Business Transitions

What 3 Value Drivers Make a Business Attractive to Buyers?

    • troshynski-laura-headshot.jpg
    • Laura Troshynski

      Sr. Director, Business Owner Advisory Services
      Nov 04 2022

What 3 Value Drivers Make a Business Attractive to Buyers?

Author: Laura Troshynski, Senior Director, Business Owner Advisory Services

The goal of owning a business is to run a profitable operation, but a strong track record can do more than ensure business success. Strong sales and financial management also are critical when it is time to sell your business.

Business owners who hope to receive full value for their years of hard work need to heed three specific value drivers to help lead to a successful sale.

Driver #1: Maintaining a Strong Management Team and Employee Base

According to the SHRM/Globoforce Survey,[i] 47% of responding human resource professionals say retaining employees remains a top workforce challenge. High turnover rates can lead to decreased productivity, low morale and high business costs.

Lack of employee retention, particularly at management levels, also can dent the value of your business when it comes time to sell. Having a strong and experienced management team in place will provide new owners with valuable resources as they learn about your business, customers, vendors and systems.

Retaining key employees and a strong management team also will provide continuity for the organization as the new owners take charge. Familiarity at the top will make it easier for employees to adjust to the ownership change and help ensure morale and productivity remain high during the transition and beyond.

In addition, your long-term management team will be invested in the operation and motivated to maintain the value of the business prior to, during and after the sale to a new owner.

Driver #2: Expanding Your Customer Base

The odds of selling your products or services to existing customers is 60% to 70% higher than selling to new prospects. However, it’s important not to put all your eggs in one basket. Creating a broad and diversified customer base will help ensure stronger sales over time and protect the company should you lose a major buyer.

Having an array of customers also will make it easier to sell your business. After all, demand for your products and services confirms the market value of your company, making it more attractive to potential buyers.

Expanding your customer base takes effort, so successful business owners usually devise and implement a marketing plan. Regular and targeted marketing helps raise awareness of your brand and drives potential new customers into your sales funnel. Once your audience is engaged, a talented sales team can turn prospects into buyers by responding to inquiries and nurturing relationships.

While building your customer base, don’t forget about the importance of retaining existing patrons. Satisfied customers can generate referrals to further grow and diversify your pool of buyers, so they deserve special attention.

A key to maintaining customer satisfaction is to regularly ask for input and then act on suggestions to improve service and performance.

Driver #3: The Importance of Clean Financials

Maintaining up-to-date financial records can help your business more easily prepare for tax season, receive financing and maintain cash flow, but clean financials are equally as important when you are selling your business.

According to a BizBuySell survey, the majority of businesses sold in 2021 had strong financials. That means your record keeping and ability to manage cash flow could have an impact on how likely a potential buyer is to purchase.

While maintaining a clear financial recording isn’t always easy for small- to mid-sized business owners, there are steps you can take to simplify the process. First, be consistent. For example, ensure that all bills are recorded and categorized in the same manner. Don’t mark an expense as marketing one month and as operations the next.

Second, make sure your records are easy to read by outside parties and kept up to date. Backtracking months of financial management to prepare your business for buyer review could delay the sale and lead to accounting errors.

Also consider having financials reviewed by outside professionals on a regular basis. This can help ensure accuracy, so there are no surprises come sale time.

Successfully Running and Selling Your Business

While the three sales drivers discussed here will help with an easier sales process, they can help your business in other ways as well. Maintaining clean financials can help generate positive cash flow and decrease tax risks, while also connecting you with a team of experts to guide your operations.

A diverse customer base, served by a dedicated team of employees can also support business growth, driving more buyers to your doorstep and ensuring a profitable operation right up to the day of sale.

About the Author

As the Senior Director of Business Owner Advisory Services at FNBO, Laura brings her experience working with business owners, and as a former member of a family business, to the Business Owner Advisory Services team. With an extensive background in business and estate planning, Laura is well qualified to help others plan for business transitions.

The articles in this blog are for informational purposes only and not intended to provide specific advice or recommendations. When making decisions about your financial situation, consult a financial professional for advice. Articles are not regularly updated, and information may become outdated.