Business Valuations for Sellers
Going Beyond the Business Valuation
The business valuation is complete. You know what the fair market value of your business is and what to expect in the marketplace. So what's next?
At this point, it is important to reevaluate the veracity of your exit strategy. Following a valuation, most businesses can be placed into one of the following categories: Time to Grow, Time to Sell, or Business as Usual.
Time to Grow
When starting a business, owners set goals. These may be short term plans to move into new facilities, increase staff by 50%, double the customer base, etc. Milestones and achievements made by a company will be reflected in how much that company is truly worth. Business owners who have plans to sell their business at any point in the future, tend to have a rough number in mind, or a trigger point for exit. Let's say a business owner's goal is to the sell the business for $5MM. Following the business appraisal, the fair market value is determined to by $3.5MM. This business is still $1.5MM in value short of the trigger point. Assuming this business owner is still driven by his business and passionate to reach the $5MM valuation, then it is time to strategically grow the business.
A business valuation and the experts involved in the process of closely consulting with business owners, should be able to provide sound insight into how that business can increase profitable revenue streams and maximize value. Rather than sticking to the same game plan a company has followed in the past, why not make some key decisions and shift the course of the business in order to reach the $5MM valuation sooner, rather than later. While each business is different and requires a unique game plan, some general areas that have proven to increase value for other businesses include but are not limited to:
- Leveraging the Internet's potential (website, marketing, reach, buzz, etc)
- Technology integration to increase efficiency (CRM, Reporting, Automation, etc)
- Increase profitable product distribution; reduce low profit product sales
- Greater emphasis on existing customers and repeat business
- Proprietary technology/operational developments to enhance business flow and competitive advantages
- Streamline business operations via consolidation and cost-effective measures
Time to Sell
Following a business valuation, many business owners are pleasantly surprised with the fair market value! When a calculation or conclusion of value is greater than an owner's expectations, odds are it is best to start the process of packaging, marketing and selling the business. Timing is everything and if a business owner has exceeded their own financial goals, realized that another owner could do more with the business, and/or is starting to grow weary of the day-to-day grind then it is time to strike while the iron is hot. Sell the business!!
A professional intermediary will be the most valuable partner you’ve ever had. Selling a business is not easy. It is very time consuming, arduous, and stressful. If a business owner has not sold several companies in the past, then it is imperative that they be represented by a professional intermediary or investment banker. The intermediary's role is to professionally package your company; develop discreet yet compelling marketing information on the entire operation; find, qualify, and present many potential buyers; serve as a conduit and buffer between seller-buyer discussions or negotiations; prepare for and manage the closing; and finalize the sale of the business. They are your advocate! And they get paid when you get paid; at the closing.
The concept is quite simple. You are a business owner, not a business sales intermediary or investment banker. While you may be able to speak intelligently about your business to prospective buyers, the time involved to go from early discreet marketing to sale can easily take 8-12 months. In the meantime, if you went at it alone and did it yourself, the business could suffer - thus negatively affective purchase price and the marketability of your company. Selling a business should be discreet, confidential, professional and timely. Hire a professional.
Business as Usual
You finally have the answer to a question that has nagged you for years - "What is my business worth?". Now that you know, it quite possibly may be back to business as usual. If you are more than content owning and operating your existing business, enjoy what you do and the impact you have, thrive in your environment, and just have no reason to strategically grow or sell your business.....then congratulations! Just remember some of the above tips if/when you do decide to take action in an attempt to exit.
To learn more about what actions to take after the business valuation, please contact us today or call us at 877-VALU-BIZ.