The day may soon arrive when you’re ready to sell your business. You may even have a price in mind, based on similar businesses that have sold recently in your area. Even if your not quite ready to sell, knowing the value of your business can be highly useful if the right buyer comes along. Besides the complexity of the process and emotions involved, entrepreneurs need to make sure they maximize the value of the business they’ve put so much effort and time into the building.
Businesses may also need to be valued for other reasons outside of sales, such as for capital gains tax or inheritance tax computations. Through business valuation services, you can measure your business’s worth based on a unique formula that takes various factors into consideration
Many small business owners, after taking a close examination of their business in its current condition, become disappointed when they find out its true market value. That’s why it’s so important to plan ahead now and prepare your business before placing it up for sale in the future. So how do you increase the value of your business?
1. Seek Advice
You should work with an experienced CPA or trusted advisor who can help you prepare your business for sale, including having an expert valuation conducted via a business valuation services company. For entrepreneurs, Selling your business is one of the most important moments in your life. Professional advice is essential and will help ensure you get it right.
2. Boost your Profits
You can’t expect a high offer if you’re barely breaking even. You also don’t want to take too much money out of the business. Good retained earnings on your balance sheet—the portion of the net income that hasn’t been distributed to the shareholders—indicates to buyers that the business has been profitable and is healthy.
Although running a business can be challenging, it’s possible to increase your business profits with just a few changes in your practices. Business owners who learn to experiment with different strategies to boost revenues become more profitable. Below we have highlighted a few tips that can help increase business profits:
• Set gross margin percent goals to increase profit
• Improve your negotiation skills
• Improve your online reputation
Expand your business into new areas with little competition
Don’t lose business due to lack of follow-up
Understand your customer’s needs and adjust your business accordingly
If your business is struggling to make profits, or if you want to ensure that your profits continue to go in an upward direction year after year, make sure to consult your local CPA.
3. Lower Expenses
In an uncertain economy when every penny counts, even the smallest increase in revenue or reduction in expenses can have an impact on company profitability. The good news is a large-scale company overhaul isn’t necessary. It’s often simple, common sense steps that improve the bottom line, especially for a small business.
Spend some time analyzing your processes and look for ways to increase operational efficiency, cut costs and control inventory without affecting your operations. Brush up your marketing plan and find ways of boosting sales including tapping new markets or offering new products and services.
4. You Have to Spend Money to Make Money
The moment you stop investing in new equipment, maintenance and process improvements is the moment you start reducing the future value of your company.
Use a loan to grow your business. While this sounds counterintuitive, in many cases the right type of business loan used for the right reasons can actually put you ahead of the game. It’s all about having the ability to take advantage of the business opportunities as they arise, and a loan can be a perfect resource to help you capitalize on them. However, be careful not to take on too much debt too quickly. Any loan you’re considering for your business needs to be part of your overall business strategy.
5. Improve Customer Service
People are predominantly emotional. They are greatly impacted by the warmth, friendliness, cheerfulness, and helpfulness of customer service representatives. Many companies are using customer service as a primary source of competitive advantage in a fast-changing marketplace. Excellent customer service can result in repeat business and word-of-mouth referrals. When you make a conscious effort to impress your customers, you create the kind of reputation that promotes word-of-mouth referrals and upsell opportunities.
6. Position your products or services to stand out in the market.
Small businesses with differentiated products and services are uniquely positioned to dominate a part of the market. They have an advantage over their competitors and therefore, can command a higher price. You can do this by developing and promoting any intellectual property, patents or other unique feature of your products or services.
Final Thoughts
It is likely that 10 million small companies will be sold in the next five to ten years. Because of this development, many small business owners regularly approach financial advisors to discuss business valuation services and ideas for transitioning their businesses. As you likely know, there are countless considerations when transitioning your business to either family members, employees or through a sale to a third party. It is important to determine how to enhance the value of your business before the transition. Making cosmetic changes to a company at the last minute before putting it on the market is a recipe for disappointment. Planning and preparation for a transition is the way to go and entrepreneurs need to take the time to do it right.
Limitless Investment & Capital Business Valuation Services
Business valuation requires a solid grasp of both how value has been created prior to the valuation date, and how it will continue to be created in the future. The foundation of business valuation is the ability to understand how a company cultivates ideas or concepts and deploys its invested capital, aiming to drive returns in excess of its cost of capital.
Understanding this process is at the heart of our extensive business valuation experience, whether we are performing a valuation analysis for financial reporting, tax, M&A, strategic planning, business restructuring, or dispute and litigation purposes. Limitless Investment & Capital routinely assists clients with the valuation of businesses and business interests, as well as tangible and intangible assets and complex, hard to value securities We tailor the scope of our business valuations to our client’s specific needs and the purpose of the engagement
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