Run your business for the Buyer! Sounds simple, doesn’t it? Here are some things that a buyer will study before he or she determines how much he or she will pay. Although the list is not all inclusive, these are some of the categories you should focus on to increase the value of your company.
- Financial Strength. Buyers want to buy a company that is growing and profitable. The buyer has to be able to cash flow the business after debt service and capital expenditures. The cash flow has to cover all of the buyer’s personal expenses.
- Owner Importance. Do you as the owner own the customer relationships? If so, you need to transfer those relationships to someone else in the company before you sell.
- Labor. Buyers will want key employees to stay, but sellers can’t expect the buyer to guarantee job security.
- Diversity and Stability of Customers. How many active customers are there? Will they stay with the new owner? What’s the customer concentration? What will happen if the company loses one or two key accounts?
- Vendors. Are there any exclusive relationships? Will they stay with the new owner? Are there contracts in place? Are they transferable?
- Repeatable Systems and Processes. The efficiency of your business has a great influence on profitability. The more profitable you are the more money you will collect at the closing table.
- Competition. How strong is your competition? Are technological changes going to give a major competitor with more cash a significant advantage?
- Facilities. Clean up your business! Buyers can’t see through clutter and dirt.
- Location. Will the buyer lease or buy the building? What’s the length of the lease? Is it transferable? Are there any changes in the area that will affect the location (negatively or positively)?
- Future Outlook. Does the business have the potential to grow in the future?
Rate yourself in each of these categories – from the eyes of a buyer. If you rate anything less than a 9, then develop a detailed plan to improve your business. Then, TAKE ACTION!
Visit www.dovetailadvisors.com to learn more.
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