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December 2014

Selling Your Business for the Best/Highest Valuation

Selling Your Business for the Best/Highest Valuation

By | Blog, Corporate Finance | No Comments

Here are some thoughts on selling your business for the best/highest valuation.

1.)    Don’t get a reduced valuation – It sounds simple, but most businesses get a reduced valuation because they are sloppy and disorganized or because they take their eye off the ball and the business begins to decline.

  1. Number one reason is poor accounting.
  2. Number two reason is poor record keeping
  3. Number three reason is some potential liability due to poor actions in the past
    –  These things include mostly bad ethical decisions that are evident in the financial management of the company or seen as patterns through lawsuits and other business dealings.
  4. Number four reason is declining revenues
  5. Number five reason is declining gross margins

2.)    Get an enhanced valuation – This is showing that your business is better than your competitors.

  1. Gross margins higher than the industry average
  2. Inventory turns higher than the industry average
  3. Profit higher than the industry average
  4. Conservative balance sheet management

3.)    Get a “Rockstar” valuation – To get to this level, your business must have a unique market position and a unique ability to create opportunities for shareholders and customers.

  1. Grow revenues and profits at least 15% per year for three consecutive years
  2. Use technology to create a barrier to entry with your products, services, service delivery, sales processes, manufacturing processes, etc.
  3. Fill a strategic business niche in the industry that is difficult to impossible for competitors to replicate.

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