Most people know the importance of staging a home before showing it, or getting a car washed before it’s sold, but few business owners do anything to increase their companies’ marketability. Some refuse to put any more effort, money, or time into the business, and they just want to move on. However, the competitive nature of today’s business world makes that a risky strategy. In this blog, we highlight several factors that make your business more attractive to buyers, which results in increased post-sale profits for you.
Loyal Customer Base
Buyers aren’t just looking at the bottom line the company reports each year; they are looking for the customer base’s regularity. Companies with loyal customers are a great source of recurring revenue, as are those with effective, repeatable marketing strategies that can be duplicated by the incoming owner. When a company has these qualities, it’s more valuable to potential buyers.
Potential buyers also want to see top-line revenue growth because it gives them an idea of the potential for future development. Revenue growth is as essential as the company’s cash flow. While it’s relatively simple for owners to cut bloated expenses and pump up their products’ profitability, it’s almost impossible for them to copy the magic recipe that makes people want the products to begin with.
Positive Cash Flow
This factor is simple to understand. If the company’s cash inflows are more than its cash outflows, it’s more marketable to potential buyers. A business buyer looks for a high ROI, and the more cash the company makes, the more the owner can pay in dividends, invest into future growth, or buy back stock. If the company has legitimate opportunities to grow cash flow, buyers get a higher return on their investment. Consult your CGK advisor for cash flow advice and recommendations.
Businesses sell for higher prices if the owner has found a way to set the company’s services and products apart from those of the competition. When owners do this, buyers realize the value of buying that particular business rather than that of a rival, and they can estimate the profit potential of ownership.
Work on Multipliers
Business valuations depend on various calculations, and it’s important for owners to understand how the process works. Some industries use a standard multiplier to arrive at a fair market value, but owners can increase these multipliers with a bit of work. CGK can help. By working with us, and adopting a long-term view of your company, you can create more future value.
The easiest and most effective way to increase a company’s value is to give buyers more confidence. Whether it’s differentiation of services and products, increased cash flow, or other value-adding benefits, business buyers are willing to pay more for companies with high cash flow potential. The best way to find the right buyer is to enlist the help of a competent local M&A advisor. Call or email us for a free consultation today, or visit our website to learn more.