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Maximizing Your Company's Value for Sale: A Critical Component of Business Succession Planning

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If you are a small business owner considering succession planning, maximizing your company's value is at the top of your to-do list. This blog is the fifth in a series of six designed to help small business owners make important decisions about business ownership transition. Its focus is on how to maximize the value of your company.

If you have not yet read our earlier blogs on business ownership transition, here are links for your convenience:

The value of a small business is not an absolute. Unfortunately, no business valuation calculator can effectively capture and account for the assets of a company. It is often more productive financially to engage the services of a business ownership transition attorney than to attempt to maximize company value without expert advice. This is one area where short-cutting usually leads to short-changing.

Maximizing the value of a business necessarily involves the exercise of judgment. This is particularly true with closely-held companies that are not publicly traded. In such cases, it can be helpful to think of your business owning both tangible and intangible assets.

What Are Tangible Assets?

Tangible assets are often thought of as things you can touch. These assets have a physical form and include buildings, real estate, machines, equipment, vehicles, supplies, and inventory. Tangible assets are typically easy to value as they can be sold on the open market.

What Are Intangible Assets?

Often, much of a small company's value lies in its intangible assets, things that have no physical form. Here is a list of several common intangible assets:

  • Employee knowledge and skills;
  • Quality of goods or services;
  • Customer goodwill;
  • Business reputation;
  • Business connections ( i.e. your network);
  • Intellectual property;
  • Internet domain names;
  • Social media influence;
  • Contracts and agreements;
  • Customer base/client list; and
  • Trade secrets.

Intangible assets can be very difficult to value, and you can expect some haggling over just how much they are worth. How, for example, would you attempt to place a monetary value on your company's domain name? Would you even know where to begin?

Proactively identifying and valuing intangible assets with the help of an experienced business ownership transition attorney gives you the best chance of maximizing your company's value.

Tips for Maximizing Your Company's Value for Sale

As you might expect, one of the best ways to meet your personal financial goals during an ownership transition is to maximize the value of your business while you are still there. Here are some ideas to get you started:

  • Making deliberate decisions about business expansion and tangible asset improvement;
  • Developing new and repeat business;
  • Investing in employee training and skill development;
  • Managing your financials meticulously, i.e. "Know Your Numbers!";
  • Expanding your company's reach and influence on social media and your business domain;
  • Building a solid customer relationship management system;
  • Focusing on solid delivery of services and goods;
  • Actively protecting business trade secrets;
  • Managing human capital effectively; and
  • Planning for an eventual business ownership transition.

The one quality these activities have in common is that they cannot be achieved overnight. They all take planning and time to do well, which is yet another reason to start the succession planning process as early as possible.

The bottom line is that your business is worth what a willing buyer will pay and you will accept-no more, no less. Fortunately, an experienced ownership transition attorney can lead a team of experts to help ensure you build and establish the maximum value for your business.

Maximizing your company's value for sale is an integral part of effective business succession planning. Remember, starting the process early is essential to meeting your goals. Don't wait any longer. Contact me, Stephen J. Golder, by calling (866) 617-4736 or completing our firm's Contact form. We pride ourselves on helping business owners in West Virginia, Kentucky, and Ohio achieve their ownership transition goals.

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