Another way to increase the value of your business is to identify ways to increase revenues from existing customers. That might include selective pricing adjustments which will not reduce the retention of existing customers. It might also involve increasing the number of services each customer receives – as long as the business remains competitive in that area. In addition, you can focus on identifying additional services which can be sold to your existing customers. This could include upsells and complimentary services or additional products. Just make sure that these revenues will make as much sense for potential buyers as they … Read more
Most sellers are aware that that there are “rules of thumb” or industry standards that suggest that businesses in certain industries should sell for a specific multiple of revenues or cash flows. Many times sellers are disappointed that there business does not generate offers at or near the “rules of thumb.” This can happen for a variety of reasons – you can be selling at an inopportune time or, for a variety of reasons, your business may not be attractive to the buyers who are willing to pay top dollar. One important issue is that there are two general types … Read more
It is very common for small business owners to own the real estate from which their business operates. This is often a very good strategy and, for many, the decision to acquire real estate has resulted in a very good investment. Unfortunately, when the time comes to sell the business, real estate can add complexity to the process. Tax and legal advisors often advise business owners to separate the ownership of real estate from ownership of the business. Sometimes, they advise the owner to place the real estate in a separate entity and for the operating business to pay a … Read more
Noncompete agreements come up in several ways in merger and acquisition transactions. This post will deal with noncompete agreements with your employees and how they may affect a transaction. When a prospective buyer looks at your business as a possible acquisition, the last thing they want to have to deal with is a disgruntled employee starting to compete with the business under the new owner. Sellers often believe that their valued employees would never do something like that. Experience, however, tells us that often can and do. There are many reasons for this phenomenon. Key employees often believe (often rightly!) … Read more
You can take steps to make your customer base more desirable to buyers. Focus your marketing efforts on areas and submarkets that are likely to produce stable, satisfied customers willing (and able) to pay good prices. Avoid adding low-priced new customers by avoiding marketing in areas likely to attract such customers. Deliver high quality, friendly services. Avoid transient areas. Increase prices on low-priced customers. Accept that the lost revenue from lost customers will be more than offset by better prices and a better customer base to sell.