Sunday, March 20, 2016

Building Value In your Business

One of the signs of a strong and healthy business is one that has controlled growth. 

The owners of the business have a 'solid handle' on where they want the business to go, a plan is in place, and they are using that plan to guide them to that destination!
In this post, our friends from Sunbelt Business Brokers some great tips for business owners to carefully consider. 
Doing so will not only help you increase the potential value of your business in the future, but it can help you better organize and manage your business now!  We trust you'll enjoy this post and benefit from the comments provided below.

Building Value In your Business: Top Financial Factors

Does your accountant dread your visit? Bad record keeping is, in fact, the biggest road-block to selling a business. Buyers want a business with a proven track record of consistent financial performance with solid, growing revenue and earnings. Yet, many businesses are rather flabby when it comes to fiscal fitness. Spending some time with a trainer/coach can boost your strength and health.
Let’s start with some top financial drivers of business value. Focusing on these will make it easier to sell your business and get you more money— then as well as now. Assess your own business, determine which factors affect your business the most and prioritize what you want to work on.

Keeping (in the) Good Books
A correct set of books prepared with proper accounting software is a necessity. Documents need to be current and correct, demonstrating timely remittances and filings.
Compliance is essential: issues with the Canadian Revenue Agency (CRA) or others can freeze your accounts and destroy your business. Continuity is also important. Are you dependent on a single employee who could leave?
Outsourced bookkeeping provides efficiencies that can benefit small businesses as you pay for work that’s being done, not standby hours. Clean and compliant books will contribute to a good relationship with your accountant and save you dollars there, too.
A good bookkeeper will also help you understand your numbers, providing forecasting, financial analysis and identifying cash flow risks.
Keeping good records and communicating any changes is a necessity. Owners often dispose of assets or sign a new lease and forget to advise the person doing their books.
Financial Value Drivers
Clean up the Balance Sheet. A Balance Sheet provides a snapshot of the business’s health. Use it to pinpoint and remove obsolete and slow-moving inventory or excess cash. Resolve potential liabilities and lawsuits, ensure that assets are properly recorded and that expensed R&D investments are noted.
The top reason businesses fail is not poor profit but dry cash flow held hostage in accounts receivable or inventory.
Increase revenues and profits. All else being equal, a better bottom line leads to a higher business valuation: a) sell more to existing customers, b) sell to new customers or c) a combination of the above.
How efficient are you at turning revenue (sales) into profit, i.e. controlling expenses?
Keep in mind that it takes six times as much money to attract new customers to businesses than up-selling, on-selling and generally over-servicing existing customers. You’ll want to keep your customers coming back and bringing their friends with them.
Review and reduce or eliminate discretionary expenses. A $25,000 increase in your bottom line might add $100,000 to your selling price. Phone bills, office supplies and insurance expenditures are areas that should be reviewed by outside agencies annually. Be careful with insurances, though. Your coverage needs to be adequate and the right kind. Having a proper insurance policy with up-to-date coverage assures a purchaser that what they’re buying is protected.
Maintain steady revenue or aim for growth. Steady sustainable revenue beats one that’s erratic.
The greater the market share, the better. Market share can be more important than revenue. A business with a 50% share in a defensible position is attractive to buyers.
Resolve and diversity customer concentration. It’s risky to have any one customer representing any more than 10% of your business. Resolve and diversify supplier concentration. A dependency on any given supplier is also a risk. Line up alternatives.
Prepare reasonable future business projections. Set goals with detailed steps to meet them. Show the earning capacity of your business. Base your plan on existing records, the market and technology; document the steps that will take you there.
Get a business valuation. A valuation tells you where you are now versus where you want to be “X” years from now. A valuation also helps pinpoint changes that can boost the business value.
Research tax implications upon selling the business, including "vendor take back" and earn outs. Who doesn’t want to minimize the tax consequences when selling? Some of the options: share sale, family trusts and deferred payments.
In our next installment, “Building Value In your Business: Top Organizational Factors”, we take a step back to address the operational factors that improve the value of a business for owners looking to sell their business.

Sunbelt Business Brokers Edmonton

Sunbelt’s team of brokers, operating at local and regional levels, have experience selling small to medium sized businesses. 

Michael McCulloch
Dale Alton

Sunbelt is the world’s 
largest business brokerage firm with approximately 300 licensed offices located throughout the world, 
and 33 offices across 
Canada alone.

More than 1,400 Sunbelt brokers annually coordinate an estimated 4,000 Main Street and Middle Market business transactions.

A variety of strategies are required to sell businesses from different industries, of different sizes, and in different economic climates. Many Sunbelt brokers have specific industry experience and cooperate with their counterparts to identify the buyer and create the right framework for the sale.

Your Local Sunbelt Business brokers sell a diverse mix of main street businesses valued under $3 Million. Mergers and Acquisitions of larger and more complex business transactions of up to $30 Million are managed out of the Ottawa Head Office. We would like to help you plan and look forward to retirement, expansion or an exciting new business opportunity. 


Have you ever thought about selling your Business?


Sunbelt represents clients who may be interested in buying a business like yours. If you are thinking of selling a business now or in the next 3 years, discover what your next steps should be. Feel free to contact our Sunbelt Business Brokers Edmonton office if you have any questions or would like a free confidential consultation. Give me a call. Dale Alton – 780-878-8787

Sunbelt - The Place to Buy or Sell a Business.

* Thank you Michael and Dale at Sunbelt for providing us with this helpful article!
Having a business plan can help ensure that you're heading in the right direction with your business, and that you have the necessary resources to get you safely to your intended destination!
In closing, we invite you to consider Pro-Vision Solutions Inc. as a part of your TEAM of business professionals. We're pleased to assist you with your business planning, through start-up, growth and expansion. Let us know if you would like to have a conversation!  

NOTE: For more information on the services provided by Pro-Vision Solutions Inc. and how we can assist ... please visit our Website:

1 comment:

  1. We can capture the essence of this definition of value in the following equation:

    Values and Prices are the value and price of the supplier’s market offering, and Valuea and Pricea are the value and price of the next best alternative. The difference between value and price equals the customer’s incentive to purchase. Simply put, the equation conveys that the customer’s incentive to purchase a supplier’s offering must exceed its incentive to pursue the next best alternative.
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