There are numerous ways of valuing a business. But only one that works – and that is the price you are prepared to accept and the buyer is prepared (and is able) to pay.
What you can do though is portray your business is the best possible light. So even if you are not making desirable profits – or even any profits – you can still sell your business for the best possible price. So what counts in making the sale? 1) Management. The more the business relies on you the less valuable it is. You need to make yourself redundant as quickly as possible a buyer of whatever nature will then have no worries if you exit stage left at completion. 2) Brand awareness. Even the smallest business should create some sort of brand. Even if the buyer intends to dispense with it on acquisition, it will be what, in part, attracted them to you in the first place. 3) Market position. It’s actually not that good to have the market sown up as this suggests little or no room to expand. Conversely, if this is what is going to attract your buyer, make sure you have evidence of investment in R&D. 4) Pareto’s Principle says that 80 per cent of business will be done with 20 per cent of your customers. What is damaging to value is where 25 per cent or more of your business is with one customer – and even more so if there are no novation rights in the contracts. 5) Good books and records, particularly financial. If you can demonstrate that your management accounts are very consistent with your financial statements, that gives substantial confidence to the acquirer day one. 6) Motivated staff, loyal to the company. A little more intangible and difficult to quantify but if you can demonstrate this, all the better. 7) Fully patented and registered products. Where relevant, the confidence this give to a buyer is immense. 8) Realistic trading terms with your suppliers and customers. Equally you will need to demonstrate these are adhered to. 9) Proper HR records and sensible contracts. Buyers want confidence staff are being treated properly in this ever litigious environment. 10) Good advisers on both sides. Including qualified corporate financiers and good commercial lawyers. The difference this makes is immense, mainly because such teams all speak the same language and hopefully, if you choose well, aren’t into point scoring (the kiss of death for lots of fragile deals). Jo Haigh is head of FDS corporate finance services. Jo can be contacted on 01484 860 501/07850 475 878 or fdsgroup@jo-haigh.com.Share this story