5 Steps to Maximize the Acquisition Value of Your Business
By Laura McElroy

If you’re a business owner and you plan to sell your company in the future, you’ll want to understand how to maximize its value to make it more attractive to potential buyers. Buyers want to purchase a business that will maximize their return and minimize risk. 

Tackling the process step by step will make it achievable and give you the opportunity to realize a higher sale price. Below are five key steps you can take to achieve the best possible value for your company. 

  1. Financial systems must withstand due diligence

The quality of your financial information can have a huge impact when it comes to its sale. Buyers will typically require at least three years of financial statements. Accurate and detailed records are vital and it helps if they are reviewed by external auditors. 

Peterson Acquisitions is a small business M&A firm that will help you to support your financial claims. It will analyze a business to realistically evaluate its profitability. This will include evaluating your sales, assets, borrowing, cash flow, employees and liquidity as well as your profits and profit margins. 

Small business mergers and acquisitions can be complex and it helps to have a firm like Peterson’s in your corner to make sure you’re fully prepared, guide you throughout the process and provide proven suggestions for improvements. 

  1. Recurring revenue and multiple income streams

The more revenue that is stable, recurring and likely to continue this way, the more enticing your business will be to potential buyers. Multiple revenue streams refer to all the ways in which a business makes money. 

If you have more than one revenue stream, this helps to reduce the risk that a single product or service may fail. The more you’re able to demonstrate predictable earnings in the future, the better your chances of getting a good price. 

  1. Motivated management and employees

Your management team should have the skills and motivation to continue to drive the company after a sale. Employees are a key asset to a company and buyers will probably require most, if not all, employees to remain committed after a sale. There are a number of incentive schemes business owners can put in place to help retain employees over the long term. 

Your business must be able to operate successfully without you. If you are seen as essential to its success, a buyer will be concerned about how performance will be affected by your absence after the sale. 

  1. A strong, diversified customer base

A good question to ask is, “If my largest customer left, what impact would it have on my business?” A business should try to avoid having one customer account for 10% or more of the revenue. 

The impact on the business is too great if that customer decides to leave and buyers are likely to regard this as too risky. This is why it is so important to build a diversified customer base. 

  1. A realistic growth plan

Buyers are interested in future performance so having a realistic growth plan is important. A written plan gives the assurance that you know where your business is going and how it will get there. Written and confirmed orders can help to give any forecasts further credibility. 

Buyers want to know whether your business is scalable and whether you have any new services or products in the pipeline. It may be crucial for them to find out whether they can take your business model and roll it out in new markets. Evidence of growth opportunities will certainly help to maximize your acquisition value. 

JOIN OUR NEWSLETTER

Don't miss out on a thriving career.