Building Value
If your business is profitable then potential buyers should be attracted to your business, building value in business may include making changes or simply uncovering existing value that you can promote to buyers. By building value, it can pay off in the form of a higher sale price. What makes a business more valuable to a potential buyer? In recent years its shown many consumers become repeat buyers when they view a business as being better than any competitor. Innovation, high quality, and great customer service are just a few things that can drastically help separate a business from the competition.
Is building value important?
When managing a business, can require you to wear many hats and look at the fundamentals of building value in the business. This may look different to each individual business depending on the sector. However, we have included 3 fundamental tips in this article. You will benefit from building the value of your business before a sale. This can include making changes or simply understanding the existing value that can be promoted to potential and existing buyers. Here are three reasons why value building can be so important:
1. Building value could look like a higher sale price.
Businesses typically receive an appraisal, and then the purchase price can be negotiated, based on the appraisal. Changes can be made to result in a higher value. It could be that multiple parties are interested in your more valuable business, which will increase the price you receive at closing if the negotiation goes well. If you build value and come to the conclusion you do not want to sell your business, you can drive & increase profit from the company moving forward. Should you then decide to sell the business later down the line, you could demand an even higher price from your track record of increased profit.
To understand the business value, put yourself in the buyer’s shoes. What makes a business more attractive and valuable to the buyer? Typically buyers want a business that will have an easy transition period to the new owner and a company that has growth potential to boost sales and profits.
2. Differentiation From Competitors
The majority of businesses face a high level of competition, with companies succeeding when they are seen as distinctive or unique in the marketplace. To think about the services and products that people purchase from the same business repeatedly. An example of this would be, owning multiple Apple products and perhaps always considering Apple first when buying technology. Or, you may use Apple Music/Spotify as your go too app for music and podcasts. Consumers will become repeat buyers when the company is viewed as better than any competitor. High quality, innovative products, and great customer service can help you separate your business from the competition.
3. Consistent Financial Performance
During the COVID-19 pandemic, If your company grew sales and profits whilst many different firms in your industry struggled? If so, the business is more valuable than the competition, with this positioning, it’s an opportunity to attract buyers. A company with consistent higher profits and cash inflows being generated will motivate buyers. A purchaser wants a business that can maintain profitability in any type of environment, and buyers will typically pay more for these companies. Businesses with repeated business through subscription, can generate higher revenue and are particularly valuable. Netflix, for example, had over 207 million subscribers during the first quarter of 2021, and recurring revenue allows the company to focus on making great content. As they have a recurring revenue stream, it opens up options to invest time and money to find new customers.
The key to building value in your business is to plan the process in a systematic way, whether you’re aiming to grow your business or groom it to get a better price from a buyer. Now is the time to start thinking about the value of your business, what can be added. With fantastic tools online such as free webinars, there is no excuse not to.
