Last Updated on March 20, 2023 by Dave Schoenbeck
About 30 percent of small businesses are valued between $1 and $30 million before a sale. You do what you can to increase the market value of your business.
The market value of your business is the culmination of many factors — beyond having a solid balance sheet.
It’s easy to think about exiting the business. However, doing the hard work to drive performance first is more important.
Read on to learn more about increasing the market value of your business.
What the Experts Say
Business brokers and M&A experts have some advice for valuing your business. First, beyond what’s in the books, consider the company’s character and don’t neglect the personnel side of the business — the part that cannot be quantified.
Increase the market value of your business, starting with the people within the company. Invest in the people from the start and watch what they can do for your bottom line.
Here are some attributes of highly-valued businesses:
Unique value – you might not be the cheapest, but your loyalty program is better than the competition
Customer-centric approach – don’t lose sight of your customers in the pursuit of profit
Diversity – businesses and consumers aim to be more inclusive and socially responsible
Empowered employees – employee turnover reduces the value of your team
Integrity – your word should be your bond.
Market Value and Brand Reputation
Increase the market value of your business by increasing your brand reputation. Unfortunately, reputation is something you cannot buy. It’s incremental, and only time builds reputation. However, it can quickly tumble with one wrong press release, bad product, or questionable employee.
Can your customers count on you to deliver, and can the business broker trust they’re buying your reputation and the products or services you sell?
It’s easier to keep a customer than woo new customers. So try to quantify your customer attrition rate and reduce it if possible.
Value Your Business for Mergers and Acquisitions
More than EBITA and P/E ratios, it’s essential to understand the meaning behind the numbers if you aim to increase the market value of your business. Increase the market value of your business to get the sale price you want.
The comparative analysis approach takes two companies with similar metrics to calculate valuation multiples for comparison. There are usually benchmarks.
Tips to Make Your Business Standout
To increase the market value of your company, you need to differentiate yourself from others in your industry. Even if selling is the last thing on your mind, the steps you take to increase your value will strengthen your company and boost your sales for years.
Here are a few ways to increase your company’s market value today.
- Branding: Having a consistent and well-established brand will make your business attractive to potential future buyers and help your bottom line long before you plan to exit.
- Consistent and increasing profitability: Buyers like to see businesses whose profits manage to grow year after year.
- New products in the pipeline: Without new products constantly in the works, your company will grow stale, and your competition will pass you by. Having plans and potential for future growth is essential for the longevity of your business.
- Originality: What makes you different from your competitors? Understanding this will help guide your marketing strategy and set you apart. Being one-of-a-kind will also add unique value when you’re ready to sell.
- Leadership in your industry: Being an industry leader will put your company miles above your competitors’ value. Strive to stay ahead of the curve when it comes to market trends.
- Buzz: What are people saying about you? Is your brand famous on social media? Of course, visibility goes along with reputation, but your marketing will handle itself if you’ve built a buzz-worthy brand.
- Great talent: An experienced team is precious to a potential buyer. You’ll improve your day-to-day operations and build a solid foundation for future employees and customers alike by investing in critical people. Conversely, a high employee attrition rate diminishes the value of your firm.
- Accurate and understandable financials: Maintaining your books and keeping up with your finances will show potential buyers you know your value. Clarity and accuracy give you more negotiating power.
Thinking about how to increase the market value of your business should be at the core of your business strategy, even if you’re decades away from selling. Not only will you set your future self up for success, but you’ll also enjoy that success in the present.
Contact me today if you’re serious about getting to the next level and working with a business coach. Click here are fill out my Free Coaching Session form.
Coach Dave
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