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As a business owner, you own someone else’s dream (though sometimes you might think of it as a nightmare). Yes, there are people out there who dream of owning a business like yours.
This guide provides tips to help you build value in your business. By understanding what buyers find valuable when reviewing businesses, you will learn how to view your own business in a whole different light.
Then when it comes time to sell your business, you will have a much better chance of providing that for which buyers look: The dream business.
Position your business for sale
This process should begin the very day you purchase or start the business. But, if you are already in business, it's not to late to start. To build long-term value in your business, think in terms of:
· Implementation of a good, yet easy to use accounting system
· Implementation of financial reporting periods (weekly, monthly, quarterly, etc.)
· Setting up written procedures to comply with all tax laws and regulations
· Setting up written procedural instructions on key functions in the business
· Developing written organizational and flow charts
· Developing and expanding a business prospectus as your business grows (a template for your business prospectus is available in the book at www.lulu.com/businessadvisor)
Manage your Business
One mistake often made by sellers is to slack-off once they’ve decided to sell their business.
To maintain maximum value, continue to manage your business with complete dedication. Hire needed employees and keep up appearances. Maintain your inventory levels, and keep your equiment and facilites in good repair.
Think like a buyer. Buyers do not place high values on businesses that have reduced their normal advertising and marketing. This is because doing so will have a negative impact on future business; and buyers are essentially buying that future business!
Eliminate any Surprises
Before you put your business on the market, eliminate the surprises! Again, you MUST think like a buyer would think. Review every facet of the business and remedy any problems that could appear during the sale process. No one likes surprises - most of all, your potential buyers.
If you have operational, employee, environmental, legal, accounting, or any other type of problem-- work to solve those problems NOW.
Even if you are not planning on selling right now, solving the problems is the right thing to do. Once the problems are resolved, your business will be more profitable--and your life will be more fun!
Keep Good Appearances
The time to replace old worn-out equipment is before you decide to sell. Don't assume that a new owner will want to do it or that the price will be slightly lower because you haven't replaced it. The time to "shine up" the business is now, even if you aren't selling!
Fix the signage, light switches, cracked glass, restroom fixtures, replace old worn carpet, and paint the place; make it look good! Even if you're not selling, it's just plain good for business.
Keep in mind that anything that increases your business sales (or decreases expenses) also increases profits and your all important cash flow! This, in turn, increases the VALUE of your business! In the year or two before selling your business, don't get too creative with business tax deductions (running personal and other non business expenses through the books).
Everything the Business Owns Has Value
There are many things that actually add value to your business. Don't forget the value of customer lists, proprietary products and/or techniques, well-maintained equipment, secret recipes, customized software programs, and good employees. These are termed "off-balance sheet assets." While these assets may not be used in most pricing models, they do add to value. They improve the buyers's perception of your business.
Look at everything in your business very carefully so you don't overlook those items that make your business more attractive to the buyer.
Maintain Confidentiality
Your business value will suffer if employees, customers, or suppliers know that your business is for sale. Most likely, they may no longer treat you "as usual." Listing your business with a qualified business broker assures you of confidentiality as well as step-by-step assistance through the selling process.
For more free information and articles go to www.gruttercpas.com
For an excellent resource on building value, to to www.lulu.com/businessadvisor
Action Steps
The best contacts and resources to help you get it done
 Update Record Keeping Systems
It doesn't cost a fortune to stay on top of your financial operations. In the days of yesteryear, it was quite common for business owners to "wait" on their bookkeepers and accountants to tell them how the business was doing. Business owners ran their businesses "blindly" from the end of an accounting period until they received their financial reports. But with today's low cost accounting technologies there is no need to wait: you can have up to the minute information and financial analysis of your business operations. Acting upon the information can make you more profitable; in turn, your business becomes more valuable.
I recommend: Updating your accounting records. The value of your business is heavily reliant upon results of financial operations; and the more reliable the books and records, the more valuable the business. Computer and software costs continue to come down in price. Learn what new software products are available for your type business. If necessary, hire someone to properly install and implement updated software so that you can benefit from what it tells you about your business. You might be amazed at what you will learn about your business...and you might become more efficient and profitable. Just as important, potential BUYERS of your business will be impressed that your technologies are up to date; and that ADDS PERCEIVED VALUE to your business. In addition, good financial records are essential to preparing a valuation of your business. Business valuations rely heavily on financial information. If that information is incorrect, then the business valuation will not provide reliable information, either.
Develop an Internet Presence
Today's buyers of business are much more sophisticated than they used to be. One of the very first places a potential buyer will go to learn about your business...is the internet. What will the potential buyer find?
I recommend: Hiring a website developer for your business. If today's buyers (and your customers) cannot find you on the web---your business is loosing out. Your competitors are all there already (or will be soon). Lack of an internet presence makes your business look old and antiquated. If you are thinking that a buyer of your business can implement a site...you are right; but it is going to cost YOU dearly. The buyer will "discount" any proposed offer they might make by their "assumed" cost of setting up a web presence. There are so many opportunities to advertise and promote your business services and product on the internet...that you are penny-wise and dollar foolish if you don't take advantage. The value of your business is based on "perceived value" in the eyes of the business buyer. Having a good presence on the Internet ADDS to the favorable perceptions of potential buyers.
Tips & Tactics
Helpful advice for making the most of this Guide
- Don't assume a new buyer will want to install new hardware and software systems when they take the reigns of your business. Buyers will only see wasted time and increased costs associated with implementation of new hardware and software systems in your business. Accordingly, they will greatly discount any offer they might make. Buyers want to spend their time learning the profitable aspects of your business---not reinventing your accounting systems. The better your bookkeeping systems--the more reliable the financial information. The value of your business will improve as the reliability of your record keeping and financial reporting systems improve.
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What might be the first step to build value in your business? The first step is to shore up your accounting and financial information. Many CPA firms provide software and program analysis, consulting and implementation services. If you don't know a full service CPA who provides such services in your area, please see the suggested sites below:
Accountants World will help you find a qualified CPA for your business.
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The AICPA can help business owners find the right CPA for the business owner's need.
Accountant's World is an excellent source for finding CPAs.
Accountant's World is an excellent source for finding CPAs.
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Reference books and informative blog site for busines owners
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