Business Value Maximization

Vision is important in any company, large or small. If you have no idea of your end goal, the beginning of your business is likely to take off in the wrong direction. If you haven’t considered how you are going to exit your company in the future, you should – now.

The journey to value maximization commences with the starting transaction. Confidence in your business progression comes with forward-thinking strategies and a solid understanding of the sales process. The following are several crucial steps to establish that understanding.

Get Professional Help

For the majority of company owners, the largest financial decision of their life is the sale of their business. An event of such momentous import requires the attention of an experienced team of professionals. Such a team should include at least one of each of the following: a CPA, a financial advisor, a business broker and an attorney. Experience in business transactions and related tax and legal effects are necessary for the role of the CPA and attorney. The broker must be capable of a credible business valuation, a potent marketing strategy, and have all of the skills necessary to negotiate the best deal with buyers. Don’t forget: just because your firm is on the market doesn’t mean that someone else will be managing your business. You will need to maintain the competitive edge throughout the whole sale so that the value is not diminished. It is exactly for this purpose that a team of professionals is necessary to focus on the sale for you. If your sales and organization dwindle at the last minute, your long-planned exit will lose much of its potency.

Look at it From The Shoes of The Buyer

When you attain a solid understanding of how sales work, you now need to empathize with the desires of the buyer: acquiring a sizable payback to the investment they made. While some firms may have enough vision to see the value of long-term investment, most small buyers will look more near term to see how quickly they can make good on their investment. With the value determined primarily by cash generated, it’s essential that a business’s cash flow is easily visible to potential buyers. Detailed and organized accounting records are imperative. If you’re hoping for a pot full of gold at the end of the rainbow, forget about taking notes on tissue paper.

The Timing Factor

There’s no doubt about the importance of timing in the sale. Market the firm when it’s at its best. With high returns and growing capital, the market is your friend. Most will want to catch the wave while it’s coming in strong, and this is the prime time for a strong valuation of your business. But be warned: the early bird gets the worm. And the bigger your business, the earlier you have to get up. Firms worth $500,000 or greater usually will be working 6 – 12 months on their sale. Firms of a smaller size can have the action completed within as little as 2-6 months.

What Will You Get in The End?

Valuation of a firm is no firm science. It’s an art of finding a win-win where you and the buyer are happy. There are generic rules to the game including EBITDA consideration and multiples of current earnings, but the end result is up to you. Business value maximization in your business sale entails disciplined, visionary action. Daily progress toward such a goal can differentiate between a business transaction and an artistic finish.

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