Business Value Enhancement
As an advisor, you have the power to help your client maximize the amount the business sells for by improving the buyer’s impression of the business, reducing the buyer’s perception of risk, and boosting the profitability of the business.
The business value enhancement process examines the factors that most sophisticated buyers will look at when they’re seriously considering buying a business. These factors will influence the price the buyer is willing to pay.
Business Value Enhancement Affects Buyer Perception
The market value of a business is subjective—it’s the perception that potential buyers have. This means that different buyers will perceive higher or lower levels of value. Your job is to help your client ensure that some buyers (you can’t please everyone) will look at the business and see a lot of value.
There are many ways you can enhance the perceived value of a business. The number of value enhancements made depends on the current state of the business, the client’s motivation to implement the enhancements, and the amount of time you have prior to putting the business on the market.
How Much Additional Value Can Be Created?
The amount of value created depends on how much opportunity there is. Most middle market businesses have many strengths as well as a number of weaknesses, as perceived by a buyer. The more weaknesses, the more additional value can be created, given sufficient time.
Your client stands to sell his business for more if he embarks on a business value enhancement program seriously. For the most impact, it is advisable to start several years before selling since the efforts will likely take some time to take effect.
Business Value Drivers
The factors that buyers look at are called value drivers. Read more about some of the most important value drivers.