According to business valuation expert, Company Valuation Services (CVS), one of the main reasons business sales fall through is because of insufficient preparation and a lack of information guiding owners through the process.
Gary Edwards, Marketing Manager at CVS, believes that entrepreneurs should value themselves fairly, and not fall into the trap of being too modest:
“In our experience, not enough of the hard-working business owners out there realise just how much their company is worth. So when it comes to negotiating a sale, they often settle for less because they don’t recognise the maximum value that their most prized asset has come to be worth!
“An acquisition is not the time to be modest, nor is it time to rest on your laurels and believe the hard work is done. The company sales market is set to experience strong growth in the next year; business owners should jump on this while they can and ensure they are doing everything in their power to maximise value and bring in a value even higher than the market norm.”
To help businesses have a successful year, he has collated five points on how owners can increase the value of their company before a sale in just 12 months.
1) Product Knowledge
How well we understand the products will translate brilliantly to customers. Confidence will seep through to customers on the other end of the phone, as well as investors sitting across us and whoever is interested in our company.
Once this product knowledge has spread throughout the workforce and employees have been well-trained, there should be significant improvements in sales. Reinforcement is vital, as it is no use implementing these changes without ensuring their longevity.
2) Know Your Target Market
Do research into who will benefit from the products and services, and start from there. Sort out the audience into market segments, breaking things down by age, gender and occupation.
It’s also important to keep an eye on the competition. What is it that the competitors are doing better, and how we can challenge it? These are the questions that we should be asking before the sales process begins.
3) Needs Assessment
Gain some insight into the kind of issues that face the target market. With this knowledge, we can create or improve products that alleviate these pain points.
With this in mind, we can begin applying the process in real-time. The sales approach is the outcome of the above.
Finally, we should have a follow-up system in place to ensure that customers are happy and well-positioned to continue using the service. Engage customers by asking for their feedback. Ask how you can improve on the service.
4) Find Your Niche
Many companies fall at an early hurdle by trying to cater to multiple markets at once. We need to define the service and products by doing the research to find gaps.
To get a little more information, we got in touch with some self-made entrepreneurs for their personal business tips.
Here is freelance web designer Katy Carlisle, who grew her business The Wheel Exists from the ground up (eventually becoming a finalist at the Freelancer of the Year Awards in 2016).
“As I’ve been more specific with my service offerings and target customers, I’ve noticed better results and more referrals,” she remarked.
“Now, all of my client work is via word of mouth and I actively turn down work outside my area of focus, as I have found the right balance that suits my skills and values, whilst also meeting the needs of my customers. In a world where reputation matters and everyone has the opportunity to share their views in public, this is crucial.”
Be specific, know your products and act accordingly. While it’s tempting to spread your net further, you will likely find more depth in the more targeted areas of your market.
5) USPs, USPs, USPs
We spoke to Founder and Managing Director of digital marketing agency Bring Digital, David Ingram, for more information on why USPs are so integral to a business’ identity:
“We work with a lot of businesses at Bring Digital, and each one has select characteristics and objectives. While this means that we have to be extremely adaptable, we know where our strengths lie.
“When your business has proven to be particularly good at something, you want to shout about it. That’s why it’s so important to know your USPs, and make them the focal point of your overall marketing strategy.”
Duane Jackson sold his first start-up KashFlow back in 2013, in a multi-million-pound deal. Since then, he has experienced success in various other business ventures and launched Supdate, a platform allowing start-ups to keep better contact with shareholders.
“The main thing to make the business ready for a sale is to build it so it can operate without you. Buyers don’t want a business that’s dependent on the person they’ve just written a cheque to.
“The key to this is to have good people and well-documented, followed processes – not just for how the business does what it does day-to-day, but how it plans, reports on those plans and how it grows.”
It is vital that the business is in decent shape for the next owner; leaving on good terms will not only instil confidence in the next owner, it will also give the skills and experience needed for the next venture.