This is the 1st of a 6-part series on Amplifying Company Valuation
When selling your company, taking some key actions can significantly increase the price. In fact, the valuation of a business is like a golf score. In golf the score is more heavily influenced by the final chipping and putting than by the 400 yards leading up to the green. Similarly, the years right before you sell your company can have a bigger influence on the value than the first 20 or 40 years you spent building it.
Businesses are typically valued on the 3 to 5 year period before a sale, with a heavier emphasis on the most recent years. Most owners leave a lot of money on the table because they put their company on the market without taking steps to increase its value.
But is it really worth taking the time to make some changes? Let’s take a look at what could happen if a company increases revenues by 25%, streamlines its costs, and becomes more attractive to potential buyers. This could reasonably translate into a 220% increase in value, before you factor in the potential for higher growth or other upsides. If this company would have sold for $10 million, the owner could now get $32 million.
So how do you get there? Here are 5 actions that can amplify what a company is worth:
5 Keys to Increasing the Value of a Company Prior to Sale
1. Choose your ideal type of buyer and build their needs into your company
2. Drive profitable growth
3. Become the shiny penny through differentiation
4. Optimize your cost structure, operations and management
5. Define strategies that will drive future growth
In addition to increasing a company’s value, these types of steps can also increase profits while preparing to sell. While this can sound like a lot to undertake, only a few changes can have a profound impact.
We will explore each of these areas more deeply in the next 5 parts of this series. You can also find additional articles on our blog page or reach out to us to learn more.