| Hughes Klaiber LLC | 28 West 44th Street, Suite 1600, New York, NY 10036 | Tel 646-654-0458 |
| Maximizing the Selling Price of Your Business |
For a business owner interested in selling their small or mid-sized business, maximizing the
selling price of the business is a key concern.
Obtaining a professional business valuation is a critical first step, providing a formal estimate of
value for the company, based on factors including the firm’s historical cash flow, balance sheet
assets, trends, sales of similar businesses, and other tangible, measurable items.
However, the real price a buyer will pay for the business is usually higher or lower than the formal
valuation, varying due to the buyer’s perception of the strengths or weaknesses of the intangible
assets of the company, such as management talent, business processes, and much more. To
help ensure a buyer will pay a premium for your business, consider how to best maximize your
company’s intangible assets:
Develop key employees
Buyers generally aren’t interested in paying a premium if your business relies on you for its
success. Remember to delegate responsibility to key employees and involve your key staff
members in the decision making process. Demonstrating that your company’s success is reliant
on your capable, well-trained employees – not just you – will pay off at the time of sale.
Document everything
Be sure that job descriptions, operation processes, and strategic plans are documented. All
documents such as sales and expense reports, internal P&L statements and tax returns should
be consistent and well organized. Documented records and plans provide a buyer with comfort
that he or she will be able to replicate your successful growth, and can also help your buyer
obtain financing if necessary.
Review your balance sheet assets
Sell or write off unsaleable inventory. A buyer won’t want to purchase unused twenty-year-old
widgets, nor should he or she see them on your balance sheet or in your warehouse. Be sure the
amount of inventory on your balance sheet matches your physical inventory. Also, review any
opportunities to turn overdue accounts receivables into cash.
Look for ways to improve profitability
Buyers want to see positive trends, so compare year-to-year results for each revenue and
expense line item on your income statement. You may realize that revenues have dipped slightly
in a particular segment, or that costs have crept up in a few areas. Address any issues now. For
example, in this environment of rapidly raising prices, you may need to switch to less expensive
vendors or suppliers, or consider passing cost increases onto your customers in the form of price
increases.
Look for barriers to entry
What does or could your company offer that would be difficult, expensive, or time consuming for
a new entrant to your industry to replicate? For example, one of our distribution clients has
developed a state-of-the-art online ordering system. Buyers will pay a premium for a niche that
has barriers to competitive entry.
Remodel, clean, and organize
When a homebuyer puts their home on the market, they spruce things up, paint, and make sure
everything is clean and organized. Consider doing the same thing. A well-maintained facility will
get the best price, by conveying a feeling of quality and efficiency.
Feel free to call us with any questions on how to best develop a plan to maximize these and other
important intangible assets, to help obtain a premium selling price for your business.
selling price of the business is a key concern.
Obtaining a professional business valuation is a critical first step, providing a formal estimate of
value for the company, based on factors including the firm’s historical cash flow, balance sheet
assets, trends, sales of similar businesses, and other tangible, measurable items.
However, the real price a buyer will pay for the business is usually higher or lower than the formal
valuation, varying due to the buyer’s perception of the strengths or weaknesses of the intangible
assets of the company, such as management talent, business processes, and much more. To
help ensure a buyer will pay a premium for your business, consider how to best maximize your
company’s intangible assets:
Develop key employees
Buyers generally aren’t interested in paying a premium if your business relies on you for its
success. Remember to delegate responsibility to key employees and involve your key staff
members in the decision making process. Demonstrating that your company’s success is reliant
on your capable, well-trained employees – not just you – will pay off at the time of sale.
Document everything
Be sure that job descriptions, operation processes, and strategic plans are documented. All
documents such as sales and expense reports, internal P&L statements and tax returns should
be consistent and well organized. Documented records and plans provide a buyer with comfort
that he or she will be able to replicate your successful growth, and can also help your buyer
obtain financing if necessary.
Review your balance sheet assets
Sell or write off unsaleable inventory. A buyer won’t want to purchase unused twenty-year-old
widgets, nor should he or she see them on your balance sheet or in your warehouse. Be sure the
amount of inventory on your balance sheet matches your physical inventory. Also, review any
opportunities to turn overdue accounts receivables into cash.
Look for ways to improve profitability
Buyers want to see positive trends, so compare year-to-year results for each revenue and
expense line item on your income statement. You may realize that revenues have dipped slightly
in a particular segment, or that costs have crept up in a few areas. Address any issues now. For
example, in this environment of rapidly raising prices, you may need to switch to less expensive
vendors or suppliers, or consider passing cost increases onto your customers in the form of price
increases.
Look for barriers to entry
What does or could your company offer that would be difficult, expensive, or time consuming for
a new entrant to your industry to replicate? For example, one of our distribution clients has
developed a state-of-the-art online ordering system. Buyers will pay a premium for a niche that
has barriers to competitive entry.
Remodel, clean, and organize
When a homebuyer puts their home on the market, they spruce things up, paint, and make sure
everything is clean and organized. Consider doing the same thing. A well-maintained facility will
get the best price, by conveying a feeling of quality and efficiency.
Feel free to call us with any questions on how to best develop a plan to maximize these and other
important intangible assets, to help obtain a premium selling price for your business.
| Hughes Klaiber LLC | 28 West 44th Street, Suite 1600, New York, NY 10036 | Tel 646-654-0458 |
The impact of the current
economy on business
sales
Maximizing the selling
price of your business
Financing an acquisition in
the credit crunch
economy on business
sales
Maximizing the selling
price of your business
Financing an acquisition in
the credit crunch
| More Information |
 |  |  |  |  |  |  |