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Unlocking The Value In Your Business

You can increase the value of your business without increasing profits! Ask your accountant or any other financial professional and chances are they will draw a blank. The truth is you can, and the concept of how you do this is astonishingly simple. You increase the value of your business when you take the appropriate steps to attract the most advantageous buyer.

To achieve the best end result, educated business owners approach the selling process with the same planning and discipline they use in the daily operations of the business. The following is a strategy on how to unlock the value of your business when selling. These simple steps below will help unlock the value of your business, without increasing your taxable income or taxes.

Plan Ahead: Smart business owners know that eventually their business will either transfer or close. There is no alternative. Your company is a product. It will be treated as a prize to be won or as a piece of distressed merchandise to be acquired as a bargain basement price. How a business is treated can often be traced back to the timeliness and appropriateness of the owner’s decision to sell. 

Take Stock of Your Business: You must step back and take a long objective look at your business.  Without objectivity, your business cannot be packaged to attract the most advantageous buyer and command the highest price.

Position Your Company to Sell: A good definition of positioning is, “It’s not what you see that counts, but how you see it”. Buyers are looking for opportunity. Often this means stepping in to correct issues so that future profits can be gained. It is just as important to know the weaknesses in your business as to know its strengths.

Identify the Correct Buyer: If your company could benefit from strong marketing, then we will include in your potential buyer profile significant strength in that area. If your company lacks customer service, then someone with special skills in that area would be a good candidate. Keep in mind, not all buyers will pay the same amount for your business. Your best offer will come from a buyer with skills and strengths that are well matched to benefit the most from your company.

Set Realistic Price and Terms: This doesn’t mean you should accept less for your company than it is worth. It does mean we need to confidently and rationally defend the price and terms that are set. Lose the confidence of the buyer and your sale price will suffer, or in some cases lose the sale completely.

Refine Your Organization: Take steps to ensure that your business does not depend upon you for its survival and success. The highest quality buyers are seeking a well-run company to manage and are reluctant to buy a business that is completely dependent on the owner for all aspects of operations.

Preparation of Financial Records: Comprehensive professionally prepared financial records are paramount to attracting buyers willing to pay a premium for your business. Well maintained records present you as a savvy owner and your business operated professionally. Solid financial records greatly reduce the buyer’s perception of risk.

Review Your Lease: Lease issues and landlords can represent the biggest “deal killers”. The lease provides the buyer with security of operating from the same location without interruption to relocate. It should provide for assignment and should be valid for a minimum of three years. If not, it could be time to renegotiate prior to starting the sales process of the business.

Obtain a Third Party Valuation: One of the most valuable tools at your disposal is a credible third party business valuation that supports the asking price. Buyers are less likely to present a low offer for a business when documented evidence can be provided that supports the price. Most non-owner sources of financing insist on a business valuation before they will even consider funding.

VR Business Profile: To attract sophisticated buyers we must provide information beyond the financial statements. Buying a business isn’t just a simple mathematical exercise involving the “numbers”. Buyers want customer concentrations, industry outlook, marketplace forecast, future influences from technology, industry margin comparisons, operating ratio analysis, stability of tenancy, and much more. A VR Business Profile that includes this type of information will greatly enhance the business prospects of selling.

Valued Representation: Selling a business is not a “do it yourself” or “part-time” project. You should assemble a team and seek professional advice early on. You will need marketplace, legal and tax assistance. This typically means a team is comprised of your professional VR intermediary, attorney, and tax accountant. Valued Representation through VR provides you with the resources and experience to guide and assist you through the entire transaction process, and present your business in the most professional and confidential manner.

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