Welcome to March! It has been a busy February for succession planning and business sales. The baby boomers that own businesses are looking to retire; most have been counting on the sale of the company to fund their retirement. We help business owners every month by providing them with certified business valuations and coaching that can help build a more valuable business and a detailed plan for the transition. Here are two things to consider before a business value is determined.
Reliable Financial Data To maximize the value of a business, it is essential to have accurate financial information. If potential investors do not trust that the information is correct, they may not feel the target business is a quality one. From a valuation standpoint, we will analyze this data and use it as the primary basis for our valuation. Often, the valuation is based on a revenue stream, not the business’s physical assets. Reliable financial information will help show a prospective buyer potential growth and cash flow and make it easier to obtain financing. It may benefit a client to have compiled or reviewed financial statements so that any potential users will view them as valid financial data. We can help advise our clients to document their processes on how revenue is recognized and transactions recorded. Having consistent and documented procedures will also benefit any potential new owner in managing the business after purchasing.
Quality Products or Services Cashflow is often the single most important component of showing value. If a company can create high-quality products or services, it makes an excellent reputation. This reputation can help build sales and lead to fewer production costs, which increase profits. Creating this reputation will also help save money on marketing. If customers are talking highly about your products or services, naturally, it will lead others to make similar purchases. By using and following up on customer service feedback, companies can increase their quality and efficiency. Companies should also document their quality control procedures to help show prospective buyers what steps they can take to ensure that quality continues.
Focusing on reliable financial data and the quality of products and services will likely increase business value. If you have not done an excellent job focusing on these key elements that build value in your business, Vesta can help. With our effective planning and strategy service lines, we can help create a quality culture and reliable financial data within the business, along with other fundamental drivers which will help maximize your company’s value. To be effective, the best time to start is sooner than later. Some people work on this for several years in preparation for transition. Contact a local Vesta office in Wisconsin, including Sheboygan, Plymouth, Fond du Lac, or Minocqua, to help build a better business.