How To Sell Your Business For More

If selling your business or setting your business up for sale in the future is on your radar – then I’ve put together a list of the many factors to consider so you get the most out of the sale.

Essentially, you need to understand what potential buyers will look for when assessing the value of the business. 

So, let’s break it down into four areas that we consider to be the key factors (in no particular order). All of these will contribute to the formula that’s used to calculate your business’s worth.

1. Key person risk

This refers to what kind of management structure you have in place in your business and how you spread the risk of the business being solely reliant on one key person. If everything in your business relies completely on you, then potential buyers won’t look on this favourably as there is too much risk placed on you leaving or not being there any more to run things.

However, if you’ve got an established leadership team that is trusted to handle client communication and project management, then potential buyers will know that the business can survive and thrive even if you are not there.

Naturally, buyers will want to know that the skills and experience of the management team are such that they will continue to drive the business forward. Therefore, ensuring that the team is well-equipped to continue running the business successfully without you (or any key person).

2. Past performance

Another key factor is your company’s past performance. You basically want to show potential buyers that this company is a good investment. The way to do that is by presenting them with your numbers i.e. stats for the last three years. This three-year performance is usually the standard, but some buyers may want to see your performance over a longer period of time (e.g. five years).

If you’re able to prove that your business has been financially healthy, your selling price will automatically increase. A bit of advice would be to postpone the sale or selling process if your performance wasn’t that great in the furthest year, and offer your business for sale when your performance stats are sparkling.

3. Earning potential

Having a good portfolio of clients that are regular return customers will also help increase your business sale value. So chasing A-grade clients as you run your business will bring you nothing but benefits. A-grade clients are those that have a long-term relationship with the business, have spent a significant amount of money over the past few years, and are expected to continue to do so in the future. This way you can have proof of future maintainable earnings.

4. Revenue and profit

Finally, potential buyers will want to look at your revenue and profit, which ties into company performance. The higher your revenue & profit, the higher your multiple will be and the more attractive your business gets i.e. your value increases. 

Again, the same tip for delaying the sale of your business will apply here. Should you not have the desired revenue or profit numbers, but have good projections that you expect to realise in the near future, potentially hold off on selling. When you hit the higher revenue and profit numbers, you’ll find you can sell your business for much more.

By strategically following these steps, you can improve the value of your business and also make it more attractive to buyers. It’s very important to start planning and implementing right now so when the time comes to sell, you get more for your business.

If you’d like to learn more, please take a look at my most recent podcast episode on this exact topic:

Click here for the podcast episode.

Click here to watch the video.

Josh ‘Selling Your Business’ Stone

PS: If you’re interested, here are 4 ways I can help you right now:

1. Join the Leaders In Engineering community designed specifically for leaders and business owners

It’s our Facebook community where leaders and business owners are learning the strategies and leadership skills to step up and thrive right now – Click Here to join

2. Download our FREE PDF guide – “How To Build A High Performing & Highly Profitable Engineering Team”

Learn the skills to get the most out of the people around you. Build a high performing team that generates incredible profits and allows you to have more fun and to spend more time with the people you love – Click Here

3. Book in a Catch Up

This session is designed for you and I to touch base, to get to know each other a little better and to really look at where you are now, where you want to be and then we’ll make a plan together for how to get you there! – Click Here

4. Work With Us

Join our training program designed to help you focus on the core areas of growing your team, your business and yourself in the process. Together we'll work on winning work, business development & client relationships. We'll look at strategies for team performance, project performance as well as your leadership skills to motivate and get the most from the people around you. We'll also focus on your growth as a leader, effective delegation to those around you and only focusing on the strategic activities that move the needle and make the biggest difference. - Just send me an email at [email protected] with the word “PROGRAM” and I’ll get you some more information.