How to Boost Your Business's Sale Price

by Richard Jacobs 12th of August, 2024

How to Boost Your Business's Sale Price

Achieving the highest possible sale price when selling a business should be a key goal for any business owner. From the day you start in business, you need to have a clear and comprehensive exit strategy if you eventually want to maximise your business’s sale price.

Being in business is a process of continuous improvement, but first, you need to understand where your business stands right now—you need to define a baseline. The best way to define a baseline is to engage a professional Business Broker who can provide you with a good understanding of what your business might sell for on the open market and identify low-cost, high-value tweaks to enhance your business before putting it on the market.

A well-thought-out succession plan demonstrates stability and long-term planning. Buyers want to see that there is a clear path for the future of the business, which adds confidence and value in their eyes.

1. Improve Profitability

Profitability is a major driver of business value. When I analyse and compare my clients' financials, patterns in revenue or expenses often emerge. Identifying areas where costs can be cut or revenue increased, even by small amounts, can significantly impact the bottom line and the sale price.

2. Optimise Your Operations

Documenting and streamlining processes to reduce waste and improve productivity is essential. I recall recommending a CRM system to a client, resulting in a 20% sales lift because of better customer tracking and callbacks. This also strengthened customer relationships, adding significant value to the business.

3. Strengthen Your Management Team

One of the biggest barriers to getting the best price for a business is the owner's indispensable role. I advise clients to remove personal goodwill as quickly as possible. Buyers will pay a premium for a business that runs smoothly without the owner's direct involvement. Invest in training and developing your team to operate the business successfully in your absence, reducing dependency on specific individuals.

4. Diversify Your Customer Base

A diversified customer base reduces risk and increases business stability. I once sold a business where 80% of their work came from one customer who ran out of money. The business sold for significantly less than it could have if it had a diverse customer base. Spread your revenue sources more evenly to make your business more resilient and appealing to buyers.

5. Enhance Your Brand and Marketing

In the digital era, a strong brand and effective marketing can significantly boost your business’s value. Yet, I often see poorly designed websites and ineffective use of digital marketing. Invest in high-quality marketing materials that reflect the value of your business.

6. Document Everything

Transparency and organisation are key to a smooth sale process. Ensure all aspects of your business are well-documented, from financial records and contracts to standard operating procedures and employee manuals. Comprehensive documentation builds trust with potential buyers.

7. Upgrade Your Technology

Modern technology can improve efficiency and reduce costs. On numerous occasions, I have recommended simple bookkeeping systems that provide various reports at the push of a button. These systems help clients understand their business's status and direction. Today’s technology is often cloud-based and subscription-based, eliminating the need for costly onsite hardware and software.

8. Strengthen Supplier Relationships

If you do not ask, you do not get. I have found that businesses often purchase on the same terms as when they were smaller, despite their growth. Suppliers want your business, and with bigger volumes, better buy prices should be achievable. One client asked for a better deal and was told, “We were waiting for you to ask.” Ensure you have favourable terms and contracts with key suppliers and work on building long-term partnerships.

9. Manage Debt Effectively

Healthy debt management is attractive to buyers. Elevated levels of debt are a red flag. I recommended to a client that they employ an accounts person to collect debts, significantly reducing debt over 30 days old and improving working capital. Changing payment terms from 30 days after invoice to 10 days also improved debt management.

10. Focus on Recurring Revenue

Recurring revenue streams are highly valued by buyers. Develop subscription models or long-term contracts that provide consistent, predictable revenue, reducing risk for buyers and increasing business value.

11. Improve Your Sales Strategy

A strong sales strategy is crucial for driving revenue growth. Continuous improvement in sales processes, record-keeping, and data analysis is necessary. I advised a client to stop handling all operational roles himself delegate these and himself focussing on sales, which led to significant business growth. Employing others for administrative roles allowed him to leverage his strengths in sales, driving the business forward.

12. Enhance Your Product or Service Offering

Often, the opportunity for high profits lies in supplementary products or services. One client increased revenue by 50% by selling the chemicals necessary to be used in the machinery he sold and providing associated service contracts. A diverse, high-quality product line or service portfolio can differentiate your business from competitors and increase its value.

13. Establish Strong Intellectual Property Protections

Ensure your intellectual property (IP) is well-protected through trademarks, patents, and copyrights. Clear ownership and protection of your IP can add significant value to your business and make it more attractive to buyers.

14. Strengthen Your Market Position

Understanding your competition and market landscape is invaluable. I liken it to a professional sports team analysing opponents to find improvement opportunities. A strong market position can command a premium sale price. Identify strategies to enhance your market share, whether through expanding into new markets, increasing your product range, or improving marketing efforts.

15. Ensure Compliance and Risk Management

Keeping your compliance with legal and regulatory requirements up to date is critical. A good example of this was a deal I was involved in, after completing a conditional sale, a client discovered an expired compliance requirement during due diligence, resulting in significant costs to regain compliance. Regular audits ensure your business complies with all relevant laws and regulations, protecting your business and reassuring potential buyers.

Conclusion

By reviewing these key areas of your business, you can significantly enhance its value and boost its sale price this fiscal year. Each step focuses on improving aspects of your business that potential buyers value the most, ensuring you achieve the highest possible return on your investment.

This article incorporates practical advice from my experience as a professional business broker. By focusing on these key areas, I have helped numerous clients achieve higher sale prices for their businesses.

If you need personalised guidance on preparing your business for sale, feel free to contact me.

Tags: business owner small business tips