by Leigh Riley · Filed Under: Uncategorized
Business Sales Ripe for The Picking
It’s a well known factor that when supply increases, prices usually fall. Think of fruits in season. When they are in abundance, they are available at the cheapest prices.
It’s no different for business, and with the amount of increasing numbers of business coming on the market for sale due to their Boomer Owners retiring out, it’s no surprise to learn that business valuations fell by 1.6% for the year ending June 2012 (Bizval Index).
A combination of Factors Forced Sellers to Take Less Than Hoped for Their Business.
1. Buyers are not as flush with cash – as financiers just aren’t lending on business they way they used to. That means even if you can find an interested buyer, they probably can’t find enough funding to pay your price, forcing you to take what you can get if you wish to release your business equity in cash.
2. Buyers have more choice - because your business for sale in market is now more likely to be one of many similar. If your business is not set as the ‘quality option’ in market with niche assured recurring revenue, your business valuation will be scrutinised heavily. To gain your best price, you will want to be prepared across several key valuation factors, to maximise and boost your business valuation and sale price.
3. Even when highly profitable, owner-centric businesses fail to attract desired business valuation multiples - That’s because removing you as the owner is likely to negatively impact ongoing sales to the business, and adversely impact profitability and the business valuation. The rule of thumb for maximising your business valuation, is that you will want to build a business that is less reliant on you personally.
4. Your Business must be Relevant to future demand - If your business is not keeping up with changes in technology and market demand, then profitability of the past is irrelevant to future performance. Buyers are buying the future potential of your business. For example, if you manufacture televisions, and you have not yet developed the ‘3 D’ version currently now in demand, then past sales results will be irrelevant to future potential sales, and your business valuation will be adversely impacted, negatively affecting the price you will receive for the sale of your business.
How Well is Your Business Tracking to Maximise Valuation When You Sell?
Find out by Taking the Business Valuation Quiz – Business Valuation Quiz
Take action now to boost your business valuation – contact The Exit Experts on 1300 499 225 to discover how you to prepare your business for maximum cashflow, profit and sale price.
Here’s to your profitable business exit!