Surprises rarely work out to be a good thing in a business transaction. When you present a potential buyer with records of concurrent years of high sales figures but your business has an uncertain future, it can put your deal at risk.
There are plenty of risks outside of the control of business owners in every industry. Whether its new tax rates, the effect of trade wars, industry slowdowns, or nationwide recessions.
You can also face surprises internally. You may have to increase pay rates, have difficulty hiring qualifies new employees, lose your technological edge, or have difficulties complying to industry regulations. When these things happen, it can drain the value of your company that took you years to develop.
Fortunately, there are steps you can take to protect the value of your business. Let’s look at how you can prepare your company to be ready for surprises.
Know Your Value Gap
A value gap is a difference between what a business owner thinks their company is worth and the price it could sell for in the current market. The larget the gap, the more difficult it is to structure a successful sale.
Value gaps can come as a major surprise to many business owners. But, once you have established what your value gap is, you can put plans in place to close it. Start with an accurate valuation of your business and then look at the actions you can take to increase its value.
Are there new technologies you can use to give your company a competitive edge? Can you strengthen your customer service team to ensure a higher customer retention rate? Are there any ways you can reduce to cost of your inventory?
Get Your Company Ready to Respond to Market Conditions
You also need to focus your efforts on getting your company ready to respond to market conditions. The more prepared your business is for unforeseen obstacles and opportunities, the quicker and more steadily you will be able to grow.
Find out what will be going on in your industry in the coming years and look for ways to get ahead of the tide. You don’t want to be the last business in your category to choose innovation.
Choose the Right Timing
Depending on your industry and location, there are more or less favorable times to sell your business. Try to make time your ally by putting together an exit strategy for your business years in advance of when you want to put it on the market.
That way, you can observe the market and learn about the ranges of value you may be able to recoup on your investment. Then, when you’re ready you can decide to make the sale.
Unfortunately, this is not an option for many business owners. If you’re ready to sell your business today, get help maximizing your value and finding a buyer. Contact Dolan Sales today.