How To Build  A Huge Small Business Valuation You Can Be Proud Of

INTRODUCTION:

Like any type of sale business or otherwise, there can be a huge range in business valuation multiples. This of course will create a large range for higher and lower sale prices even where the same business can have similar adjusted earnings before income tax (adjusted EBIT).

You see, business valuations aren't just based on numbers alone contained within the financial statements and tax returns.

So here are some key steps to help you get your business sold for the higher end.

Figure1: There's always work to do but the rewards can be tremendous.

1. have a one page business plan that is easy to follow

Most purchasers like to see a business plan. Having a one page plan is generally easier to follow and understand rather than 50 pages of wordy information.

If they can see the business's goals over the next 3 years usually broken down by the number of customers/clients, average sale, number of transactions, the adjusted EBIT and a brief summary of the strengths, weaknesses, opportunities and threats, this will give them a good overview of what the business is trying to achieve.

2. engage your team

This is an area that can be fiercely debated depending on which side of the fence you sit on.

My view is that if your team don't have a clear idea on what you are trying to get your business to look like over a period of time, getting the business to improve its value will take a much longer period of time. Think of a rowing boat with members trying to go in different directions or at different speeds. If they are aware of what the end goal is it could become chaos!

Figure 2: Not engaging your team could see  your crew getting a crab!

Your team can be your eyes and ears on the floor and can pick up improvements once they know what the game plan is. Therefore by getting engagement from your key people including showing them numbers can be a very dynamic way of getting the business to improve dramatically.

A team that is engaged will naturally be a team that is proud to contribute to the cause. A team that is left in the dark will generally encourage suspicion and fear and in same cases a sense of little worth.

3. stand out from the crowd

If you are selling a small business, if you are doing the same as everybody else in terms of your competitors, my reaction is that you are going to be prone to a price war from somebody or some other organisation (e.g. public company) with very deep pockets.

This would make me nervous to pay a higher amount for your business unless I can allay these concerns.

List down what you differently and why your competitors either don't or won't do to match these nuances. Yes the times will come where they try to catch up so what are you doing to stay one, two & even three steps ahead?

4. be disciplined

Good business operators show good discipline with their operations and financial practices. How do they do this? Well usually they have an operating procedures manual which is followed religiously and they meet with their small business accountants Sydney regularly to discuss the goals, key performance indicators and other numbers.

Not only do they discuss numbers but they talk about the right numbers that will increase the business performance and then the business valuation.

Again if I am buying a business, I will feel more secure if I know how things are being kept on track just like clockwork. Daily, weekly, monthly, quarterly and yearly reports produced will give more comfort that the business can adapt quickly if it starts to get off track.

A business that gets its returns done 9 months after the year end once a year, suggests to me the finger cannot be on the pulse. Therefore, I will either walk away or I will be looking for a bargain.

How are your reports produced and over what intervals are they discussed with your key team members and business advisors?

What do successful business owners discuss?

5. service, service,service & service your customers

A solid business will have very satisfied customers who are happy to provide testimonials. It's not uncommon for prospective purchasers to ask for testimonials either formally or discreetly. The best testimonials usually come form customers and clients who are serviced above and beyond.

What would your best customers say about your business today if they were asked? If you are not sure, I would recommend that you ask them immediately as they may have some wonderful information that will improve your business valuation several fold!

6. presentation of premises

Be proud of your business but also show your pride! I can never understand business owners who have premises that need a good paint job or clean up. Very rarely will a strong business have a very ordinary presentation inside and out of its offices and buildings.

Stand across the road of your location. Does it look like you are proud to be in business or does it look like you just don't really care? Go inside have imagine you are a customer. Does everything look neat and tidy and organised or is everything all over the shop?

Figure 3: Making sure you present well always adds to business value & makes it more saleable. Photo courtesy of Lara Scolari Gallery Balmain 

CONCLUSION:

 I hope some of the tips above will get you thinking about what you need to consider to get your business ready for maximum sale. It's never too late but the earlier the better.

If you happen to get business valuers Sydney to value your business, make sure the report also takes into account matters not always shown within the numbers. If it doesn't, find out why they were ignored or you could end up with a much lower price.

Consider this: For every dollar you improve your business now, you could see an extra sale price of up to $5 when you sell. Throw in some capital gains tax concessions (where you qualify) and you may even pay no tax whatsoever on this 500%! To get the same result not selling could mean you have to earn 10 times your extra profit now before tax.

Please feel free to contact me to discuss the enormous potential and show you how.