Boost the sale price of your business by making it ‘strategically’ attractive

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Boost the sale price of your business by making it ‘strategically’ attractive

Buyers use a very simple methodology when valuing a business. They consider whether the benefits of purchasing are purely financially based (where there is a proven history of reliable and increasing profitability) or there is some sort of strategic value where they are purchasing the growth potential of the business.

  • Michael Derin
    Michael Derin is the CEO and founder of Azure Group, an accounting firm that specialises in working with entrepreneurs and fast growing SMEs. Michael also acts as virtual CFO for numerous organisations and is passionate about helping SMEs to be more commercially aware and business savvy.

The financial news pages often feature companies which have achieved a strong sale price by making themselves ‘strategically’ attractive to buyers. However I believe it’s not just those “out of the ordinary” businesses that can create hype around their sale. If you are considering a sale, this is worth considering.

I have seen many businesses capitalise on aspects of their organisation - beyond just profitability - that greatly appeal to a buyer and add more value to the sale price.

However, your business needn’t fall into only one of these categories. The reality is, only a small percentage of businesses are sold for purely strategic reasons, the majority are sold based on their inherent profitability. What many businesses don’t tend to realise is that combining both methodologies will enhance their overall attractiveness and value to a buyer.

In any type of business sale it’s important to pinpoint who your buyers could be, what their needs are and what drives their organisation. This will highlight what aspects of your business are likely to be deemed valuable and what you can concentrate on developing further.

Profitability is nearly always an important factor and steps should be taken to maintain and even increase revenue and profit levels to put the business in a strong value position for sale.

But how do you uncover the strategic elements of your business that could be exploited by the purchaser?

The key is to identify the synergies that exist between your business and the purchasers and what aspects of your organisation they could take advantage of for future profit. For instance:

  • A complimentary service or product to add to their existing business offering 
  • Access to a new customer market they have been unable to leverage previously
  • An innovative service offering, developed internally that is unique to the market
  • Technology they can be used to enhance their business offerings.

Engaging a corporate advisor can also help in uncovering your business’ strategic capabilities.  Not only that, they can add significant value in the acquisition process by helping you find and engage in discussions with potential buyers including managing the valuation and due diligence processes.  Ultimately a corporate advisor will manage the complex process of enticing multiple buyers in order to create a “bidding war” to further increase the sale price of your business.

At the end of the day, you want to position your business in the best possible way to ensure it attracts the highest possible price. By putting yourself in the buyer’s shoes and thinking about what aspects of your business they could not only sustain but leverage off to significantly grow profits, puts you in a better position to place a higher value on your business.

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