//The right value for your business Once you’ve made the decision that you want to proceed with your succession plans, and you understand which routes may be available to you, it’s then important to focus on maximising the value of the business. Typically, businesses are valued using a balance sheet analysis, a cashflow forecast of future performance and an adjusted value of profitability based on the industry and size of the business. Getting the right support and advice in understanding what is included in these calculations is crucial so that you can start taking steps to improve the business’s value. To achieve this, it’s vital to have a plan in place which includes different aspects of the company – either to ensure an important box is ticked, agreements are secured, or to review and improve processes within the business. Here are some tips for what to include in your valuation strategy:
1. Ensure a high-quality management team is in place, not only to help achieve the aims and plans ahead of the sale, but to give you flexibility in exit routes available to you.
2. Ensure patents and trademarks are in place for all intellectual property you have created and used.
3. Make sure you have appropriate contracts in place with key customers and suppliers. This is especially important where only a handful of customers and suppliers are used.
4. Make sure you have a lease for your trading premises in place that extends beyond the sale date. This is vital for continuity of the business from the new owner’s point of view.
5. Ensure that key members of staff are tied to the business, especially where they have good relationships with key customers and suppliers. You may want to discuss share options and structures with your advisor at this stage. 6. Make sure that internal processes are as efficient as possible and well-documented. Check that financial information is readily available. This will help potential purchasers to more easily see, and have confidence in, how the business runs.
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