Is your business your retirement plan? If so, make sure you avoid these common mistakes so you can get top dollar for it when it’s time to sell.
Here are my top 3 things that can devalue your business:
1. Skewed revenue distribution amongst customers.
Your top 3 customers should generate no more than 30% of your revenue, and no one customer should generate more than 20%. If it’s more than that, it’s too much risk for potential buyers, as one of those customers leaving could make or break the business.
2. Flat or declining 3-year growth rate.
Buyers are looking for cashflow. If your growth rate over the last 3 years has been flat or worse, it will dramatically decrease your business’s value. This means you need to do everything possible to increase revenues and profits for3 years so cashflow projections justify your desired asking price.
3. Too much reliance on the owner.
If the owner is the top production person or salesperson, it will significantly decreasing the business’s value. Customers must have a relationship with the business/team, not just the owner, and operations should run smoothly regardless of whether or not the owner is present
If you don’t want to be a member of the worthless business club, let’s talk.
Schedule a 15 minute call and we’ll come up with an action plan to make sure your business is worth what it should be.
Author: Mark McNulty, Business Coach in Louisville, KY