More often than not, business owners procrastinate on preparing the company for sale because it’s difficult to know where to start. Worse yet, time, energy and money may be invested into areas that do not improve business sale value. Proforma Partners Advisors use three simple steps to help business owners get moving in the right direction.
1) Understand what buyers value.
Business owners tend to look back at the value of their sweat equity. Years of hard work, energy, and financial sacrifice are essential to creating a company that survives and thrives through the inevitable recessions and booms. When it comes time to sell, it’s natural to want these investments and sacrifices to be considered.
In contrast, business buyers look forward. They place value on solid business performance matched with practical growth plans that leverage future potential. This forward view does consider the stability and quality of historical financial performance but also includes practical considerations like reoccurring revenue, or dependence on a small number of customers, employees or suppliers.
The key challenge to maximizing sale value is to turn sunk investment into an ongoing success story of solid performance and future potential. Your Proforma Partners Advisor is here to help.
2) Benchmark your business value drivers.
Where should time, money and energy be invested to improve areas buyers value? The Value Builder System benchmarks eight “value drivers” from your business against the metrics of 20,000+ other businesses. History shows that companies scoring 80+ across all eight business value drivers receive offers that are 71% above the average.
How do your eight business value drivers score? Take 15 minutes to complete The Value Builder Survey and you will instantly receive your score for each business value driver, along with an explanation that can be used to identify next steps for improving your business value.
3) Improve your business value drivers.
Knowing your score for each Value Builder Driver helps you understand how to focus your attention on what business buyers value. Work with your Proforma Partners Advisor to focus on improving value drivers with low scores. Start with simple steps to improve the quality of your financial reporting. Consider your customer and supplier diversification. Target improvements in reoccurring revenue. Each small step that improves the score for a single value driver multiples together to dramatically increase the value of your company in preparing for sale.
In the coming months, the Proforma Partners blog will investigate each Value Builder Driver.
Proforma: financial statements prepared in advance of a transaction.
Partners: those who share an endeavour on the same side or team.
Since 1987, Proforma Partners has facilitated smooth transfers of business assets that minimize operational impact to employees and customers, and are rewarding for the buyer and seller.