Growing & Enhancing Your Business
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Focusing on growing and enhancing your business not only increases your earnings, it also drives the value of your business. By Lowering the risk of events that have a negative impact on the business from employees, customers and competitors creates a more stable and valuable business. The items below are just a sample of the things that can positively impact a buyer's interest in a business and how much they are willing to pay. For a more detailed explanation of items for your business please contact O'Keeffe & O'Malley.
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- Cash Flow/Earnings:
Buyers typically base their offers on the earnings or cash flow of the business. Extraordinary and excessive expenses, owner perks and benefits can negatively impact value. Focus on increasing your bottom line as each additional dollar generated in earnings can yield $3 to $6 in selling price.
- Management Team & Owner Dependency:
Are key customer and vendor relationships dependent on the owner? Buyers want to see transferable relationships that won't be overly vulnerable to competitors once the owner departs. Develop a strong management team to back up the owner. Otherwise the owner will need to stay working with the buyer for an extended period of time and the price may be paid out over time.
- Non-Compete & Confidentiality Agreements:
Key employees are a threat to become competitors. Having employee's sign non-compete and confidentiality agreements before they find out the business is being sold keeps you in control and will comfort a buyer's anxiety.
- Customer Base:
Revenues derived from several large customers impairs a buyer's confidence in the future of your company. Implement a marketing plan that will lead to the creation of new markets or customers. Ideally no customer should account for more than twenty percent of total revenues.
- Employee Dependency:
Are employees cross-trained in multiple areas of the business? This minimizes the negative effects of employee defections before and after a sale..
- Pre-Due Diligence:
Conduct a pre-due diligence of your organization. Letters of Intent (LOI) often fall apart because of unknown items that come up in due diligence or because the due diligence process drags out trying to resolve certain issues that could have been fixed if known earlier. Identifying hidden skeletons prior to selling allows owners to resolve issues on their time frame. Having a pre-due diligence package assembled prior to selling comforts and impresses buyers plus it speeds the selling process towards closing after a LOI is executed.
