Selling Your Business? 8 Signs Your Business May be a “Fixer Upper”
Building business value is very much like building equity in your home. Just as we are constantly maintaining and updating our homes to retain its value and saleability it is equally important to maintain and update our business so equity continues to grow and provide the maximum payoff when we are ready to cash out.
Similar to a home, when a buyer looks at a business they will determine if your business falls into one of three categories: (1) Fixer Upper (2) Fair Market Value (3) Strategic Buy.
Fixer Upper – Businesses in this category are not necessarily losing money. They may be showing modest profits but the new owner would have to make significant investments in time & money to update systems to improve sustainability and profitability. This business is often sold for much less than Fair Market Value
Fair Market Value – These businesses are generally well run and producing acceptable profits. It would provide a “turnkey” opportunity for the new owner. They would have to make minimal investments in time and money to improve the business.
Strategic Buy – The business actually sells for more than Fair Market Value. We have often seen it in real estate. There is that home with such great features, location and livability that new owners will line up to buy it and pay a premium to get it. This can also happen with businesses. A business may have a strong brand, proprietary information or access to a specific market that make it extremely attractive to a direct or indirect competitor to buy it.
So how do you recognize if your business is a “fixer upper” and you need to consider building business value?
Look for these 8 Signs:
- Profit margins are below the industry average
- Sales growth is behind the industry average
- You & your staff are always fighting fires
- Taking a day off or a vacation is a challenge; you’re afraid that the “wheels will fall off”
- Your customers would leave if you were not there since you have such a strong personal relationship with them
- None of your processes have been improved or updated in the last year
- Talented people keep leaving your business
- You are the intellectual property for the business (the one with all the knowledge)
You can take specific steps to improve the status of your business from “Fixer Upper” to “Fair Market Value” or even a “Strategic Buy”. Identify the steps your business needs to take; email email@example.com with “Business Value” in the subject line and I will be happy to send you my mini 40 Point Business Effectiveness Evaluation to get you started.