5 Ways to Boost Your Retail Business Value
There’s no arguing that banks, potential investors and creditors look heavily to a company’s financial statements to determine its value. However, past financials often aren’t the whole story. Below are five additional factors to consider as you seek to maximize your company’s value, whether you plan to sell soon or simply want to be ready when that day comes.
1. Build buyer's confidence in the fact that the business has the potential for increased profitability. The first step in what might be the most important aspect in making a business attractive is to produce documentation showing steady revenue and cash flow. There are other steps to show off your untapped potential, however. For instance, a key way to build value into your business is to create a plan that will drive future growth. If you plan on continuing to operate the business, such a plan will help you think strategically and advance the business despite day-to-day operating demands.
2. Good organization will help you run your business more efficiently. When it comes time to sell, potential buyers will find your business and its operations easier to understand. No buyer wants to take over a disorganized business. Prepare historical financial documents (ideally up to three years of tax returns and financial statements) and other important documents in a binder with tabs and an index. This will not only serve as a great resource for you, it will provide potential buyers with easy access to the information they’ll need to make a buying decision.
3. Many banks are still hesitant to lend money for business purchases. As a result, buyers of businesses with tangible assets are having greater success securing purchase loans. Tangible assets can be used as collateral to secure lending from banks. Focus on highlighting the tangible assets within your business. Supply potential buyers with a comprehensive list to give them a leg up when applying for loans.
4. It's more important than ever that you're willing to finance at least part of your business sale. Banks are reluctant to lend for a business acquisition without some level of seller financing included in the transaction. In today’s market it’s rare that a buyer can purchase a business without some form of financial help. Sellers willing to finance part of the sale price and have buyers pay them back with interest over time are having the best success. Offering seller financing has the additional positive impact of showing that you have confidence in the future of your business and that you'll help the new owner succeed.
5. Concentrate on the strong points of your business when the time comes to meet with potential buyers. You know the business better than anyone. There are bound to be some areas where your business excels, so make sure you highlight those. Highlighting what makes your business special will make you stand out to buyers and illustrate why your business is a good investment.
Mike Handelsman is group general manager for BizBuySell.com and BizQuest.com, business-for-sale marketplaces.
