4 Business Errors That Spell Trouble for Your Valuation

I once had a friend, we’ll call him Frank, come to me for help selling his office cleaning business.

He had a good size company with about ten employees. He owned all of the equipment and had thorough and consistent cleaners on the payroll.

For years, his business thrived. His employees were being treated and paid well and it reflected in the way they went about their daily operations.

But over time, things began to change.

He took a more hands-off role with the company and put his daughter in control. She had trouble getting along with the staff and they lost a couple of key employees who they were still struggling to replace.

Twenty-five years after opening his doors, Frank was ready to sell the business, but he didn’t know if he had anything left. His company that at one time he considered franchising, was now failing.

He had an unstable workforce.

Unfortunately, that’s not the only way his daughter mismanaged his business. As Frank began to dig deeper into the company’s records, he found a lot of key reports were missing. He couldn’t even find detailed tax returns.

With his problems mounting, Frank was desperate for a way out.

I had to be the one to tell him – it was going to be near impossible for him to find a buyer with a business in that state. He was going to have to pull things together before we could make a sale.

But, what if Frank had come to me sooner? Could he have saved himself the time, effort and money of rebuilding?

One of the major reasons I write this blog is to help business owners like yourself avoid becoming Frank.

If I can help you recognize these four common mistakes that will tank your business’ value and salability, you can fix the issues you have today and avoid new ones tomorrow.

Messy and Missing Records

Potential buyers will want to review at least three years worth of records for your business. They need to be able to see your sales history, operating costs, and revenue streams.

That way, they can break down your company to see if it is scalable and viable for their vision.

When you provide a potential buyer with accurate financial statements and clearly outlined business plans, they become confident in their purchase. If you hand over messy or missing records, they will view your company as disorganized and unprofessional.

Stalled Investment and Improvement

Don’t stop investing in your business – ever.

If you want someone to purchase your company, they need to be able to see a future for the business. You should constantly be looking for ways to create a more efficient and streamlined model.

You also need to identify all of the opportunities to reduce your costs and improve your services.

Lack of Innovation

Is your business up to date with the latest industry technology?

If you want someone to purchase your company, they need to believe it can outpace its competitors. Keeping up with the trends in your industry shows prospective buyers that you are paying attention to the way things are going.

Unstable Workforce

If, like Frank, your business suffers from high employee turnover, you’re going to need to correct the problem before you can make a sale.

Buyers want to see that there is a competent manager in place to give them peace of mind during the transition.

You may also need to take steps to prove your workforce is stable if you use a lot of 1099 employees. Find out more about handling those concerns before your company goes to market.

There’s Still Time to Turn Back

If you read down this list and felt your hopes sinking, fear not.

You can always take the time to correct the course of your business before you sell it. I would love to help you put together a long term plan no matter where you’re at today. Give me a call and well talk things over.