Maximize Value

Maximizing value during the selling process of a business involves several key steps:

1. Understand Your Business's Current Value: The first step is to calculate what your business is worth today. This involves understanding the value drivers of your business and how much money you will need for your next stage of life. You can use discounted cash flow, which calculates the present value of a business’s future cash flow, discounted by the business risk.

2. Improve Management and Company Culture: Potential buyers will be interested in the depth of your management team and the culture of your company. These factors can dramatically improve the multiple your business will command when you sell.

3. Financial Trends and Profit Margins: Buyers will look at the overall financial trend of your business. Are revenues, EBITDA, and gross profit all increasing? You'll also want to look at your business from a margin perspective. Is your gross profit margin going up or down? Is your EBITDA margin going up or down? If you hope to get the maximum value out of your business, you will want to grow gross profit by increasing sales volume, rising prices, or decreasing the Cost of Goods Sold for each revenue unit.

4. Attract a Diverse Customer Base: If you understand your customers, document their needs, and evaluate why they choose to use your business, you can form a better overall relationship and use this knowledge to implement winning strategies. A diverse customer base reduces risk for a buyer and can increase the multiple you can ask for.

5. Develop a Stable Management Team: Buyers and investors alike seek businesses that have management teams to effectively carry out sales, marketing, and product or service delivery.

6. Establish Processes and Documentation: Clearly defined and documented processes can increase the purchase price based on what physical assets you have.

7. Negotiation Techniques: When selling your business, it's important to understand negotiation techniques. This includes preparing the company for sale, understanding the company’s valuation, and building a personal relationship with the buyer.

8. Seek Professional Advice: Working with an experienced outside advisor can help you prepare your business for sale, including having an expert valuation conducted.

9. Continue to Invest and Improve: One of the biggest mistakes business owners make is to stop investing in new equipment, maintenance, and process improvements after deciding to exit. This reduces the future value of your company.

Remember, maximizing the value of your business is possible if owners put in intentional and consistent efforts to do so. On average, a company needs two to three years to improve.