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

Comments & Replies: 2     Views: 7332     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
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.

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.

Peter Siegel, MBA: Business Purchase Financing Solutions

Niche business purchase financing advisory and loan placement services with SBA and Non-SBA Financing, Retirement Fund Rollover Solutions, Combo Financing Packages. To get professionally pre-qualified or more information on the ProBuy/ProSell Programs: 925-785-3118.

Brad Steinberg, Business Broker: Laundromat Specialist

PWS is the leading laundromat broker in California. Since 1968 PWS has brokered over 2,500 laundromat sales. With over 90 employees dedicated to the coin laundry industry, PWS has 18 licensed agents, a 3 person in-house finance department, 10 service technicians and a 20 person parts department.

Mike Brewer: Liquor License Broker, ABC Consulting Service

Liquor license brokerage and consulting services. We provide: Alcohol License Transfers Application Consulting & Processing, Liquor License Purchases & Sales, City Zoning Permits & Land Use Entitlements, Public Convenience or Necessity Findings and Letters. Phone Mike Brewer direct at 800-437-1100.

William F. Ziprick, Attorney: Legal Services For Buyers And Sellers

Through creative problem solving, attention to detail, accessibility, & understanding that unnecessary delay is often a deal killer, I work closely with my clients and other professionals to consistently achieve a high rate of closings. Office: 909-255-8353, Cell: 509-951-7230.

Helen Yoo, New Century Escrow - Escrow Services In Southern California

New Century Escrow, Inc. is a fully licensed & bonded independent escrow company. Over 20 years combined experience in handling bulk escrow transactions. Multi-lingual staff that speaks your language, including Korean, Chinese, Vietnamese. Call Helen Yoo direct at 626-890-1151.

Peter Siegel MBA, BizBen Founder, ProBuy, ProSell, ProIntermediary Programs

Founder Of BizBen.com (since 1994). I am the Lead Advisor for the ProSell, ProBuy, & ProIntermediary Programs. I consult daily with buyers, sellers, and brokers daily about buying and selling California small to mid-sized businesses. Call 925-785-3118.


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

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).


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