunity altogether or make an offer that is significantly lower than the asking price.
8) Management and Personnel Continuity: Every business is largely defined by the quality of its employees, so having good people in place is essential to attract serious buyers. Poor morale and inattentive workers often jeopardize deals, so ensuring key employees are productive and satisfied is critical. Buyers look favorably on companies that have existing employment agreements that include a non-competition clause.
Improved Marketability Leads to a Higher Selling Price
Is your business ready for sale? If not, don’t delay in working to increase the value, salability and attractiveness of one your most valuable assets. Preparing today will yield significant rewards in the future – when you consider cashing out and selling your business.
To read the entire article written by Kyle Griffith, click HERE.
The Summit Acquisitions Group — Business Brokers and M&A Advisors — specializes in the sale, appraisal, and financing of privately owned companies ranging in valuation from $750,000 to $25,000,000. Contact their offices in Atlanta, GA or Charlotte, NC for a free consultation.