How to Value Your Business and Prepare It for Sale

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By Courtney Rosenfeld

How to Value Your Business and Prepare It for Sale

Letting go of a business can be a challenge when you’ve invested time and energy to build it from scratch. Your persona may be so intertwined with the business that selling it seems impossible. But you have limited time and energy reserves. Therefore, it’s important to appreciate the need to pass on your business at the right time, to the right people and for the right consideration.

Signs That It’s Time To Sell

Many people don’t know when they need to sell a business unless an external party, such as a mentor, points it out. However, it’s important to remain open to certain cues. For instance, when you’ve professionalized the business by hiring the right people, you may no longer need to be there to supervise daily operations. If the business’s bottom line is good and future cash flows are projectable, you can sell the business for good value.

In other situations, the business may outgrow you. It may require expertise that’s beyond your ability for it to maximize its potential. Letting go of the business allows the injection of new ideas and energy to power the next stage of growth.

Preparing the Business for Sale

No matter the reason for selling the business, you want to get the maximum compensation for the value of the business. There are several ways to determine the value of a business:

• Assessing historical revenue and profits
• Projecting and discounting future cash flows
• Calculating the net assets of the business
• Valuing the size of the business’s  current market share

The various approaches are likely to yield different valuations for your business. You may need to consult an expert to help you choose the most favorable approach. For instance, capital-intensive businesses may favor the assets approach, while a business in a fast-growing industry may find a future cash flow valuation approach to be better.

Business Paperwork

Regardless of the approach, proper records of the business are paramount. Business records are important for tax purposes, and they help prospective investors and buyers assess the true value of the enterprise.

If you don’t have comprehensive business records, start proper bookkeeping practices today. You can improve your internal processes through simple-to-use accounting tools. Sending your customers invoices for their purchases helps you gain insight into your sales volumes and trends. A free online invoice generator allows you to quickly customize an invoice for your business from pre-made templates with your own photos, logo, and text.

When preparing the business for sale, ensure your legal paperwork is in order. Have your Articles of Incorporation available, and renew all your licenses. If you have ongoing contracts with vendors and customers, ensure they’re in writing for the sake of business continuity.

Preparation Helps You Get Fair Compensation

Selling your business requires preparation, and completing the process may take more than a year. Talk to the right consultants to determine a provable valuation, and get your paperwork in order to help expedite the valuation and sale process.

Visit Bay Area Business Brokers for more information on how to prepare to sell your business. 408-246-3846.

Courtney started Gig Spark to be a resource and the first step for people who are looking to join the gig economy, either to supplement their income or as a way to fulfill their dreams of becoming an entrepreneur.

Using Data to Improve Your Business Across the Board

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By Cody McBride

Using Data to Improve Your Business Across the Board

More and more companies of all sizes are using data analytics these days. They have long proven to help managers and teams make critical decisions and position their businesses for long-term success. By utilizing the valuable data at your fingertips, you can gain a better understanding of your company dynamics, your relationship with the market, the risks in front of you, and much more. So, what is data analytics, and how can it help your business reach the next level? Below, Bay Area Business Brokers lays it all out for you!

What Is Data Analytics?

Data analytics describes the process of using different approaches to analyze data. Some of the data is predictive and others quantitative, but all business data can provide valuable insight into your operations, strategies, and growth. Essentially, using data analytics effectively can help your company accomplish goals and make better decisions.

You can use data analytics to compare past data with current data, identify market trends, and determine what outcomes are likely to occur and when. Data analytics can also help you determine the steps your organization needs to take in order to reach your overarching mission, ultimately helping you to make profitable judgments.

Every tool, individual, and business generates a plethora of data each day, meaning you must learn how to organize your data sources before you analyze them. Many business owners use cloud storage and various software and tech tools to manage data.

Marketing Strategy

One way data analytics can benefit your business is that it provides insight into how you can improve your marketing campaigns. Data can help you decide on your target market, customer demographics, and the primary reasons people buy a product or service. It can even help you learn seasonal patterns so that you can adjust your promotions accordingly.

Figuring out your target market is one of the most critical aspects of running a business, and once you’ve done it, you will need to determine when and where consumers will be likely to discover and purchase your product or service.

Consumer Trends

When analyzing data through a business lens, you can gain in-depth knowledge of how consumers are using the products or services of your business and the market in general. For example, a streaming service company might use a predictive analytical model to determine how to encourage consumers to stick with them for the long term. Analytics can show these companies how to make their marketing strategies more impactful.

If you run an e-commerce company, you might use data analytics to identify which visitors remain on your site, how long they stay on each page, and which visitors return later on.

Risk Management

Every organization must understand risk in order to make good decisions. One of the most valuable aspects of data analytics is that it can help you identify and manage virtually all risks regarding your business.

When used effectively, data analytics can help you avoid crises and optimize reactions so that you resolve crises as effectively as possible. This is because analytics provide insight into the most likely scenarios of each potential decision. By improving your risk management practices, it can enhance the overall management of your business.

Exit Strategy

If you are developing an exit strategy for your company, any expert could tell you that growing your business beforehand is one of the best approaches for ensuring a profitable sale. The insight provided by data analytics could be one of your most significant assets in helping you make decisions that build your business. Furthermore, working with professionals can help you handle any other tasks for preparing your exit plan.

The value of data analytics is becoming more known across industries every day. When harnessed correctly, analytics can help your managers and teams make critical decisions and lay a foundation for flourishing in the coming years. Consider the information and advice above to develop a plan for incorporating analytics into every aspect of your operations.

Are you interested in buying or selling a business in the Bay Area? Contact Bay Area Business Brokers today! 408-246-3846

Author Cody McBride’s love for computers stems from high school when he built his own computer. Today he is a trained IT technician and knows how the inner workings of computers can be confusing to most. He is the creator of TechDeck.info where he offers easy-to-understand tech related advice and troubleshooting tips.