When small business owners go to sell their company they often receive a rude shock when the valuation that is offered to them is greatly below what they were expecting. This happens because buyers have become much savvier over the past few years in understanding for what they are really paying. Revenue and profits are great, but they only tell part of the story when it comes to the value of the company.
Owners looking to sell need to address a few key areas in advance that can have tremendous returns when they go to sell. These are items that cannot be done at the last minute. If not addressed well before any plans to sell, an owner is unlikely to see the value they hoped for in a sale. The following are two examples of how the owner can increase the value paid for the company.
Ensuring a Profitable Business Exit, an Executive Event
on July 31
Experts will discuss the points below and others in detail during the Ensuring a Profitable Business Exit event, on July 31 in McLean, Virginia. A few seats are still available. For details and an invitation to this breakfast event, please send an email to [email protected].
1. A Repeatable, High Performance Sales and Marketing Engine
Take a hard look at how you obtained the revenue and profit numbers that you are showing. A buyer is looking to see if the sales results are repeatable, predictable and profitable. If you can show that you have a sales and marketing process in place that meets these three criteria and are not based on the strength of personal relationships or one stellar sales rep, then the company will pay a premium for this. Would you pay extra for a company where if a single sales rep left, the sales would go out the door? Of course not. Companies are looking for a purchase where they will feel confident they can transfer the sales process to their sales teams and see expediential growth in the business.
2. A Company That is more than the Owner
The second area to consider is the owner. Many small companies have been built upon the strength of the personal relationships of the owner and their drive to succeed at all costs. You need to take an honest look at the role you, the owner, are playing today. If the success of the sales (therefore revenue) is based on your know-how, relationships and drive, then expect to receive a less than stellar offer for your company. Remember, the whole point of selling is for you to have an exit from the business. If you leave, who is driving that revenue and profit? Why as a buyer would I pay a premium to have you leave?
Now is the time to have an independent expert help you do an assessment of where you stand on these and other key issues that drive real value for your company. If you wait until you have decided to sell, it is too late to address these issues.