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Increase your business’s sale price by up to 50% with these 6 tips

Posted by Kanika Sinha

June 27, 2022    |     5-minute read (913 words)

Not every business owner who puts their company up for sale gets a deal done. In fact, the statistics for the same are far more depressing —  80% of entrepreneurs who try to sell their businesses fail within a year, according to Jessica Fialkovich, business exit expert and a founder who has successfully bought and sold two companies, as cited in an article on Inc.com

But the question is, why don't most businesses sell? One big reason is that business owners set unrealistic exit prices or terms. The second big reason is that they're not really ready for an actual sale of the business that they spent years building, Fialkovich said.

Here are six fundamental steps that can help you flip the odds in your favor and ramp up your sale price by up to 50%.

1. Organize your financial records correctly.



The most important thing you can do to ensure a successful sale and fetch a higher selling price for your business is to clean up your business’s financial records. Buyers will consider everything from equipment to financial documents including income statements, balance sheets and cash flow statements to determine the financial health of your company. It’s your job to get all your business financials in order before taking your company to market.

You might think that you've already got this nailed down as you update all these documents every time you file taxes. However, you may miss some things and make your company look financially weaker than it really is to prospective buyers. For instance, you invested in developing and market-testing a potential product but later decided not to go ahead with launching it. While those expenses will appear on your income statement, they aren't part of what you're selling. Make sure to move such expenses out of your business entity either by working it out on your own or seeking the help of a professional. 

2. Clean up your reputation.



What online reviews say about your company or its products matters a lot, particularly in today’s connected world. And this holds true while getting ready for a sale as well.

In case you don’t have any reviews, reach out to your most loyal customers or referral partners and ask them to share their experiences online. And for the negative reviews, make sure you tackle them well. Respond to them professionally and address the concerns on priority while pushing the communication offline.

Additionally, you can consider soliciting customer testimonials. In fact, there are companies you can hire to do this for you. However, if you are a small business, 10 or so good reviews would be enough to make a big difference. Hence, seeking help from customers would be a better and more effective option. Also, being recent, these reviews will push the bad reviews, if any, lower down.

3. Review your contracts.



Your company’s contracts with customers and vendors are one of its most valuable assets, and you need to make sure those assets survive a sale, particularly if you want to get your selling price up. But for this to happen, your contracts must remain in force during the sale and that requires your contracts to have an assignment clause that specifically states you can assign the contract if you sell the business or any of its assets.

In case your contracts don't carry these clauses, start adding them whenever you renew the expiring contracts. However, try doing this before anyone finds out that you're planning to sell, else you could put yourself in a very weak negotiating position.

4. Build your own owner's manual.



Ensure to have a system in place wherein you have all key business processes, practices and tasks that you and your employees perform documented, ahead of the potential sale. This may sound like a tedious job, but this can form the basis for a handbook of how your company functions and something a potential buyer might find invaluable. Besides, in case you aren’t considering a sale of your business any time soon, these documents can be quite useful and keep work flowing even if any of your team members quit or are unable to work for a while.

5. Try making it less about you.



One of the biggest concerns a buyer usually has about a business is its dependence on the founder(s). The uncertainty about the future of the business without the one(s) who has all relationships, processes, procedures and technical know-how under their control is what makes a business unattractive to potential buyers and may frighten them away. 

If your company depends on your ability to do everything and anything, then work toward delegating the many roles that you have taken up to someone in the company or a freelancer. However, make sure that you keep a close eye on profitability if getting help from a freelancer with these tasks means increasing your expenses and ultimately lowering your company’s revenue. Additionally, make some changes to the company's marketing and promotion if you have been the public face of your company.

6. Keep management focused on business.



Even when you’re considering selling a business, the day-to-day operations must still go on. Have a professional team on hand that stays focused completely on keeping the business operating and trending in the right direction. And let your advisory team handle the sales process; otherwise your business will suffer and your valuation can go down significantly.

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