The price is right – or is it? How much is your business really worth?

The author is director of Strategic Corporate Finance

1. There’s often little magic in a ‘magic figure’

It’s all too easy to dream up a ‘magic figure’ of what you’d sell for if an offer was received. In my experience, this figure is often far from the commercial reality

2. Remove your rose-tinted spectacles

Take a long hard look at your business and don’t let emotions stand in the way of reality.

Shareholders often become far too close to the business – leaving them blind to how negative issues can impact on the value.

3. Play to your strengths

Never lose sight of how attractive a quality customer base, patent protected products and sales opportunities can be to a potential buyer.

4. Be wary of values paid for other businesses

No two businesses are the same which means prices paid for competitors in the past often hold little or no relevance.

5. Plan your exit 

Shareholders should start planning for their exit up to five years in advance to give time to consider all the options, make necessary changes in their business and maximise the value they eventually get.

6. Plan for the unexpected

Shareholders should start planning for their exit up to five years in advance to give time to consider all the options

Discovering your company is worth much more than expected can accelerate the timing of a sale.

Conversely, knowing the value is much less than anticipated – coupled with an understanding of factors behind the value – gives shareholders time to implement an action plan.

7. View your business from a buyers perspective

The price a buyer will eventually pay for your business will reflect the value they see in combining your business with their business – eg, complimentary products, cross-selling opportunities, access to new customers, skilled workforce.

Understanding what kinds of businesses are buying businesses like yours and why will help you to build a business which is attractive to buyers. Don’t just think of your direct competitors as potential buyers – companies in adjacent markets or serving a similar client base with different products might be prepared to pay a higher price. 

8. Never assume you’re right!

Finally, the golden rule. Even if you believe you know the value of your company, never leave it too long to find out if you’re right.

Your knowledge about the value and strengths of the company, coupled with time to address any issues, will ensure you maximise your chances of securing the best price.

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