Every business is actually priceless to its owner and most of them are not likely to sell. But there are times when a business owner might want to sell their business and it is important to get the maximum value for it without anyone exploiting the situation of emergency or any financial need. If you are a business owner and want your business to be worth more, there are four reasons to consider. Understanding these reasons will to get a better value out of it.
4 Reasons to Increase the Value of Business
- It helps to measure success and your business’s potential for growth in the coming days.
- It can result in a bigger payout when you are considering selling your business.
- It is important to raise more capital in exchange for less equity.
- Increasing value of business ensures employees of the company with job security.
How to Increase the Value of a Business?
There is an effective four-step exercise for this which is also known as the EXIT habits.
E Stands for External Habits:
Your business must have a strong presence in the niche market where buyers can find its real worth. When you are able it create a personal brand that is popular and commercialized in the market well, you will be able to seek out a premium value considering its position in the competitive market.
X Stands for Expansion Habits:
Every business has a growth potential and it can vary from one business to another. Your business might not be in a great position right now but if it has the growth potential to do something remarkable in the future; it can become one of the top in the line. Make sure to create a ‘Blue Ocean’ strategy that helps to stand out and allows you to demand price control.
I Stands for Internal Habits:
What makes a business stronger outside is how strong it is from the inside and that is why, your business should be built in a solid way. A tidy organizational structure can help you churn out more value for your business. Therefore, you should focus on the aspects of decision-making processes, team building, implementation of Standard Operating Procedures (SOP), and so on.
T Stands for Tangible Habits:
What talks for the business is the numbers as they are the biggest proof of success. The quantifiable metrics that help to measure success for your business are revenue, profit, recurring revenue, and cash flow. Therefore, these metrics should be always monitored to get an errorless value. When the parameters are right, you will find the right value for it based on the data.
How to Determine the Value of Your Business? Is it too Small to Sell?
No business is too small to sell and even small businesses can have the potential to become a giant. Therefore all businesses are sellable when there is the right for it. The commonly used method for evaluating a small business price is by multiplying EBITDA which stands for Earnings Before Interest, Taxes, Depreciation, and Amortization which is a measure of profitability. The ‘EBITDA multiple’ can help you find the real value of your business and how much you can enhance it. Businesses that are making less than $2 Million in annual revenue and getting bought and sold on a regular basis do not decrease their value but only increase it. Therefore, small businesses have a bigger potential.
It is important to enhance the value of your business before selling it which confirms greater return on investments.
