Time to Set New Year’s Resolutions to Increase the Value of Your Business
We want to wish you a Happy New Year and hope that you were able to enjoy the holidays even if they looked a little different than last year.
As we begin a new year, we look ahead and also reflect on the past year. Many business owners are ready to put 2020 behind them. While some businesses soared last year due to the industries they served, it was a devastating year for others due to shutdowns, work force issues, and customer slowdowns. Whether your business soared, slowed down, or continued to plug along at the same pace as last year, there are things you can start doing today to make 2021 as successful as possible.
Moving into 2021, business owners can continue building the value of their businesses in order to successfully transition ownership whether they want the transition to take place this year or in the coming years. A transition to an employee, the next generation, or a 3rd party, will all need to have a similar foundation: clean financials, strong management, and a strong business plan.
With the SBA moving to a 90% guarantee for loans, there will be an increase in buyer demand in 2021. This will cause buyers to be more critical in assessing the businesses they are interested in. In order for you to successfully sell your business for the highest value, consider doing the following:
- Make an investment in understanding the current value of your business – have an equipment appraisal and business valuation completed. If you own the real estate your business occupies, get a real estate appraisal too. It’s hard to plan for your future if you don’t know your starting point.
- If you have a business plan, update it and make sure it is still relevant to your business today and your plans for the future. Make sure your sales and expense projections are realistic. If you don’t have a plan, dig in and put one together. This document should be used as a management tool and will be useful in dealing with your bank if ever in need of an additional credit line or growth loan. A business plan can also assist a buyer in understanding your vision for the business.
- Do a SWOT analysis. Knowing your strengths, weaknesses, opportunities and threats is an invaluable management tool. Be honest in your assessment and set goals for maximizing the positives and reducing the negatives of your business in 2021.
- Analyze your position within the business. If you look in the mirror and realize that you are absolutely critical to the operation of your business, then you have a problem that needs to be addressed. Identify people within your organization that can be groomed to become a more integral part of your organization and take the steps to educate, train and mentor them. There isn’t anything that limits the value of a business more than when the key employee is the owner.
- Make a commitment to your balance sheet. Hopefully, your P&L improved in 2020 and you see opportunities for further improvement in 2021. While it’s natural to keep an eye on the bottom line and the balance in your checking account, it is mission critical to make sure you continue to improve the strength of your balance sheet.
- Remove any personal expenses from the P&L. This may mean a slightly higher tax obligation but will increase the value of the business significantly.
- Deepen the relationship with your key advisors – attorney, accountant, banker and others. Make sure everyone is on the same page when it comes to planning your business’s future.
If you have questions on how to help build the value of your business, please don’t hesitate to reach out. We have a team that can help you build value through sales and marketing, leadership training, and office organization.