Several business owners do not give much thought to the value of their company till the time they begin to consider their exit strategy. Because plenty of owners of businesses sink the majority of their wealth in growing the company over the period of their respective careers, selling the business is typically the main strategy they use when it comes to creating liquidity and starting on the next chapter.
In some cases, based on the distinctions between rules of thumb or other methods, entrepreneurs might find themselves asking “how to increase the value of my business before actually selling it”. Regardless of how or whom you would like to sell your business, there are options for increasing your business’s value based on value rather than just waiting to negotiate a higher sale price. Here is how to prepare your business for a valuation.
1. Invest in Marketing and Brand
Marketing and branding must support the efforts of your sales team. Confirming that your brand is well-defined and consistent helps differentiate your business from the competitors and can make a huge difference between premium pricing and commodity for your services and products. A robust brand will allow you to attract more customers while also helping to retain them.
2. Handle Customer Concentration Risk
It is best recommended that you take a much closer look at your current customer base and assess whether your business relies too heavily on a single customer or client when it comes to its overall revenue. Even though you may have joyfully built your business on a very robust relationship, in case your business changes hands, the relationship will unlikely hold the same value. A buyer will indeed be aware of the risk. Although it is not a single customer, your client base might be concentrated in one single industry or a specific geographical area. Priotiosing building out your business through selling into some new areas or markets will allow you to decrease customer concentration risk. When it comes to business valuation, taking the help of business valuation experts and consultants in Australia is also recommended.
3. Reduce Supplier Risks
In the last few years, many companies have learned how vulnerable their supply chains actually are to whims of weather and climate, geopolitics, labour constraints, etc. Diversifying vendor relationships can prove to be ideal, distributing the risks more widely and enhancing long-term performance. It will also allow you to create opportunities, assisting in outselling the competitors in the meantime. Just remember to focus on asset valuation as well.
4. Re-Assess Pricing
Many businesses often go long periods without giving a thought to how much they charge for their products or services, which is a common mistake. If a simple price bump can help you increase your sales because the customers are ready to accept it, there is simply no reason not to do it. This does not mean that a price hike is always a good choice or that you should assume that your clients won’t walk away. However, if you are monitoring revenue and sales performance diligently, you will have an easier time knowing if a price increase is a good idea or not.
Wrapping Up
Increasing the value of your business is worth the effort before selling it. However, most entrepreneurs are unaware of how to do it. Follow the tips from this article to prepare your business for valuation.
