Selling a business is hard. Selling a small business is even harder. But not impossible. And, lucky for you I happen to know how to sell them. Today, I’m going to give you my top tips and tricks for selling your small business by improving your valuation.
1. One thing I’m going to harp on before we dive in is seller’s discretionary earnings, or SDE. Consider the potential buyers for your business. Chances are, most business buyers will either want mailbox money or want to be an owner/ operator. With smaller businesses, the owner/ operator buyer candidate tends to be a corporate refugee. Picture this: someone that’s tired of the 9-5, makes great money and receives full benefits but just wants to be in charge of their own growth. These refugees will not purchase smaller companies that pay the owner/ operator less SDE per year than their current salaries to work more hours. If you wouldn’t take the same deal, why would they? So we have to make your business attractive to these refugees seeking freedom from their corporate bonds.
2. Focus on your business’ profitability. A small business with remarkable profit margins will be instantly more attractive to any potential buyers. (One way to increase profits by thinking outside of the box is by acquiring another company instead of growing organically. I know this isn’t the least expensive way to increase profits BUT it will increase the size of your company, grow your profits, and make your business that much more appealing to potential buyers. Win, win, win.)
3. Make as many things as possible automated. The less a prospective buyer has to do to manage the day-to-day, the more attractive your business. Please don’t be that business owner that has ten different email accounts all on an outside server to handle the daily running of your company. Please don’t be that business owner that has some quirky way to remember when to pay their business license. Please automate as much as possible and (extra credit opportunity!) keep a record of EVERYTHING. Put yourself in the buyer’s shoes: the former owner hands you a an operations manual detailing how to run the whole business. Sounds pretty great, right?
4. Work in the business as little as possible. Many potential buyers will not want an investment that takes the bulk of their time. If the business does not need your constant attention, chances are that it won’t need a buyer’s either. Find ways to slowly step away from the daily grind of managing the operations and automate them OR designate them to employees.
5. And, my #1 piece of advice: have accurate, professionally done books that cover your last 3 - 5 years in business. I can’t stress the importance of this one enough and if you don’t take any other pieces of my advice, please just take this one. A buyer needs to know what they’re buying. They need to know how you’ve run the business and where they can expect the business to go when they take over. And you know what accomplishes this? A history of professionally done books for the last 3 - 5 years. I promise, your investment will be repaid in spades.
We’ve covered my top pieces of advice to make your small business more attractive to buyers by improving your valuation but maybe you need just a bit of one-on-one coaching. Because I want you to succeed and I want your business to sell for as much money as possible, I’m more than happy to talk to you. Seriously. Click here to book a FREE call with me today so we can talk about how I can best help you and how we can get your business sold!