If you’re thinking about selling your business in the near future then you will want to make sure you get the best price for it. Sometimes, all you need to do to see your business rise in value is to wait for the right market to sell it in. However, there are many more pro-active ways to increase the value of your business before you sell.
Is the Market Rising?
One way that your business can increase in value is if the market grows stronger and its price rises. The value of your business can go up if there is more demand for businesses in your sector or if the economy as a whole gets stronger. It can sometimes be a good idea to wait to sell if you’re expecting the value of your business to increase. You might only need to wait a few months till a seasonal business is at its peak, but sometimes it’s worth taking a longer term approach. Waiting can be a particularly good move if your sector is recovering from temporary issues such as the COVID-19 lockdowns as the price is expected to go up.
However, it’s important to remember that no one can guarantee when the market will improve. The value of your business could go down if the economy suffers an unexpected shock or downturn. Any business owner who has been through the COVID-19 pandemic will be well aware of these risks and how unpredictable the market can be. Even if the market rises, this might not benefit you if you’re planning to invest your money in another business, as it will also become more expensive to buy. Instead of relying on the market to raise the value of your business, it can be better to take a pro-active approach and do what you can to make your business more attractive to buyers.
How to Boost the Value of Your Business
The best ways to make your business more attractive to buyers will be to improve its finances, make the future revenue more predictable, and ensure that the business can run without you.
Review and Renew Your Contracts
- Check your lease and any other essential contracts. You’ll need to be clear on the terms when talking to potential buyers. You might also want to renew key contracts to make the business more valuable.
- Make sure customer contracts allow for change of ownership. You may need to rewrite contracts or add a clause to ensure they’ll carry on after you sell. Ensuring these customers will stick with the business will have a big impact on its value.
- Make sure you have reliable suppliers. Making changes to supplier contracts to ensure continuity is important, but you may also want to consider diversifying your supply chains. Having more options can make the business better at coping with the unexpected, which will enhance its value in the eyes of potential buyers.
Make the Business Less Dependent on You
- Train your staff. If you have any employees that will stay with the business, use the next year to build up their skills and hand over some of your responsibilities. Having skilled employees could make the business more attractive to a wider range of buyers, including those with less experience in the sector. It can also help your employees to accept and benefit from the sale.
- Step back from dealing with customers and suppliers. The relationships you’ve built up are a valuable part of the business, but they shouldn’t depend on your personal connections. Encourage your key customers and suppliers to build relationships with other staff members to ensure these connections stay strong even after you sell.
- Take some time off. Plan to take a break from work for a week or two to check how well they can cope without you. It’s important to ensure that the business will continue to thrive even when you’re not there to make decisions. You may need to leave written instructions or prepare your staff before you try this, but it can be a good way to ensure the business will survive the sales process. It must be able to keep going when you leave permanently.
Get Ready to Transfer the Business to a New Owner
- Put everything you know down on paper. If you’re planning to sell your business next year then you have plenty of time to gradually record the processes that you follow. Set aside some time each month to write instructions for the new owner so they’ll be able to step into your shoes. Having this information ready can make your business more attractive and ensure the transfer goes as smoothly as possible.
Valuing Your Business
Knowing how much your business is worth now could help you make the right decision about when to sell. You can ask one of our experienced brokers to value your business. We will take a close look at the business and use our understanding of the local market to give you a better idea of what it is worth. Our brokers can also advise you on the best time to sell and what you can do to increase the value of your business before you put it on the market.
Contact us to find out more about business valuations and more specific advice about selling your business.