Why did you start your business? – this is often a question asked by people of business owners. However, there is a better one; When are you going to STOP your business?
By stop your business, we don’t mean just not turn up and shut up shop, but rather; what is your exit point? And by that we mean when will your business be in such a position that you could either:-
a) Walk away and it would run itself
b) Sell it with some value attached beyond the value of any stock or fixtures & fittings.
So in order to judge what a business is worth, here are some criteria;
What are typical businesses of this type worth?
What is the multiple for the industry?
What is the market like for the product? i.e. growing, shrinking
What are the follow-up products?
What is the turnover?
What is the stock holding?
How well structured is the company? –
What are future sales projected to be?
There are also intangibles which are, by their nature, less easily measured; these are the elusive ‘goodwill’ or other feel good things about the business
However, there also tangible things you can do which will increase the value you are likely to obtain when you exit;
- Make sure your business is systemised and documented, you cannot sell something which you can’t write down.
- Get everything out of your head (and preferably written down!!). If the business won’t run without you, you don’t have a business, you have a job!
- Make sure you have KPIs for your business. These will vary according to your business but measuring things is another indicator that you are taking your business seriously!
So some things you can effect and some, like the economy, you can’t. But if you do truly want to exit your business and maximise its value, then you should consider how many of the things you can effect you have got in place.
Reasons why people buy businesses:
- The prospective buyer sees growth in the market and an opportunity to increase the company’s turnover
- The buyer is looking for stable income/lifestyle
- An investor is looking for growth prior to exiting
In any of these situations, the prospective buyer will pay more based on proof that these aims can be achieved.
So, to use the 5S acronym, Sort, Shine, Standardise, Systemise and prove it’s all sustainable (and preferably able to grow!).
If any of this resonates then do call us on 0845 108 3949 or have a look at http://www.lean4business.co.uk