This is a continuing series of suggestions to owners of privately-held companies to increase the marketability and value of their companies.
Here are the Top 10 ways to increase your company’s market value:
1. Get Your Financials in Order
- Why? The higher the risk (meaning more investment on their part to mitigate the risks), the lower the selling price. Buyers will perform due diligence on your financial records to determine how much assurance they can place on them. When buyers find “issues” in the financials, they ascribe the types and volumes of issues to risk. To the extent there are questions/concerns, buyers will use these “red flags” to negotiate a lower sale price or delay payments to the seller since there is apparently more risk.
- What to do: Have a review that will simulate the due diligence process, identifying all of the red flags that will pop out during due diligence. Red flags are essentially discrepancies or “vague” areas of your financials where sub-ledgers do not readily and apparently tie to the General ledger or where there are large balances that do reconcile to a detailed schedule. Have someone perform a “GAAP Review” to identify all of the issues that will potentially come up. Then, correct or mitigate the issue immediately and consistently.
Better yet, have a CPA firm, properly credentialed to do so, perform an audit. Audited statements provide the highest level of assurance and consequently the lowest level of risk for the buyer.
- Benefit to you: Maintain and/or increase the sales price. Having clean financials gives buyers confidence in the numbers, which can lead to a higher sales price. Furthermore, many buyers simply won’t look at companies without higher levels of assurance. The benefit is multifold.