It’s no secret that the key to surviving in business is rising above the fray of competition each of your industry peers have long been engaged in. Doing so raises your company’s value, resulting in a premium business valuation that helps your business stand out and be a more valuable asset or potential acquisition than any other member of its industry peer group, such as similar businesses in the GTA.
With the help of a business valuation expert and your accountant, you can increase your company’s value and turn it into a prime acquisition target by making these 10 factors part of your strategic plan:
As one of the growth strategies many companies employ is acquiring other businesses, these potential purchasers are more likely to pay a premium to acquire your business if its valuation reflects a growth rate that’s much higher than the rest of the industry in the GTA.
It’s been proven that those looking to acquire businesses are willing to pay a premium price for companies that naturally hedge the loss of a single customer. To avoid this and gain a favorable business valuation, make sure that none of your customers account for more than 10% of your revenue. This way, your business will be valued higher than its peers in the industry whose revenue comes from just a few big customers.
Companies generally want their acquisitions to have trustworthy and reliable financial data, as evident in audited statements that reflect healthy financials. For this, you will want to upgrade your financial statements from a compilation to an audit or review.
Securing accounts that have a recurring contract or subscription reduces the risk associated with continuing to generate revenues from these accounts. The more revenue your business earns from these recurring transactions, the higher its company valuation, and in effect, its marketability in the eyes of a potential purchaser in the GTA. Even if subscriptions are not usually used in your industry, finding a way to earn recurring revenue can greatly increase your company’s value compared to its competitors.
Unique Selling Points
The more unique your products and services are, the more likely you are to receive a premium offer for your business. This is because products and services that cannot be easily replicated are deemed valuable by any purchaser, since it’s harder for a competitor in the industry to follow suit, and in effect, compete with your business in the market. In contrast, a business that sells the same commodity as everyone else in their industry isn’t likely to yield a high valuation.
Over the years, if your business has perfected a way to win over customers, maintain good relationships with them, and documented your sales funnel with a predictable set of conversion rates, this ‘secret to success’ greatly improves your business valuation, making your company a prized acquisition over your industry peers who have no means of figuring out where their next customers come from, or how to acquire them.
By objectively demonstrating that your customers are satisfied with the products and services you provide, and intend to purchase or avail of your products and services in the future, you can improve your business’ valuation, and in effect, make it a more attractive and valuable acquisition than an industry peer that does not have a reliable mechanism of tracking customer satisfaction.
Usually in a merger or sale, a business undergoes staff changes, most notably, you, as the owner, no longer being in charge or active in the business, along with some key management personnel. However, in cases wherein a management team or “second-in-command” agrees to stay on after the sale, you could expect a higher business valuation resulting in a premium offer, since the purchasing body will want access to the same knowledge that keeps operations running.
Where your business is located sometimes determines how your products and services can be positioned and made marketable, and in effect, also gives rise to a good level of reach, growth, and valuation.
Location isn’t just about how your business can be easily found by potential customers; if your business location is prime and hard to replicate, these unique characteristics greatly increase the company valuation, resulting in premium offers when it goes up on the market.
As tired, old companies turn to acquisition as a growth strategy, they may be interested in a trendy, younger company to create some new found market interest. If your business is regularly featured in industry trade media and enjoys a loyal following or brand recall, you can expect a premium acquisition offer.