5 Ways to Increase The Value Of Your Startup Before You Sell
03rd, July 2019 - Guest blog
Selling a startup is no easy task. Startups are relatively unknown entities, making them somewhat difficult to tout to potential buyers. However, there are a few things you can do to maximize the value of your startup prior to selling. Follow these tips before listing your startup and you will rest easy knowing you did everything you could to get the most out of your business.
1. Replace Family Members With Staffers
Plenty of startups feature the founder's family members and friends in key positions. After all, you started the business so you should decide who is hired, their role and so on. However, family members and friends are a major red flag to potential startup buyers. Replace all family members with staffers who have no relation to you or anyone else in management. This way, when prospective buyers analyze your business, it will have that much less risk in the event that there is a mass employee migration following the purchase.
2. Ensure Essential Employees Will Stay Beyond the Transition
As the business owner and founder, it is up to you to ensure critically important employees will remain with the company after its sold. This is the time to brainstorm a staffer retention program to ensure employees essential to the business remain with the company after the sale. Put yourself in the position of a prospective startup buyer. You will be that much more comfortable bidding on a business if you are given assurance that essential employees are incentivized to remain with the company beyond the sale date.
3. Document and Systematize All Major Business Operations
Take the time to systematize all key business tasks. Though current staff members know what to do, potential buyers need reassurance that the proper systems are established so the business can operate like a well-oiled machine even if the owner is not present. It will also help to document each important business function as well as all of the business's functions. This task will certainly take some time yet it has the potential to entice prospective buyers to the point that they engage in a bidding war for your startup.
4. Separate Your Business From the Rest
If you can find a way to help your business stand out from the crowd, it will be more attractive to a potential buyer. Selling a business is somewhat of a marketing endeavor. It is up to you to distinguish your business from the rest. If you are struggling to figure out how to stand out from the pack, consider asking current clients for testimonials to explain why they swear by your startup and what keeps them returning for more.
5. Tidy up the Books
If your books are sloppy or inaccurate, potential buyers will be hesitant to make an offer. It is not enough to decrease the business's tax burden. Startup buyers are more interested in whether the books are accurate and reflective of the business's true health. Tidy up your books, play by the rules, be detail-oriented with all facets of accounting and it will be that much easier to sell your startup for fair value.
Take Your Time Before Selling
Be patient and mindful as you prepare your startup for sale. The manner in which your business is presented to prospective buyers has the potential to make the difference between tens of thousands or even hundreds of thousands of dollars in the sale price. Take some time to think about how you can improve your business beyond the tips detailed above, proceed accordingly and you will maximize the value of your startup.
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Marla DiCarlo is an accomplished business consultant with more than 28 years of professional accounting experience. As co-owner and CEO of Raincatcher, she helps business owners sell their business so they can get paid the maximum value for their company.