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6 Simple Things To Increase Business Value Before Offering It For Sale

Comments & Replies: 2     Views: 5975     Posted By: Timothy Cunha JD  Timothy Cunha JD: Business Broker, SF Bay Area

How do you value a small business before putting it on the market? Tim Cunha, JD offers 6 items all business owners should consider. Other advisors and business brokers also weigh in on this very important topic especially when over 70% of small businesses never end up selling (due to pricing).

Topics: Business Valuation, Selling A Business     Tags: business valuation, selling a business



Here is a list of six little details to get right before you put your business on the market:

#1. Find your lease. If you rent space, you may be required to notify your landlord if you intend to sell your company. Read through the fine print and ensure you're not scrambling at the last minute to seek permission from your landlord to sell.

#2. Professionalize your books. Consider having audited financial statements prepared to give a buyer confidence in your bookkeeping.

#3. Stop using your company as an ATM. Many business owners run trips and other perks through their business; but if you're planning to sell, these "treats" will artificially depress your earnings, which will reduce the value of your company in the eyes of a buyer by much more than the value of the perks.

#4. Protect your gross margin. Often, when leading up to being listed for sale, companies grow by chasing low-margin business. You tell yourself you need top-line growth, but when acquirers see your growth has come at the expense of your gross margin, they will question your pricing authority and assume your journey to the bottom of the commoditization heap has begun.

#5. If you're fortunate to have formal contracts with your customers, make sure your customer contracts include a "survivor clause" stipulating that the obligations of the contract "survive" the change of ownership of your company. That way, your customers can't use the sale of your company to wiggle out of their commitments to your business. Have a lawyer review the language to ensure it has teeth in your jurisdiction.

#6. Consult an experienced business broker about (a) the current fair market value of your business, and (b) a "SWOT" (strengths, weaknesses, opportunities, and threats) analysis to identify any shortcomings you need to overcome before taking your business to market.


A great way to build value in a store before putting it on the market is to make sure it's clean and bright. A potential seller should replace any lights that aren't working, give the store a good sweep and mop, and remove any unnecessary signage from the windows. Curb appeal is important and shows pride of ownership.

If there is anything that a owner doesn't want to include in the sale, such as an expensive television, it's best to remove and replace it before buyers start looking at the business, because once they see it, they'll want it along with the business.

Pricing the business to sell in the beginning is important, because the first month of when the business is on the market is the honeymoon period, when there will be a surge of activity, and so the longer the business is on the market, typically the less activity there is from buyers.


  Helpful Resources To Assist In Selling And Buying California Businesses
Janet Carrera: Escrow & Bulk Sale Service - SF Bay Area

Redwood Escrow Services, Inc. is a full service, licensed independent escrow company. We are EAFC Fidelity bonded, fully insured & licensed with the Department of Corporations. Committed to offering our clients the most comprehensive variety of escrow services available. Phone Janet at 510-247-0741.

Willard Michlin, CPA, Certified Fraud Examiner, Due Diligence

Willard Michlin, CPA #106752, offers buyers step by step training & assistance in doing Due Diligence Services when they are thinking of making an offer, or are in process of investigating a business purchase. He helps to determine the actual net profit even when there is cash. Call 805-428-2063.

Diane Boudreau-Tschetter: Escrow & Bulk Sale Services - CA

California Business Escrow, Inc. is a full service independent escrow company serving all of California and has expertise in a wide range of escrows. Our team prides itself on providing an exceptional escrow experience. For more info phone Diane Boudreau-Tschetter at 888-383-3331 or 209-838-1100.

Elizabeth McGovern: Escrow Services - San Francisco Bay Area

McGovern Escrow Services, Inc., is a leading independent escrow company. We are a trusted partner with our clients, assisting them through the tangled bulk sale & liquor license transfer process. We provide attentive, quality & innovative customer service. Phone Elizabeth McGovern at 415-735-3645.

AJ Rana - Business Broker, San Francisco Bay Area

Professionals who understand the importance of world class business brokerage service and the value it can create. Specializing in assisting sellers and buyers with retail stores, restaurants, hospitality & lodging, manufacturing operations, distribution companies, e-commerce and service businesses.

Taj Randhawa, Business Broker Specialist - Gas Stations, Liquor Stores

If you are interested buying or selling a gas station, liquor store feel free to phone me for a consultation. My vast experience & specialization in gas stations & liquor stores helps me in serving my clients with full confidence, trust & sincerity. Serving Central Valley, SF Bay Area. 559-259-4247.

Shalonda Chappel-Pilgram: Escrow & Bulk Sale Services - Southern California

Escrow services to brokers/agents, sellers, & buyers. Established 43 years. Extraordinary service. Experienced with handling difficult transactions. One stop for all your escrow needs: Bulk sales, lien searches, UCC searches, liquor license transfers, publishing & recording services. 951-808-3972.

Michael Floorman, Business Brokerage, BTI, San Francisco Bay Area

Business Team, San Jose (Campbell) located in the Pruneyard Towers at Bascom and Hamilton. Established in 1981 Business Team with over 6600 sales to date has 1000 business listings to choose from, paid Google advertising. We offer highly trained and experienced professionals.


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