If you're a business owner, the thought of selling your business may feel both exciting and daunting. Selling your business, something you've built over years, is a major decision.  One of the most important questions you can ask yourself, and one I hear frequently as a business broker is: How can I maximize the value of my business?

1. Clean Up Your Financials Buyers want to see financial records that are accurate and up-to-date. This may sound obvious, but you’d be surprised how often this detail is overlooked. The more transparent your financials are, the easier it is for potential buyers to understand your company’s value. It’s worth the effort to work with an accountant to review your books, to make sure everything is verifiable, consistent year-over-year for at least the three previous years.  Running a lot of personal expenses through your business might save you some tax dollars on the front end, but if you are losing on value down the road, is it worth it?  Find a happy medium; certain add-backs are widely acceptable, and others are tougher to justify.

2. Reduce Owner Dependence Another key factor that affects the value of your business is how involved you, as the owner, are in its day-to-day operations. Buyers are often hesitant to purchase businesses that are overly reliant on the owner's expertise or relationships. Work towards reducing your direct involvement in the business. Delegate responsibilities to a capable General Manager to make sure the business can run smoothly without you. A business that operates independently of the owner is far more attractive to potential buyers, as it promises a smoother transition and continued success post-sale.  If the business is too small to support the salary of a General Manager, consider hiring a position to reduce your day-to-day business tasks to free up time to run high level business decision making and focusing on growth.

3. Customer Concentration A business with multiple revenue streams is often more attractive to buyers. Why? Because it reduces risk. If your company depends on just one or two key customers or products, a potential buyer (and their lender/advisors), will see it as vulnerable. Think about how you can add new offerings or reach new customers.

4. Address Potential Red Flags Every business has its challenges, but before you decide to sell, it’s best to address potential red flags that could turn off buyers. This might include any unresolved legal issues, dependency on a single supplier, run-down equipment, or any of the issues discussed above. Proactively identifying and mitigating these risks can help prevent them from becoming deal breakers later on.

Building value isn’t something that happens overnight. It takes thoughtful preparation, and ideally, you’re starting this process a couple of years before you intend to sell. Even if you’re not planning to sell immediately, these strategies will only make your business stronger and more profitable in the long run.

If you're considering selling your business one day, it’s worth taking the time now to make these improvements.  Don't hesitate to reach out to a business broker; they are typically happy to advise on many of these items, even years before you intend to sell.

 

Looking to Sell?

Nashville Business Brokerage is here to guide you through a seamless and rewarding selling process. Our team of experienced professionals is dedicated to maximizing the value of your business and ensuring a smooth transition. Take the first step toward a successful business sale by scheduling a consultation today.

Contact us now to get started.