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Author: Lisa Riley

Lisa brings her mid-western values to business brokerage, where Integrity meets Results.

5 Ways to Grow Your Business to Maximize the Purchase Price Value

5 Ways to Grow Your Business to Maximize the Purchase Price Value

In order to maximize the value or the amount you keep in your pocket when you decide to leave or sell your business, you can:

  • Start a business or
  • Buy a nice small business, build it up, pay off loans, and sell.

Set up a business from the beginning (or now) to maximize sales value by following these 5 steps:

       5. Maintain Good Financial Books and Records

  • Keep your personal and business funds separate. Yes, for small business owners starting out funds may be indistinct. As soon as possible, keep separate books.
  • Make sure your accounting policies conform with those in your industry.
  • Enlist your accountant and attorney to determine which entity type is best for your business and your future plans.

       4. Diminish or Remove Unreported Cash, Perks

  • Report cash (e.g, no $10,000 ‘cash’ bonus in your pocket).
  • Identify and limit or remove non-essential business expenses (e.g., additional $10,000 for family vacation to Fiji counted as business expense)
  • Why: $10k off the bottom line is a potential reduction of purchase price by 2 or 3 times that amount.

       3. Keep Investing In The Business…

  • …as if you were going to keep running it yourself. If buying new equipment, make sure that it is increases revenue and would increase the value of the business. Buyers will consider the level of debt and the quality of assets, particularly in manufacturing operations.
  • Acquire another small business to create some synergies and increase value….equity being value.
  • Review leased and financed assets to see whether they should be fully owned.
  • Debt is not bad. Too much debt or unmanageable debt is!

       2. Make Sure The Business is Financeable

  • Seller financing indicates to buyers & bankers that seller believes the buyer can continue and grow the business. Additionally, MAXIMUM value is achieved (always a cash discount).

       1. Work Yourself Out of a Job ****

  • Make sure you are NOT critical to the business.
  • IF your company’s success is not solely dependent on your input in terms of operational know-how, technical skill or personal relationships with clients or suppliers, then VALUE is greater.
  • It is helpful to have a reliable management team to demonstrate that the business will continue to be successful once the owner has left.

In summary, to get the greatest value when you decide to sell your business:

  • Make sure you know your financials;
  • Do not commingle funds;
  • Invest (reasonably) in your business;
  • Provide financing or have a SBA able business; and
  • Become dispensable to your business’s success.

Why It’s a Good Time to Sell Your Automotive Business in Phoenix

If you’re the owner of an independent, family-owned auto repair shop in Phoenix, you may be reaching a point in your career where you want a new challenge or you’re ready to retire and hand over the business to another pair of capable hands.

Selling a business is a big decision to make, and it should be considered carefully. Regardless of the industry, selling requires a lot of planning and preparation that, if not done carefully enough, can actually hinder the process instead of helping it.

The good news is, if you’re a business owner in Phoenix who is looking to sell, there has never been a better time to get the process started.

Strong Population Growth

According to data released by the US Census Bureau in May 2017, Phoenix’s population increased the most in the United States between June 2015 and July 2016. The total growth was an additional 32,113 persons.

Nearly five million people currently live in the Phoenix area as of 2018, and this number is expected to grow over 8 percent in the next five years.

Population growth is good news for business owners and those who are looking to sell, as it widens the potential pool of buyers. It’s also an indicator that the Phoenix market is starting to return to pre-recession norms. Steady increases in population help fuel the success of construction businesses, retail, restaurants and other services, including automotive.

Large Pool of Buyers

According to LINK’s internal figures, buyers are ready to pay top dollar to purchase automotive shops that have revenues from $100K to $1M. With such a large pool of interested buyers, sellers can certainly drive a competitive price to ensure they earn the most profit from the sale.

What Are Buyers Looking For?

If you’re set on selling your automotive business, you may be wondering what buyers are looking for when they consider whether or not to purchase a new business. Typically, buyers look for the following in an automotive business:

  • Well-functioning: Does each of the staff know what their roles are? Are they well-managed and cohesive, and do they work well together? Are processes in place that keep things moving smoothly and make it easy to address customer issues and other problems that might arise?
  • Situated in an ideal location: Is it easy to get to, is there plenty of parking for customers, does it have enough road visibility?
  • Well-trained technician team: Are the technicians and staff employed there skillful and reliable? Will certified technicians stay on after the transition?
  • Established customer base: Does the shop have a steady stream of business and maintain a good standing reputation in the community?
  • Longevity: A business that has been in operation for a long time is often a good indicator of future success.

If you believe it may be time to start the selling process of your established Phoenix automotive business, contact a business broker at LINK today. We can help you get started with the first steps toward a successful sale and let you know exactly what’s involved from start to finish.