You’ve spent years building your business. It’s likely your most valuable asset, and so you hope that others will see the value in it, too. But finding a good buyer rarely happens overnight. It takes a little luck, and luck demands preparation. These five strategies can make your business a more attractive acquisition, helping you find the right buyer and get a premium price.
Improve Your Financial Metrics
The best strategy for increasing value is to create cash flow that continues under new ownership. Optimize your use of capital assets and labor to promote efficiency without cutting corners. Your financial documents must be in order, with clear data and impressive numbers—not mere window dressing that conceals serious deficits.
If buyers cannot understand the business or how it is profitable, they may disregard your financial statements. So make them clear and comprehensible. Finance your business in a sustainable way, and ensure this is well-documented.
Plan for Succession
It might seem counterintuitive but a business that is heavily dependent on you is worth less. Buyers want to avoid risk. If your business is dependent on you as a figurehead or charismatic leader, that means value will likely decline when you leave. So get a team in place who can ensure your business runs well without you. Consider what might happen if you went on a month-long vacation. Then begin shoring up any areas of weakness so that your team has the full capacity to run your company when you’re not around.
Diversify as Much as Possible
No matter how much money you make, if you’re dependent on a single product or a small group of clients, your business is a high risk one. Lose one client, and you may lose profitability. Face competition from a new entrant to the market and watch value tank.
Work to broaden your customer base such that no single customer accounts for more than 20% of sales. Don’t produce more products than you can reliably deliver or afford, but consider expanding your reach with a new line or two.
Focus on Curb Appeal
In some ways, selling a business is similar to selling real estate. You won’t attract qualified buyers if you don’t have strong curb appeal. What that means varies from business to business. At the very least, your physical locations must be in good shape, and your brand must be respected within your niche.
Look to the Future
Buyers want an investment—not something that was once great but now is in decline. Don’t neglect your company. Start planning for the future, and stay ahead of the curve—whether that means incorporating new technology or developing it. An estimated 10 million businesses will go on the market as owners retire in the next 10 years. If you want to get out soon and earn a tidy profit, you need to begin planning for the future now. Turn your business into something buyers can get excited about, and watch as the offers begin pouring in.
About Kratos Capital
Kratos Capital is an independent, Dallas M&A advisory firm that specializes in mergers and acquisitions, private capital raise and corporate finance, across a broad range of industries. Our bankers comprise an aggregate of over $1 billion dollars in completed transactions, resulting in over 200 deals completed in the private middle-market.
We are an experienced, highly effective firm specializing in managing transactions with capitalized values from $25 million to $300 million. Our industry-tailored investment banking expertise helps owners maximize the value of their investment of time, money, and hard work.
We measure the success of our process by the outcomes it produces. Routinely, our methods result in attractive initial offers, and clients closing a deal at or above their initial valuation range.