6 - Build a Competent Team

An important, yet challenging thing for an entrepreneur to do, is to recruit and build a capable team. This takes a lot of time, resources, plus trial and error. The success of your business depends on the collective capability and teamwork of every member. Having a competent team allows the business to scale, while reducing key-man risk.

Having a proper team in place can provide legitimacy and assurance to the potential buyers. The sale of the business entity is the sum of all parts: customer base, operational and management team, brand name, sale channels, partnerships, intellectual property, assets, know-how, organizational culture and goodwill.

7 - Proper Documentation

It’s common among solopreneurs, micro and small businesses not to have proper documentation. Proper documentation includes the SOPs (standard operating procedures), write up and responsibility of each roles, organizational chart, operational manual for using various tools (Hardware and/or software), storage of digital and intellectual assets, etc

This will facilitate the ease of business transfer. It will ensure that know-how and capability are not lost. It builds confidence in the buyer that good practice and a high level of professionalism are observed. This indicate to the buyer that the seller is ready to sell his/her business. It cultivates goodwill in the prospective buyers.

You can consider using google workspace drive and notion for documentation, ensuring that important information are recorded. By opening up the space to your staff/ co-workers to input, it can give you precious insights and granularity into the operational side of things.

8 - Initiate Growth Opportunities

Businesses are generally classified into 3 broad categories: High Growth, Stagnant or Distressed. Make a guess which category of business typically have the highest valuation, considering all things being equal?

If you are guessing High Growth Business, then you are right.

Below are some common ways for spurring growth:

·      Enter into new markets

·      Introduce new products

·      Opening up new channels

·      Revamp the brand

·      Explore new partnership

·      Convert one off licensee fee to recurring subscription model

·      Acquire another business

An example is Microsoft. Microsoft introduced recurring payment for Microsoft Office with the launch of Office 365 in 2011. This move helps to ensure continual purchase and revenue predictability from its existing customers, thus enlarging the number of paying customers on yearly basis.

Office 365 was a subscription-based service that provided access to Microsoft Office applications, including Word, Excel, PowerPoint, Outlook, and others, along with additional cloud-based services. This marked a significant shift from the traditional one-time purchase model for Microsoft Office.

Another example is Old Chang Kee.

They have been around since 1956, and is well known for their curry puffs and other local snacks. They started off in Singapore, subsequently branch off into Australia, Indonesia, Malaysia and United Kingdom.

This international expansion not only allow them to develop their brand internationally, and also to acquire a bigger slice of the global market.

Would most buyers prefer a business that just serve the local market or a business that serve the international market?

You can ask yourself this question: Do you rather have 6 million potential customers or 8.2 billion potential customers?

9 - Improve Customer Satisfaction and Loyalty

One important aspect that get overlooked easily is customer satisfaction. Customer satisfaction can have a huge impact on a business profitability and it’s ability to thrive.

When it comes to the buyers, they will typically look into the following elements: Customer Retention Rate, Customer Lifetime Value and Customers Review.

Customer Retention Rate – The percentage of the customers who continue as a paying customer within a stipulated time. (This will give the buyer an idea how good or relevant your product offering is.)

Customer Lifetime Value – It is a measurement of how valuable a customer is to your company, not just on a purchase value basis but across the entire customer base.

Customer lifetime value = Customer value x Average customer lifespan

Customers Review – This can be found online, depending on the type of products and market segment. The reviews can have a big impact on the customer acquisition cost, plus the impression it has on the potential buyers. Below are some example of reviews used by customers and buyers for research purposes. There are different ways to acquire reviews.

10 - Adopt Good Bookkeeping Practice

It’s common among many entrepreneurs not to adopt good bookkeeping practice for varied reasons. By having good bookkeeping practice, this will allow the buyers to have a stress-free audit during the due diligence phase. Which in turn, raise the confidence and goodwill of the buyer.

Some of the good accounting practice includes the following:

• Completely separate personal and business finance.

  
  

• Determine which accounting method to adopt (cash basis accounting and accrual accounting)

• Usage of Accounting Software (QuickBooks, Xero, Netsuite)

• Keep clean and thorough records (Don’t toss out your previous year record)

If the buyer can easily understand the state of your business via your accounts, they will have less to worry about. Sometimes if the bookkeeping is messy, this can causes doubt in the buyer. In such scenario they may want to price in discount in anticipation of the potential discrepancy. (As part of their risk management)

In a nutshell, there are many things a seller can do to improve their business valuation. This will be a long term project, and may potentially take a year or two to implement.

Read Next Article: 10 Effective Ways to Increase Sales for Your Business!

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Whether you are looking to buy business in Singapore or sell business in Singapore, let us help you. Talk to a business broker in Singapore today.