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DALLAS/MCKINNEY
321 N. Central Expressway
Suite 350
McKinney, TX 75070
Phone: (214) 733-8282
Fax: (972) 542-7644
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VR Business Sales|Mergers and Acquisitions
DALLAS/MCKINNEY
The Selling Process
Increasing the Value of Your Business
Simple steps to increase the value or your business and increase its marketability.
Can you increase the value of your business without increasing the profits?
Ask your accountant or other financial professional and the chances are they will draw a blank. Or they will answer "no". But 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 appropriate qualified buyer.
To achieve the best end result, smart business owners approach the selling process with the same planning and discipline they use in the day to day operation of the business. The following is an overview of the winning strategy that you will need to follow to get the most out of your business sale.
These simple steps will increase 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 at 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. In some cases owners wait too long to sell their business only to find that they missed the opportunity to sell at the peak value.
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 into correct problems so that future profits can be gained. It is just as important to know what's wrong with your company as it is to know what's right.
Indentify the right buyer: If your company could benefit from strong marketing, then you should 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. Remember, 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 your company.
Set realistic price and terms: This doesn't mean you should accept one cent less than your company is worth. But it does mean that unless you can confidently and rationally defend the price and terms you set, you will lose the confidence of the buyer and your sale price will suffer, in fact you ultimately may loose the sale.
Refine your organization: You should 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 day to day operations.
Prepare your financial records: Comprehensive professionally prepared financial records are a must if you want to attract buyers willing to pay a premium for your business as well as to demonstrate the value of your business. Well maintained records present you as a savvy owner and your business as professionally operated. Solid financial records greatly reduce the buyer's perception of risk.
Review your lease: Lease issues and landlords can represent one of the biggest "deal killers". Your lease provides you with a license to operate a business in a particular location. Without a lease, your business may be of no value to a buyer. Take the time to review your lease. It should provide for assignment and should be valid for a minimum of three years. If it's not, renegotiate it before you start the sales process.
Obtain a third party valuation: One of the most valuable tools at your disposal is a credible third party business valuation that supports your asking price. Buyers are much more likely to pay top dollar 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.
Comprehensive business profile: You must provide information beyond the financial statements. Buying a business isn't just a simple mathematical exercise involving the "numbers". Smart buyers want more. They want customer concentrations, industry outlook, marketplace forecast, future influences from technology, industry margin comparisons, operating ratio analysis, stability of tenancy and much more. A comprehensive business profile that includes this type of information will greatly enhance the business prospects of selling as well as selling the value of the company.
Valued Representation: Selling a business isn't a "do it yourself" project. You should assemble your 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 business intermediary, attorney, and tax accountant. Valued Representation through VR provides you with the resources and experience to present your business in its most favorable light.
To discuss specific plans to increase the value of your business, contact VR Business Brokers of McKinney, TX at 214-733-8282, or email @ llane@vrmckinney.com.
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