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.
- Number one reason is poor accounting.
- Number two reason is poor record keeping
- 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.
- Number four reason is declining revenues
- Number five reason is declining gross margins
2.) Get an enhanced valuation – This is showing that your business is better than your competitors.
- Gross margins higher than the industry average
- Inventory turns higher than the industry average
- Profit higher than the industry average
- 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.
- Grow revenues and profits at least 15% per year for three consecutive years
- Use technology to create a barrier to entry with your products, services, service delivery, sales processes, manufacturing processes, etc.
- Fill a strategic business niche in the industry that is difficult to impossible for competitors to replicate.
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