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9 Top-Secrets: How to Sell Your Business for More than it's Worth

Posted On - 16/12/2016 07:44:03

How to sell your business for more than it's worthIs this a dodgy post about tricking buyers to pay over-the-odds? Well, while that might be amusing it's petty crass. Plus, you learn nothing.

No, this post does what it says. You see, value's a curious thing. It's not inherent in anything. Yet it's worth so much. And that - worth - is something each of us individually bestows. We even value money differently. So what we're prepared to pay isn't just about the value of what we're eyeing-up, it's also how we feel about what's in our purse or wallet.

But if you get all this, if you understand what buyers will pay for and how to make them pay more, you've got the secret. It's been what we've been writing about these last 9 weeks. And this post puts it all in one place.

#1: Your customers are worth little, until you make them worth a lot

Nobody pays for anything they can get for nothing. Take your customers: did you buy them? Someone had them before you. And you took them free no questions asked. So why will anyone pay for yours when they could pick them up free the moment you close? They won't if there's nothing to pay for. If your customers have no value.

So what's the secret to making your customers worth something? Well, there's value in a well maintained and comprehensive name and address book. It shouldn't come as a surprise buyers will pay to know how to contact your (their) customers! But what really gets the price up is the link with sales. If your customer database links to what they bought when, that's worth far, far more. For more on this see "Selling Your Business: Are Your Customers Worth Squat?"

#2: Strong historical sales are good, forward contracts are better

Sales and profitability matter – bigger numbers increase selling price. But accounts are history – they don't predict what's to come. Dependable revenues, like maintenance contracts, do. They're another secret to taking the lid off what your business is worth.

Buyers love maintenance contracts not just for the reliability of their income, they cushion seasonality and leaner times. They're not just B2B, we know maintenance contracts are being sold successfully B2C – see "The Pied Piper of IT" for more.

Dependable revenues also come in other ways. Products like BullGuard have a revenue share. So you get paid whenever a customer renews or upgrades. There's also "advance sales" – for example when you do a repair include a free health-check for 12 months' time. It'll legitimise making contact then and give you a great chance of drumming up business when you do. For more on all these see "Get Top Dollar for Your Business: Ignore Sales and Profitability".

#3: Fag-packets are out, KPIs are in

Running your business isn't the same as doing the work. Selling or repairing computers isn't the same as managing your business. And none of these is the same as paying bills, ordering materials, upkeep, and all that. So ask yourself this: is a buyer after how well you do admin or how good you are at selling and fixing stuff? Neither! One adds no value and the other can't be bought anyway.

No, what buyers want is a business that's well managed. And managing anything hinges on using data. The secret? Management accounts. They can be run from any accounting package - so if you're not using one that'll raise questions. How can this business be well run? How to they generate their management accounts? Get the hint?

Here's another secret. Can you prove how ‘good' your customers are? Can you rank them by spend and average profit margin? Can you show if the highest spender is profitable? Can you identify which customers are ‘expensive'? If you can do these sorts of things, the price of your business just went up. For more on this see "Can't Read Management Accounts?! You're Not Fit to Run Your Business!"

#4: How to make your business worth less: run it like you're selling

You can't predict what your business is worth. The best you can do is make it as ‘sale-ready' as you can. And by not spending a penny more on it than you have to. Hang on! Is this actually good advice?

Well spotted. Avoiding spends on new software, equipment or staff means over time you'll just under-invest. So running things with one eye ogling for buyers comes at a cost. Congratulations – you're making your business worth less! The secret to attracting buyers and getting the best price is to run your business like you never plan to sell it.

But how can you give that impression? What's the evidence that says: "this business is their baby, they've given it 110%"? Annual business plans with results showing they've been driven through are pretty compelling. Business plans don't have to be hundreds of pages, three will do. For more see "Looking to Sell Your Business? Then Don't Obsess about its Turnover".

#5: It's nice to feel wanted, it's better to know you're not

You're in computers because you love them. You know everything about them, you're great at building and fixing them and you enjoy helping people with your expertise. Customers flock because of your years of knowledge and skill. It's what they expect from a specialist niche business like yours. You love every day. The gaming build, screen replacement, malware removal – they're all things you adore. You make the money, look after customers, pay the bills, place the orders... You do everything. Absolute heaven!

But it's been said "if your business depends on you, you don't own a business - you have a job." Buyers won't pay for that - YOU are the business - the moment you're gone, the business is too. What's the secret to changing this? See "Negotiating Business Sale: What's Your Exit?"

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