Increasing Your Business's Worth

Your company’s value depends on many factors, some of which include cash flow, asset values, financial history, condition of equipment and premises, lease attractiveness, competition, potential for improvement, location, industry type and the economy, among many others.

Most business owners sell their businesses at the wrong time - they only sell it when they have to. The best time to sell a business is when your business is doing well. If you wait too long, you risk a downturn and the selling price will suffer.

Next, many people attempt to sell the business themselves by methods they have seen in movies, television, and newspaper. Unfortunately, these sources deal with public companies and not the private companies they own. There is a world of difference between the two. Private company owners need not be concerned with hostile takeovers, junk bonds, P/E ratios or loss of a job because the company did not show a sizable profit in recent quarters. Applying public company protocol to sell a private company arrives at the wrong selling price, and many times attracts the wrong buyers.

A company’s selling price is driven substantially by earnings, yet most private owners minimize earnings for taxation, which leads to a selling price lower than it should be. The key to knowing the true value of your business lies in recasting earnings into a meaningful cash flow for the potential buyer. In addition, the recast will need to be a demonstration of the future cash flow capabilities of the business.

After the recasting process, your company will need to be properly positioned. Because it is virtually impossible to view oneself truly objectively, positioning should be left to a professional. Your company’s strengths, weaknesses, uniqueness, hidden values, competitive environment, and information from outside sources will be gathered and organized into a comprehensive profile that will attract the right buyers and position your company to sell for a premium price.

Obtaining the best price for a business begins with the timely decision to sell. Doing it yourself should be limited to the decision to sell. Thereafter, professional assistance should be obtained in order to maximize value, maintain confidentiality, and avoid costly mistakes.

Major corporations engage “pros” to enhance the value of their products in the marketplace. Professional athletes have their promoters, actors have their agents, and public companies have their investment bankers. The unfortunate fact that most small to mid-size companies are sold for much less than they should be indicates that the owners of these companies need professional assistance in their sales process.