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How to improve Business Value

Hamish Pryde • February 16, 2014

How to Improve Business Value

A successful small business sale begins with a solid grasp of business valuation. The valuation can make or break a business sale because for many sellers, attaching a dollar value to their company is a touchy subject - especially if they have spent years building it from scratch to a profitable enterprise.

A valuation process is a skill that is not derived from a simple formula. It involves subjective judgment coupled with acceptable market valuation methodologies and should be undertaken by experienced advisors.

Remember - the actual value of your business is the amount someone is willing to pay for it in the business-for-sale marketplace. Personal feelings about your company's worth have no relation to the value determined using sound valuation methodology, accurate documentation and other factors that could potentially influence value.

Business valuation experts often find that sellers are surprised to discover that the valuation process yields a lower-than-expected asking price for their business. The good news is that if you are not happy with your business' estimated value, there are steps you can take to increase the business potential value before putting it on the market. It is important to start immediately however, as you need to start planning usually years in advance to make the kinds of changes that substantially improves the value of your company.

From a buyer's perspective, proven profitability and future earnings potential are the most attractive qualities in a potential business acquisition. By documenting a multi-year record of accomplishment of profits and positive cash flow, you can drive up the value of your company-substantially! Get your business advisor involved to help you plan for profit improvement. The investment in professional advice will pay big dividends on the eventual sale price.

It is also important to strategically position your business for future earnings, identifying advantages your business either has or will have in the general marketplace. What is your point of difference from the competition? Also, identify and fix any areas of weakness. Does your business have a key person or over reliance on certain customers or industries?

Another strategy for improving business value is basic organisation. Carefully maintained financial records, documented employee policies, sales scripts, manufacturing documentation, the how to manual, think "McDonalds" a tidy workplace and/or workshop - it all counts when it comes to the amount buyers are willing to pay for your business.

Simplicity has value, and the easier it is for buyers to understand your business and see themselves in the driver's seat, the more likely it is that your business will sell for its full value.

By Hamish Pryde September 11, 2024
Paper is everywhere. We spend a lot of time and money moving paperwork around. But with today’s technology it is now possible to get rid of paper entirely. Digital documents are simpler, easier to store and send, more searchable and permanent. How long does it take to post a document to somebody via the ole stamp and envelope method, that is snail mail? It is more efficient and timelier to email the document. How many times do you go to print a document at home and find that your printer has run out of ink? Why do we still hold onto printing paper documents? Sometimes it’s just because that’s what we’ve always done and let’s face it change can be difficult at first. Paper alone is cheap. But when you start paying for printers, toner, servicing and maintenance, paper starts to look more expensive. Let alone the storage cost. Paper tax records for seven years can be quite a few boxes of paper. We have embraced some paperless technology as part of a modern business practice. This includes digital signatures, digital collaboration, paperless minutes of business improvement and coaching meetings, electronic work papers and my new digital notebook which I am enjoying. We send questionnaires via email to you to gather vital information to enable us to prepare your annual financial statements. This is a PDF document. Instead of printing the questionnaires you could save the document down into a folder of your choice then edit the PDF document and return to us. How do you edit a PDF document you ask? Once you have opened the document the Adobe online editor lets you do some things for free. The online editor works in any web browser and lets you add text, sticky notes and highlights. Click on the fill & sign button to the right of the document, then in the top toolbar click Iab text button. You can add text directly on the PDF document. Have a try next time you have a PDF document open. Xero and Farm Focus users can attach invoices directly to the transaction loaded into Xero. Then if you are looking at the rates expense in the profit and loss account or farm working account, you can drill down into the rates code and see the transactions. Then attached to each transaction is the rates invoice if you use this great functionality. All invoices can now be stored in the cloud. So why paperless? Productivity - electronic documents are instantly and simultaneously available to everyone who needs them. Reduce waiting times with less risk of loss or damage. Cost savings - you will save money on printing, postage and associated costs. You could pay less rent because you won’t need all that space for your files. Security - electronic documents are more secure than printed ones. Digital records can be password protected and rendered unreadable through encryption. Printed documents are only as secure as their proximity to a copy machine. Reduced Clutter - paperwork on desks and shelves are not only untidy it’s inefficient too. The organisation of digital files is simpler and your office will look much neater. That will help you clear your mind to focus on your business. Environmentally friendly - less printing means fewer trees cut down for pulp and less energy used to make and transport paper. Disaster recovery - if there is a fire or flood, recovery from the backup is much easier with digital storage them with paper. There are great help articles available in Xero or Farm Focus if you are not attaching invoices to payments already. To find out how click on the links below: If you would like to explore ways you can go paperless we can help.
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