10 Ways to Enhance Your Company’s Value
Are you considering selling your company in the next 10 years? If the answer is “yes,” now’s the time to start making a plan. Lack of preparation can cost you a great deal at the closing table. For most owners, selling their company is a once-in-a-lifetime opportunity. You want to be fully prepared when the day comes to receive top dollar for the company you worked so hard to build. Where do you turn for advice? BKD Corporate Finance (BKDCF) can help. BKDCF investment bankers, finance specialists and financial analysts have years of transactional experience and are ready to share their insights. As a starting point, here are 10 ideas to help you develop and implement a strategic plan for boosting your company’s value.
- Mold a Strong Management Team
If buyers think your involvement is vital to your company’s success, you may be forced to stay on after a sale or the value of your company may go down. To avoid these scenarios, identify and train key employees to take over the business after you leave. From the buyer’s perspective, a company with a seamless exit strategy is more attractive.
- Invest in the Future
With most transactions priced on a multiple of earnings, many company owners mistakenly believe decreasing expenses will result in a higher purchase price. In reality, outdated IT systems or dilapidated facilities and equipment can diminish your company’s value. Appearances matter, so it’s important to make needed improvements.
- Decrease Customer Concentration
If your company relies on just a handful of big customers, buyers may view that as putting all your eggs in one basket. If diversifying your client base is too difficult, try obtaining sales contracts or agreements with key customers to help put potential buyers at ease. If contracts aren’t an option, demonstrate how your customers depend on your company.
- Prune Unprofitable Customers or Products
Consider “pruning” less-promising customers or products—eliminating anything that decreases earnings can pay off handsomely.
- Clean Up the Balance Sheet
To reduce confusion and disagreement about which assets and liabilities will be included in the transaction, remove items like these from your balance sheet:
- Excess working capital
- Investment properties & personal vehicles
- Obsolete inventory
- Excess property or equipment
- Loans to shareholders
Audited Financial Statements
With regulatory scrutiny on the rise, audited financial statements are a must in any transaction. Their absence can lead to increased due diligence costs for the buyers, forcing them to offer a lower price and potentially delaying the closing of the transaction or even leading to its cancellation.
- Aim for Controlled Ownership
Buyers prefer to purchase 100 percent of a company from a small number of like-minded owners. Trying to sell a closely held business with unwieldy minority shareholders isn’t only difficult but often impractical. To facilitate a smoother transaction and increase value, buy back the minority owners’ shares well in advance of a sale.
- Think Like a Buyer
Put yourself in the buyer’s shoes. If you were buying your company, what would concern you? Looking in the mirror can be enlightening. If you’re caught up in the day-to-day operations, you may not be thinking objectively about your company’s value. Be realistic so you don’t have to regret turning down a good offer.
- Choose the Right Timing
The timing of a transaction can significantly impact value. An underperforming company in an up market may sell for more than a well-performing company in a down market. Too many owners decide to sell based on their age or an unforeseen event rather than the overall business climate. You need an experienced intermediary to help keep you informed about industry and market conditions. BKDCF advisors have the experience and expertise to help you sell for the right price at the right time.
- Engage a Multidisciplinary Team of Advisors
BKDCF professionals have deep transactional expertise and can handle your transaction from start to finish, allowing you to focus on managing your business. Our multidisciplinary team of professionals have the right training and experience and a high degree of professionalism and integrity. Our finance specialists, investment bankers and financial analysts collaborate with third-party merger and acquisition attorneys and estate planners to deliver results. When you’re ready to start planning for the sale of your company, call us.