What can you do now to improve your company’s value? There are three fundamental areas within your control that will increase what your business is worth today and will determine its ultimate worth should you decide to sell.
EBITDA is defined as a company’s “earnings before interest, taxes, depreciation and amortization” and is a measure of a company’s profitability. However, the adjusted EBITDA — the profit line with depreciation, taxes and owner add-backs all added back in — is the baseline used for determining what a buyer will likely pay for your company. This tweak alone means that your company likely has greater value than you might have estimated.
Your business mix is a critical component in how valuable your company appears to prospective buyers. Things like service agreements, contracts and other forms of recurring revenue go a long way toward increasing your company’s perceived value, so if you don’t currently have these types of revenue, start building them into your business model as quickly as possible.
Can you go away for a month without the company going backwards? If not, get busy now equipping a management and financial team to the point where your company can thrive even if you are gone indefinitely. Doing so will make your business much more valuable to buyers, as they will see that they don’t have to bring in and train a management team from scratch.
Now is the time to focus on growing these aspects of your company, because the sooner you do, the better off you’ll be both now and if or when you decide to sell.
To learn more about what your company is worth — and what you can do now to make it worth even more — download our free e-book, “What Is Your Company Worth?”