March 17, 2017

Why Your Business Isn’t Worth As Much As You Think It Is

The #1 reason why businesses do not sell is over-valued asking prices. Being able to justify your valuation is extremely crucial, especially when you are looking to sell your business.

Throughout my experience creating a connected community of engaged buyers and sellers, several common issues have stood out, from unprepared sellers to business owners without a proper exit strategy. But the most difficult problem to address? Sellers over-valuing their business.

So the real question is, why is your business not worth as much as you think it is? I can answer that.

It’s Not Self-Sufficient

You are too involved in the business and haven’t built or implemented systems and/or hired/trained employees you trust. You cannot build a valuable business that is dependent on 1 owner, 1 vendor, 1 supplier, or 1 client. A savvy business buyer will walk about from this deal in the blink of an eye!

Ill Prepared

Business owners think time is one their side. That’s not always true. Prevailing trends and changing tastes can pit time against you. The rise of ride hailing apps and video streaming services we’re seeing right now means the best time for selling a taxi business or video rental store has likely passed. Be sure to track the trends and predict good timing to sell in order to maximize your value. Also, preparing a business for sale emotionally, financially, and operationally takes time as well. You’ll need to give yourself at minimum 3 years to prep and get ready for your exit.

No Defined Sales Process

Your business has no concrete plan on how to acquire new customers and retain existing ones. A potential buyer wants to walk into a business that has healthy, profitable recurring revenue and without a well-defined sales process this can be questioned.

Conducting Business Like It’s 1999

How strong is your brand? Do you have social media accounts with engaged followers? Do you have a mobile friendly website? Are you up to date with marketing initiatives, signage, and overall branding? These are things that add value to your business, so ensure you are conducting business for the year you are in.

No Plan for Growth

With your years of experience, can you document a solid plan on how a new owner can capitalize on the opportunities in the industry? Most sellers think they are selling the business at the present; however, buyers want to know they are buying a business with a future. Be clear on the future opportunities in your industry has.

Remember, preparation is key. Don’t be afraid to pull in your acquisition team (accountant, lawyer, banker and BizON) in order to ask questions and find resources in anticipation of the sale. Other than your home, selling a business is probably the biggest asset you are going to sell, and you want it to end up sold to and in the hands of the right buyer.

If you are looking for more tips on how to increase the market value of your business and implement a succession plan, be sure to attend the Ceridian-sponsored webinar coming up on March 21. I’ll be there with more valuable information for you and to answer your questions. Register today!

Note: The views, opinions and positions expressed by the author of this blog are personal and individual to him, and do not reflect the views, opinions or positions of Ceridian.

Team Ceridian

Our experts provide timely, essential insights and analysis for HCM leaders. We share fresh strategies and practical tips for businesses of all sizes, thoughts on hot topics and industry trends, and the latest legislative updates.

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