Remember to Invest in the Face of Your Business So You Get the Most for Your Business
It can be easy to focus on the financial side of things when you decide to sell your business, but the true value of your business includes more than just profit, revenue, and expenses. There’s also the off-balance-sheet items that include such things as your management team, customer base, and the overall appearance of your facilities and equipment.
It’s not unusual to compare the sales of two companies with similar financials and find a drastic difference between the two final selling prices simply as a result of the higher value of one company’s off-balance-sheet items. Don’t forget these aspects of your business before you go to sell because they are the fundamental strength of your business, thereby increasing its value.
In particular, the appearance of your facilities—and/or storefront—and equipment speak to the state of your business and books in the eyes of a potential buyer. You may think the state of your facilities, especially the so-called hidden facilities one usually doesn’t see, should be fine as they are since they’ve gotten your business to where it is now, but that’s not how a buyer will see it.
If You Want to Get What You’re Asking or More, the Condition of Your Facilities and Equipment Must Mirror the Asking Price
While your best bet, of course, is to keep all your facilities tidy and organized from day one, it may not have been a priority in your business, particularly if you had no need of a storefront or to have customers visit your warehouse or distribution center. However, when you decide to sell, it’s imperative that you focus on making all your facilities shipshape.
“…if the buyer is being asked to pay millions of dollars for your company, he or she will want the business to look like a million dollars.”
It’s only logical for a potential buyer to think this way. After all, from their point of view, the state of your facilities and equipment reflect the state of your business affairs, your books, and your practices. Why should a buyer take a risk on disorganization that they’re only going to have to iron out?
Clean and tidy facilities and equipment that have been maintained have the secondary benefit of showing you’re proud of your business and your product. It shows you’ve cared for it enough that you’ve taken the time to invest in it regularly throughout your tenure as owner.
Think of it this way, when you sell your home, you do so through a series of open houses. Those open houses necessitate you keep your home shiny, organized, and attractive so it appeals to buyers and demands top dollar. Why should the sale of your business be any different?
If every part of your business—storefront, offices, headquarters, warehouse, distribution centers, and manufacturing facilities—show well and you’ve kept well-documented records of all repairs and preventative maintenance, your business will sell for more because you’ve offered the buyer less risk and increased the value of some of your tangible assets. The bottom line is this: make the face of your business mirror your price.
Your Facilities and Equipment Must Be Well-Maintained and of a Size and Number that They Allow for Continued Growth
One of the key factors any potential buyer will look for is the potential for future growth. An atmosphere that allows for continued growth after a new buyer takes ownership of a business is another checkbox in the reduced risk category. The state of your facilities and equipment illustrates that more effectively than anything else given its visual nature.
Are your facilities large enough to accommodate future production expansion? Have you maintained your equipment and invested in additional and/or upgraded equipment to ensure it can handle future growth? If you can confidently answer yes to these questions, a buyer will be more likely to not only purchase your business but pay top dollar, again, because of the reduced risk.
As so often happens, owners can forget to pay attention to such things as facilities and equipment when they go to sell simply because it’s too far down on the priority list. Besides, a common feeling, once they decide to sell, is that it’s really not their problem anymore. That’s for a new buyer to worry about.
“One of the biggest mistakes business owners make is to take their foot off the accelerator after deciding to exit.”
However, as soon as you stop investing in your facilities and equipment is the minute you stop investing in your company’s growth. And that affects your bottom line when it’s time to sign on the dotted line. A buyer does not want to shell out millions of dollars in a business just to have to turn around and have to purchase new facilities or equipment or invest in major repairs.
The takeaway here is that neglecting the state of your facilities and equipment creates a negative value driver. Rundown or outdated equipment tells a potential buyer you’ve not been making the capital investments you should have and that they’re going to have to make those investments themselves after purchase. That reduces both the value of your company and the price you’ll get at purchase if your business sells at all.
At the same time, disorderly facilities reflect a disorderly business. That means everything from your financials to your processes, and that creates too much risk for a buyer. There’s no incentive to buy your business if a purchaser can’t make heads or tails of your books, your inventory, or your processes.
“A buyer will not pay a premium, and may very well discount an offer, for a disorganized warehouse, office, or other building.”
In the end, all these factors stunt any possibility of future growth or at least delays future growth. That just adds to the risk for potential buyers since one of the principal aspects they’re looking for when deciding on a business to buy is the potential for continued business growth.
So do yourself and your future a favour and continually invest in your facilities and equipment and always re-examine them to determine where and what improvements can be made to allow for that future growth. Don’t be lulled into that feeling that once it’s time to sell, it’s not your problem anymore.
And remember the importance of hiring a professional when it’s time to sell. They’re the experts in the steps you need to take to get the most for your business, and they allow you to continue focusing on your business without distraction. The sale of your business is a complex process and one in which you stand to realized substantial losses or gains, depending on the choices you make.
So stack the odds in your favor and give Muise Mergers & Acquisitions Inc. a call now at (902) 456.6473 or send them an email. They’ll ensure your business is as appealing as possible and you’re as prepared as you can be so you see a premium price from the sale of your business.