3 simple changes that could increase the value of your business before you sell it

Building a business from the ground up can be a hugely rewarding job, as all your long hours of hard work and burning the midnight oil finally pay off.

Of course, at some point you may decide that you want to sell up, whether this is to fund your retirement or start a whole new project. When this happens, you’ll obviously want to ensure you’re getting the proper reward for all your hard work.

So, it can be useful to make a few simple changes to your business when the time comes, to boost its value. Read on to find out three simple tips and why they can help.

1. Improve your cash flow

If you want to boost the value of your company, strengthening your cash flow is one of the most important things you can do. Even if the potential sale is several years away, making this improvement can be hugely beneficial for you.

When investors consider taking over a business, knowing that it has a positive cash flow can make the company seem much more attractive. After all, if its finances are healthy now, they may be even stronger in the future.

If your business’s cash flow is steadily improving under your management, documenting this trend early can help you to attract investors and boost your company’s value.

Of course, if your company’s finances need some improvement, there are a few useful changes you can make, such as:

• Making regular thorough inventory checks
• Conducting customer credit checks and ensuring invoices are paid quickly
• Cutting down non-essential expenses and tracking the difference this makes.

It’s important to put these measures in place sooner rather than later, so that you give them the maximum time to work before the sale.

Another benefit of improving your cash flow early is that if you later change your mind and decide to postpone the sale, your business’s finances will be much healthier!

2. Having a clear and defined management structure

Another useful way to improve the value of your business is to be able to demonstrate that you have a clearly set and defined management structure. After all, even though you might be an excellent manager, it’s important to show that you’re surrounded by talent, too.

Seeing that a company has a highly competent set of people in charge can be very attractive to potential buyers, as it shows that the business is being run effectively.

Conversely, if your team isn’t strong enough then the buyer may have to search for other people to run the business once they take it over. To compensate for this inconvenience, they may choose to make a lower offer than you were expecting.

Furthermore, however you choose to manage your company, whether you prefer to centralise decision-making or give your staff greater autonomy, it can be useful to highlight the benefits of this approach.

For example, if you prefer to give your managers more independence when it comes to decision-making, you may want to underline how this enables their teams to be more flexible. This approach can help them to respond to client requests more easily.

While there is no “correct” way to run a company, being able to highlight how your preferred management style is effective can really help to boost your business’s value.

3. Being free from debt

Another simple way to boost the value of your business is to settle any debt you might have. This can help to show buyers that your company is financially viable and doesn’t come with any problematic obligations.

In many sales, having some amount of debt is common enough that it’s rarely a deal-breaker. After all, according to government sources, the number of small or medium-sized enterprises (SMEs) with any debt has more than doubled due to the financial shock of the coronavirus pandemic.

That being said, eliminating debt can make your business much more attractive and can help to boost its value. If a potential buyer knows they would have to take on financial obligations after the sale, they may reduce their offer accordingly.

If you want to reduce your business’s debt, there are a few useful things you can do, such as:

• Review your company’s outgoings – Cutting down any unnecessary expenses can be an easy way to save money and reduce your business’s debt
• Expand your revenue streams – As obvious as it may sound, having greater income can reduce the need to rely on debt and can help you to pay off any you might have incurred
• Seek professional advice – Working with a financial planner can help you to manage your business’s finances more effectively, enabling you to pay off your debts and build cash reserves.

Get in touch

If you want to get your business ready for sale and feel you would benefit from working with a professional, we can help.

Email enquiries@rosebridgeltd.com or call 01204 300010 to find out more about how we could help you.