With forethought and planning you can attract more potential purchasers and maximize the value of your business. It’s more complicated than cleaning and polishing your car before placing a classified ad, but the concept is the same.

As a general rule, the value of a business is determined by a formula – earnings x multiplier. The multiplier is a function of perceived growth versus perceived risk. Grooming can reduce the risk and increase growth potential, greatly affecting the multiplier.

Questions we can help you to answer to address issues of risk are:

  • Am I crucial to the company’s continued success?
  • Does the potential buyer need specific industry experience?
  • Will clients and suppliers easily accept a new owner?
  • Are appropriate management, operational and information systems in place?
  • Are key positions filled and stable?
  • Is the company’s intellectual property preservable and transferable?
  • Is the company’s market position stable?
  • Are legal and contractual arrangements in order?
  • Are reports of past performance credible?
  • Is the business platform right for growth and a profitable future?

As you ask yourself these questions, it will become evident, that some risk factors are more easily dealt with than others. For instance, if you’ve become crucial to the company’s success and have an inextricable relationship with the clients and suppliers, you will need to exit gradually while grooming someone else to take over. A “turn key” business is always more attractive to a buyer.

These questions also lead to an ideal business, that kind of “move in” real estate agents tout. You can create an “ideal” for your business and work toward it. The goal is to cap or minimize the risks and emphasize the potential, to maximize the purchase price and/or the likelihood that you get paid, and the business continues on successfully.