There's no arguing that banks, potential investors and
creditors look heavily to a company's financial statements to determine
its value. However, past financials often aren't the whole story. Here
are some additional factors to consider as you seek to maximize your
company's value - whether you plan to sell soon or simply want to be
ready when that day comes:
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Proven Potential for Increased Profitability
Perhaps the most important aspect of making a
business attractive to a potential buyer is building their confidence
that the business has the potential for increased profitability. Of
course, step one is to produce documentation showing steady, reliable
revenues and cash flow, but other steps can help paint a picture of
untapped potential. For instance, highlighting (and proving) key
advantages inherent in your businesses industry such as a history of the
sector outperforming the economy at large or examples of recession
resistance will demonstrate that your business carries less risk.
Regardless of your business' financial track record
and your sector's inherent advantages (or disadvantages), a key way to
build value into you business is to create a plan that will drive future
growth. If you plan on continuing to operate the business, such a plan
will help you think strategically and advance the business despite day
to day operating demands.
If you plan to sell your business, experience has
shown that owners who offer a clear, focused plan for growth have an
easier time generating buyer interest and closing the sale. Your plan
might detail strategies such as acquiring competitors, expanding to a
complementary product or service, or implementing operational
efficiencies.
Be Organized
It sounds simple, but it's hard to do. Good
organization will help you run your business more efficiently and reduce
employee (and customer) confusion. When it comes time to sell,
potential buyers will find the business and the operations easier to
understand. At such a point it will be especially critical to have your
books in order to provide credibility and to instantly make your
business more attractive to potential buyers. No buyer wants to take
over a disorganized business.
Focus on Physical Assets for Debt Financing
Buyers of businesses with tangible assets - capital
equipment or owned real estate for example - are having greater success
securing purchase loans. Though intangible assets, like intellectual
property, knowledge and relationships, are all important parts of your
business, they often don't come through in a financial statement.
Tangible assets, on the other hand, can be used as
collateral to secure lending from banks. Focus on highlighting the
tangible assets within your business, and supply potential buyers with a
comprehensive list to give them a leg up when applying for loans.
Highlight the Positive
Finally, when the time comes to meet with potential
buyers, concentrate on the strong points of your business. You know the
business better than anyone else and there are bound to be some areas
where your business excels, so make sure you highlight those. For
example, perhaps your business is established within its trade sector
and known throughout the community or maybe your customer base is widely
diversified, providing security against any one customer having too
much leverage. Highlighting what makes your business special will make
you stand out to buyers and illustrate why your business is a good
investment.
Whether you are ready to take steps to sell your
business today or just wanting to build value for a future sale,
following the tips above will help ensure success.
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