How to increase the value of your business?
What can I do to improve the value of my business?
Every business owner wants to get the highest price when the moment arrives to sell their company. One needs to have a well-thought-out plan to get the ideal sale with the right conditions and an interesting price in the future. Understanding the view of a potential buyer is crucial. The value drivers to achieve a good business sale should be determined. The critical issue is working on these value drivers in a timely manner, so they are optimized when you actually start the business sale process.
What can I do to improve the value of my business? We describe the things you can do further below. First, we will give you an idea of items that decrease and increase the value of your company. After that, we give you 6 important ways to increase the value of your company. Working on these items will help you in achieving the best value for your company.
Factors that have a positive influence on the acquisition price
There are a lot of factors that have a positive effect on the valuation of your company. It is best to start with a structured plan on how to improve all of these. This normally takes many years of preparation. Sometimes, you might find out you want to sell right now, and it is too late to work on improving the value drivers in a structured way. In this case, you will find some items below that have a positive effect on the price of a business at the moment you sell.
Aspects that make the acquisition price rise:
- Independent management (not dependent on you)
- Size of the business
- Recurring revenue (with long-term contracts)
- Specific, unique technology
- Lifecycle of the product(s)
- Market position
- Growth revenue and profit
Factors that have a negative influence on the acquisition price
There are many factors that have a negative effect on the sales price of a company. If you have the possibility to repair these items, please do take your time to do this. Only start the process of a business sale once your company is ready. If you are not in a position to improve the value of your company, at least it is a good idea to be aware of what determines a company’s value. This can help you in setting realistic expectations at the moment you sell.
Aspects that lower the acquisition price:
- The owner is ‘the management’ and manages all contacts
- Size – too small
- Portfolio of products at the end of their lifecycle
- Assets that need a lot of maintenance
- Decreasing results
- High customer concentration
- Low revenue and low margins
If you have sufficient time, determine your strategy upfront and work on improving these items. Please contact us to hire the right advisers and get the deal done.
How to improve the value of your business?
Now that you have seen which things that can increase or decrease the value of your business, you might have a better idea of what you can do to improve the valuation of your company. If you have ample time to work on improving the value of your business, below you will find some of the items that are important. You can work on these to increase the value and sell at a satisfactory price when you are ready. All items are described separately in more detail below this list. The items are listed in the order of importance as per my personal view (the top item has the highest value).
Ways to improve the value of your company:
- Recurring revenue
- Remove yourself from the business
- Diversified customer base
- improve working capital and cash flow
- limit ‘normalizations’
Download how to increase the value of your business to read the full article.
Information about the value of your business
We have advisers that speak your native language and have experience with optimizing companies for a business sale. We are happy to share this knowledge and give you some free consultation on what to consider when optimizing your company for a business sale. Do you want to get support in increasing the value of your company today? Do not hesitate to contact us.
It might be possible that you are looking for information about the costs in the M&A process of selling a business. For this, we would like to suggest visiting the pages below: