Graham’s Guide Chapter 5: 

 

Increasing the Value of Your Business Before You Sell

By now your business is becoming organised, your records are improving and you’re thinking like a seller rather than just an owner.

This chapter is about increasing value. Many owners assume that value can only be improved by dramatically increasing sales. In reality, buyers reward businesses that are lower risk, easier to operate and have clear opportunities for future growth.

Think Like a Buyer

Ask yourself one simple question:

‘If I was buying this business tomorrow, what would make me hesitate?’

Every hesitation is an opportunity to improve value before going to market.

Improve Profit Quality

Increasing profit is valuable, but improving the quality of that profit is often even more important. Buyers prefer stable, repeatable earnings over one exceptional trading year.

·       Reduce unnecessary expenses

·       Reduce personal and non business expenses

·       Review pricing and margins

·       Exit unprofitable customers or product lines

·       Strengthen recurring revenue

·       Ensure financial reporting is current

Reduce Risk

Risk reduces value. Focus on reducing the issues that make buyers nervous.

·       Diversify major customers

·       Strengthen supplier relationships

·       Renew key contracts

·       Update health and safety systems

·       Resolve outstanding legal or employment matters

Build a Business That Runs Without You

One of the highest-return investments before selling is reducing owner dependence.

Delegate decision-making, document procedures, develop your management team and allow staff to take greater ownership. The easier the transition appears, the more attractive the business becomes.

Invest Where Buyers Notice

Not every dollar spent before selling creates value. Focus on improvements that buyers see and appreciate:

·       Clean and organised premises

·       Well-maintained equipment

·       Professional branding

·       Modern software systems

·       Reliable reporting and dashboards

Broker’s Desk

Some owners spend thousands on cosmetic improvements while ignoring customer concentration or poor systems. Buyers usually forgive ageing carpet far more readily than unreliable earnings or undocumented processes.

Graham’s Tip

Every improvement you are considering before selling should answer one of two questions:

Does it increase future profit?

Does it reduce future risk?

If the answer is yes, it’s probably worth considering before selling.

Common Mistakes

·       Trying to maximise profit by cutting essential maintenance.

·       Making major strategic changes immediately before selling.

·       Overcapitalising on improvements buyers won’t value.

·       Ignoring recurring operational issues.

·       Assuming buyers won’t notice weaknesses.

Action Checklist

·       Review customer concentration.

·       Increase recurring income where possible.

·       Reduce owner dependence.

·       Address operational risks.

·       Improve business presentation.

·       Meet regularly with your broker and accountant.