5 Things You Must Do To Make Your Business Valuation Higher

INTRODUCTION:

Most of us know what our end game is when we decide it's time to exit the business. Selling could be part of our succession planning or retirement planning. Naturally we would want the highest price or maybe we just want to hand a valuable asset to the next generation or loyal employee. If you put yourself in the shoes of a potential buyer, what would their accountant or business advisors be telling them to look for when purchasing a business? What effect does it have on the final business valuation?

Reason #1 Have a history of solid profit

• Businesses that have a consistent level of profitability sell easier and at higher values than volatile ones;
• Make sure you understand how profit is adjusted when business valuations Sydney is calculated (e.g. reasonable salary for owners or reasonable rent being charged where you own the premises);
• Businesses that are growing give the potential buyer confidence that they are not buying a business on the way out - how are you achieving growth each year?;

Reason #2 Show strong cash flow

• Who wants a business that struggles to get cash in?;
• Work out whether you have decent cash flow by getting your accountants to do an analysis on your numbers (debtor days, inventory days, supplier days etc);
• Business valuers usually look for strong cash indicators when assessing higher business valuations;
• Perform a cash flow forecast - we find 3 way budgets are best and very powerful.

Reason #3 Reduce owner reliance

• Businesses that rely on you 100% will raise a big red flag to potential buyers;
• Brainstorm ways that can free up your time by firstly sitting down and analysing what it is you do on a daily or weekly basis;
• Systems is the key! If something were to happen to you how would your business perform? Document what, how and when an action should occur at every stage of the business cycle.

Reason #4 Have a vision for the business

• Always have a picture of the business 5 years, 10 years, 20 years out;
• Generally these businesses will always outperform those that don't;
• Have a business by design not by default - this is what business planning is all about!
• Do not make basic business planning mistakes;

Reason #5 Hold onto your employees!

• A business with long standing employees gives an indication that you have a great workplace environment;
• Potential buyers will ask their business valuers Sydney to look for volatility in this area and if there is, discount the sales price accordingly;
• Have compliant Fair Work employment contracts in place. This will also ensure concerns that employees might take customers with them cannot occur easily or at least for a reasonable period of time post purchase.

Now that's worth putting the effort in place immediately!