You may choose to undertake a business valuation for a number of reasons; evaluating your exit options, to support a fundraise or simply as a comparison against your industry peers.. A business valuation isn’t just a snapshot of the profitability of a company but an overview of the company’s value profile over time. Therefore, a valuation can be used as a health check on the business to identify areas for improvement, as well as areas of strength.
Having a valuation done can help to redirect the company to focus on areas of improvement, to enhance the company’s value. There are steps to take towards enhancing the value of your business.
- Professional advice
You should always seek experienced external advice from a professional to carry out a valuation. At Verde Corporate Finance we have carried out a number of valuations for businesses, including as part of the disposal and fundraise process.
- Give yourself a reality check
If you’re only breaking even, the valuation won’t be high. Be careful not to take too much money out of the business. You need a good amount of retained earnings on your balance sheet, indicating to buyers the business is healthy and profitable.
- Boost sales and lower expenses
Look for ways to increase operational efficiency, cutting cost and controlling inventory without affecting the businesses operations.
Review your marketing plan to find ways to boost sales, including tapping into new markets or offering new services. Focus on creating a varied customer base that, ideally, produces recurring revenues.
- Continue to invest
One big mistake business owners make is to take their foot off the accelerator when deciding to exit. When you stop investing in new equipment, maintenance and process improvements is when the company’s value starts to decrease.
- Plan strategically
Formalise a plan that presents measurable goals and milestones for the coming years, giving your business credibility as a going concern with long-term potential.
- Empower your staff
If your business can’t function without you, it will be difficult to find a buyer. The aim is to train, motivate and empower staff that will remain in the business, particularly the management team. Resolve any internal conflicts and strive to keep employee turnover rates down. A strong management team adds value to the business.
- Stand out
If you’re considering an exit, your business needs to stand out from the crowd. Showcase to potential buyers the differences in your product or service from competitors. Ask long term clients for testimonials and feedback on what keeps them coming back.
Regardless of the valuation reason, following the steps above will add strength to your business. If you are looking for a valuation or evaluating your exit options, contact us at Verde Corporate Finance we’d be happy to help.