Many business owners want to know what their business is worth, but business buyers want to know what it’s worth after the original seller is out of the picture. You see, buyers determine value not by how well your business is run, but by how well it’s run without you. After all, once the sale goes through, you’ll be gone. What will be left? The value of a business without its original owner is known as the “transferable value.” And it’s important that you maximize transferable value to get the best possible price for your business.
Does Your Business Depend on You?
Start by asking yourself some possibly uncomfortable questions:
- If you left your business today, would it negatively impact cash flow?
- Who will run your business after you leave? And would that result in disruption of your cash flow?
Likely, the answers aren’t everything you would hope for. To maximize the value of your business, you need to focus on new value drivers that will build value without you in the picture. Whether you’re planning to transfer the business to a new generation of family members or to a third party buyer, your legacy will be how well you’ve positioned the business to succeed without you.
Driving Transferable Value
To achieve your goal, you’ll need new strategies and a new focus. You’ve got to make the business the best it can be and prepare to walk away without massively disrupting cash flow. That means adopting new methods like:
- Next level management teams
- Diversifying the customer base
- Developing recurring revenue
- Demonstrating scalability
- Improving cash flow
- Installing financial controls
Each of these new value drivers must not only positively contribute to cash flow, they must also be able to do it under new ownership.
Selling a business requires advance planning, and perhaps the biggest part of that is putting the right people in place. Your management team for the next phase of your business’ life must be as dedicated as you are, and as committed to the growth and health of the company. By making sure you have the next generation of leaders in place, you reduce the amount that the company revolves around you. While that might give your ego a bit of a bruise, it’s exactly what you need to do to maximize your transferable value and therefore your profit when selling.
CGK Business Sales are experts in selling businesses, whether in our Washington DC office or at any of our nationwide locations. We succeed where others fail, and we do it because we really know how buyers and sellers work. Let us help you sell your business. Contact us confidentially today for a no-obligation conversation. Even if you’re years away from selling, now is the time to start preparations, and we can help you do that.
