We experience many company sales being initiated by an owner who, for whatever reason, wants to immediately sell their business or, conversely, by an unexpected external party making an offer for the business. In both scenarios, the buyer has the upper hand in negotiations, leaving the seller at a disadvantage. This is because the business is being sold without any preparation for an acquisition.
In the retail industry, shops display their products in visually appealing shop windows to attract attention, create interest, and raise the perception of value. In addition, any product that is sold needs to retain this perception of value into the future, over its lifetime. Similarly, companies need to prepare for acquisition to maximize their value and price. This maximisation of value needs to be factual and substantiated and not just cosmetic. By preparing the company for acquisition, the seller can create a positive perception of their business’s value, giving them a stronger negotiating position when it comes to price. This holds so long as the actual company performance during negotiations and into the future actually lives up to the positive perception created.
To prepare your company for a sale, you need to employ specific strategies to increase its value and make it more attractive to potential buyers. These strategies need to be considered individually and holistically to achieve maximum impact on your company’s value. Here are ten actions that you can employ to raise your company’s value:
1. Increase revenue
Growing your top line revenue can significantly increase your company’s value. This can be achieved through expanding your customer base, increasing sales, and introducing new products or services
2. Improve profitability
Boosting your profitability can also increase your company’s value. This can be done through cutting costs, increasing efficiency, and improving margins.
3. Develop intellectual property
Developing intellectual property, such as patents, trademarks, or copyrights, computer software or other intellectual property can add significant value to your company. This can help you differentiate your products or services from competitors and increase barriers to entry.
4. Expand into new markets
Expanding into new markets can provide new revenue streams and opportunities for growth. This can include expanding globally, entering new product or service categories, or targeting new customer segments.
5. Build a strong brand
Building a strong brand can increase customer loyalty and create a premium pricing strategy, which can increase your company’s overall value.
6. Strengthen your team
A strong team can help drive growth and create a culture of innovation. Consider investing in your employees by offering training and development programs, improving benefits and compensation, and creating a positive work environment.
7. Streamline operations
A strong team needs to be supplemented by streamlined operations to make your business more efficient and reduce costs. This will not only make your company more attractive to potential buyers but also improve your profitability.
8. Build knowledge into the processes
Capture the knowledge that is in your employees’ minds and design processes and systems that incorporate as much of this knowledge as possible. This will mitigate the effects of staff mobility in the future on the smooth operations of the business.
9. Optimize your balance sheet
A strong balance sheet can increase your company’s value by reducing risk and increasing financial stability. This can include reducing debt, improving cash flow, and increasing shareholder equity.
10. Address legal and regulatory issues
Address any potential legal or regulatory issues that could impact the value of your company. Resolve any outstanding lawsuits or regulatory issues and ensure that all legal documents are up-to-date.
These ten actions are common strategies used to increase a company’s value when preparing it for a sale. They create a positive perception of your company’s value and are what a buyer looks for in a business. It is obviously important that these actions actually deliver into the future as that is what will really support the seller during negotiations. Unfortunately, however, many unplanned company sales miss out on these opportunities to increase their value.
At CMG Consulta, we work with entrepreneurs and business owners to help them increase their business’s value, both to grow and to prepare for a company sale.