When it comes to selling your business, there’s a pervasive myth that increasing sales is the golden ticket to a successful sale. Sales is not the sole determinant of your business’s attractiveness to potential buyers. There are many other factors that can significantly impact the value of your business. Here are some examples of other aspects that potential buyers will consider when looking at your business.
Profitability Trumps Sales
Profitability is one such factor that often gets overshadowed by the obsession with sales. A business with soaring sales but minimal profits may not be as attractive to buyers as one with steady, sustainable profits. Buyers are interested in the bottom line—the cash flow that sustains the business and generates returns for owners. A business that can demonstrate consistent profitability is most often more valuable than one that relies solely on sales growth.
Don’t Overlook the Qualitative Factors
Qualitative characteristics play a significant role in determining business value. Factors such as market share, depth of management, operational efficiency, and intellectual property can greatly influence a buyer’s perception of your business’s value. A well-run operation with solid processes and procedures in place is far more appealing than one that is chaotic and disorganized, regardless of its sales figures.
A holistic, strategic approach that focuses on optimizing all aspects of the business is key to maximizing its value in preparation for a sale. By emphasizing profitability, operational efficiency, and other qualitative factors, sellers can position their businesses as attractive investments that should command premium valuations in the market.
Read our new business owner guide Maximizing the Value of Your Business – Getting the Most You Can for the Sale to learn more. In this guide, we debunk common myths about business value and reveal:
- More than a dozen ways to professionalize your business
- How to prepare for buyer due diligence
- Ways to improve the quality of your business to command a premium price
Take steps now toward maximizing your business value and securing your financial future – plan your exit and dramatically improve your chances for a successful exit!
