Building a business over the years is not a stroll in the park. At some point, you may want to make an
exit or retire from business. Whether you are starting a new venture or generally retiring from business,
you will want to receive adequate value for your business. Getting a good price for your business is
important and there are some ways that you can improve your business valuation to ensure that you are settled after your exit. The steps are;
Understanding the valuation model: Your business is worth only what a buyer is willing to pay for it.
There are certain ways that buyers will value your business and knowing those ways will help you
improve your business valuation because you will be well prepared. The ways buyers assess businesses
are;
• They may use your SDE (Seller Discretionary Earnings) as a means of calculating the value of your business.
• What are the selling prices of other similar companies?
• Age of equipment and assets
• Customer or client base
• The security of the streams of income of the business.
What are your needs and wants: Knowing your goals will help you in determining the right buyer for
your business. You must determine what is more important to you before listing your business for sale.
Clean up your financial reports: Many buyers will actually look out for the profitability of the business
they want to purchase. It is important to prove that you run a profitable business by producing all
financial reports and of course, keeping a close eye on your business finances long before you decide to
list your business for sale.
Document your standard operating procedures: Document the process by which your business makes
a profit. This is very necessary. A business with documented procedures is assumed by buyers to be a
business that is well organized and has the potential of even making more profits. So, document it at all.
If the buyer has to start figuring out a way to run the business after buying it, the valuation of your
business may reduce.
Make your weaknesses look like opportunities for the future: Your weaknesses doesn’t mean issues
with the daily running of the business. It means areas that you have not ventured into. Consider those
areas as future opportunities that the new buyer can take advantage of. You must present it to the
buyer as long-term goals you had for the expansion of the business before deciding to retire. This will
improve your business valuation even more.
Whether you take only one or two of the steps listed above, the results will be a smoother exit from
your business with adequate compensation for the years spent building it up resulting from the
improved valuation.