Merger & Acquisition Insights

6 Ways to Make Your Business More Marketable When You Sell

Posted on January 31, 2019 by Beau McGinnis

When business owners are considering a sale, they’re often asking themselves the age-old question of “How can I bring more value to my business?” Often more value means more consideration from prospective buyers and likely a higher overall price consideration. In this piece, six different ways have been outlined that any seller would benefit from at selling time.

Grow the Business

Stagnation does not sell. And even worse, decline often leaves buyers disinterested. Growth within the business inspires multiple questions within buyers’ minds. What is causing this growth? Is this growth sustainable? Is this growth expected based on the external environment or is it an anomaly? Is this growth organic or a byproduct of other factors? Growth at the very least intrigues buyers – stagnation does not. If your business is in a decline or has plateaued, clearly be able to convey how a buyer could grow the business post-transaction and increase return on investment.

Develop a Clear Understanding of Current Value

What makes your business stand out from the rest? Frequently we see owners of companies clearly outline the differentiator in their business, and rightfully so. That differentiator is a large factor in bringing in the business. The differentiator can range from something as small as a confirmation call the night before a trip or as large as state-of-the-art equipment. Whatever it is, it provides value. Additionally, understanding the industry value drivers is critical. In trucking, driver shortage is a real issue – If an individual owns a trucking company with qualified drivers, low turnover and great safety records, that in itself brings tremendous value.

Ensure Clean and Current Financials

If the books of the business are a mess and numbers seemingly fail to tie together, that might be a deterrent for a prospective buyer. At the very least, it doesn’t make it any easier for the seller to truly understand the value of his/her business. Current and clean financials might not seem like a looming issue in day-to-day operations if the owner and accountant look at the numbers every day, but when presented to someone not in the day-to-day operations of the business, it can often be detrimental to a possible sale. This is one of those items that provides tremendous value to both the seller and the buyer.

Develop an Experienced Management Team

There’s a certain weariness that exists among buyers when evaluating a business and its accounts. A real fear exists that if the owner is suddenly out of the picture, the business will falter. Whether that be by means of a “coup” by employees who are only loyal to him/her, accounts disappearing after the relationship is no longer, or simply because the owner has carried such a tremendous load, owner dependence is real. To avoid these things from happening, make sure the employees are well-trained and knowledgeable about the processes within the company. Additionally, give them clear expectations and authority to be able to deliver results.

Avoid or Reduce Overall Customer Concentration

There’s a reason the saying “Don’t put all your eggs in one basket” exists, and its day-to-day applicability is wildly apparent, especially in running a business. We’ve seen owners of businesses gain an account, pour resources into it, and then watch it grow, grow, grow. Suddenly though, while they’ve been watching this “flower” grow into the sky, they’ve forgotten to turn around and water the rest of the garden. Before they realize it, the rest of the garden has wilted. And then, when that beautiful flower dies, their garden is dull and lifeless. The same goes for business. Just like that flower, that account might end for reasons outside of the owner’s control, and when it does, the owner is the one left in the dark. Having low risk means a higher value. Avoid or reduce overall customer concentration.

Extend the Life/Remaining Years of Contractual Revenue

Business owners love revenue that they can count on. Not only does it make the budgeting for the year easy to manage, but it serves as a true value-adder for prospective buyers. As mentioned above in the owner-dependency paragraph, the buyers are wanting to ensure they get the business that’s being advertised, not one that suddenly dissipates after the owner leaves. Contractual revenue does just that. Contractual revenue drastically minimizes possible risk, and when the risk is low, the value of the business is high. If the owner has a chance to extend the remaining life on these contracts, they ought to take that opportunity because it will provide tremendous value not only to them, but to a prospective buyer.

Overall, there’re certainly more than six ways to make your business more marketable for when you sell, but these six are variables we see nearly every day. Improving on these aspects can dramatically alter the way buyers look at your business and the overall value that accommodates it.

Tags: Selling a Business

Category: Articles