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The #1 Tip for Maximising the Sale Price of Your Business

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The #1 Tip for Maximising the Sale Price of Your Business

By , April 28, 2021

It’s probably one of the most asked questions “How do I increase the value of my business?”

To improve the value of your business and improve the likelihood of achieving a successful sale, most focus on:

  • improving profitability,
  • reducing costs,
  • systemising the business,
  • improving policy and procedures,
  • updating IT and
  • automating processes.

For some business owners the challenge is sales and marketing aspects for building such as:

  • an automatic funnel of leads,
  • building recurring revenue,
  • locking existing clients into long-term contracts.

Others give you plans around selecting the best business broker, advertising the business on the best websites etc. Sometimes HR and people are a key issue and so an Employee Share Plan is implemented.

We do many of those things in our work with clients on maximising the value of their business and they can all improve profit which is one side of the valuation equation. None of them make as much difference as the most important thing you can get right in preparing your business for sale:

The most important aspect is to identify and attract the right buyer!

This is the easiest and fastest way to drive up the multiple (the other side of the business valuation equation) and ensure you maximise the value of your business when you sell.  A strategic buyer will always pay more for your business and almost as importantly, they have probably done this before and so will be efficient and professional.

In many cases, but not always, this could be a listed company and that’s even better. Obviously, it varies across industries and sizes of business but let’s use the average of 11.19 (which is the trailing 12-month average as at April 2019). They are often cashed up and have access to funding for acquisitions and therefore they become great buyers.  This compares to the long-term average for private companies is 2.5.

Importantly, this aspect of preparing a business was often overlooked. It takes time and effort and a level of expertise. Some business owners (mostly those that have left succession planning to later) don’t have time to implement this strategy properly, but for those who do, we have seen successful sales to strategic buyers including listed companies at much higher multiples of 6, or higher.

Please get in touch to find out how to achieve a successful business exit in 21 steps or read more about business valuation at Succession Plus NZ.

 

 

Craig West

Craig West

Executive Chairman | Succession Plus

Craig West is a strategic accountant with over 20 years of experience advising business owners. His background as a CPA in public practice has provided invaluable experience in the key issues of concern to business owners.

In March 2014, Craig was appointed Executive Chairman of the SME Association of Australia, Australia’s largest small business organisation representing over 300,000 business owners.

In October 2014, he was awarded the Exit Planner of the Year at the Exit Planning Institute Annual Conference in Texas, USA, due to his innovative development of an exit planning process to help business owners maximise business value and achieve a successful exit.

Craig’s proprietary structure - a Peak Performance Trust - has won the Australia-wide award for the Employee Share Ownership Plan of the year twice in four years.

In November 2018, Craig launched SME Experts in partnership with Mark Bouris’ Mentored on Podcast One and quickly grew the monthly podcast audience to over 26,500 downloads; in October 2019, he released a new podcast focused on medium-sized businesses - Mid-Market Matters.

In July 2021, Craig joined the NSW Committee for STEP (Society of Trust & Estate Practitioners) – focusing on advising families across generations.

Craig has also launched a SaaS platform, Capitaliz (which captures the 21-step process), to assist other advisers internationally deliver advisory services at scale.

In November 2021, Craig was appointed Executive Chairman of NSW Leaders, a business mentoring group for leading NSW businesses.

In July 2022, Craig West received the award of Doctor of Business Administration for his research thesis titled “Examination of the key factors driving business exit options in Australian Small and Medium Enterprises.”

Craig is passionate about encouraging business owners to think strategically, maximise the value of their business and achieve a successful exit.