How to Raise Business at a Fair Market Value
Fair market value is the estimated market value of a business to a buyer who is interested but not desperate, from a seller who is also interested but not desperate to sell. Fair market value is the best option for the seller of the business, because it is a business valuation that considers both monetary assets and valuable intangibles, such as the company's goodwill.
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Increase revenues. Whether you achieve higher revenues through marketing efforts, price increases or price reductions, the more sales you bring into your business will increase its revenue and raise its fair market value. Cutting production costs is another way to increase the business's value by turning more of your revenues into profits.
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Develop attractive ownership perks. These are fringe benefits enjoyed by the owner that will raise a business's fair market value. They are not really necessary to the running of the business, but extra luxuries included with the purchase price of the business. This can be personal-use assets such as luxury vehicles and properties, or special long-term contracts the business has with entertainment and travel companies.
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Expand your market reach. Add a new income stream to your business by looking for growth areas in your industry. This will add to the diversity of your business offerings and increase total revenues. Market to additional areas and age groups that are good candidates for consuming your products and services.
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Pay off debts. Your business will increase in liquidity as it reduces its debt. Pay off company credit cards and business loans to make the business highly liquid. Fair market value cannot be raised very much if the seller is in a desperate debt situation. You will only achieve a fair price for your business if you can reduce your debts down to a manageable level.
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Enhance the image of your business and strengthen your brand. Participate in community events and talk to the local media to develop goodwill for the company in its local community. This can help separate the business from competitors and make it more attractive to buyers. Everything your business does should promote a particular brand message to the community.
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Maintain your most important staff members. Continuity is very important in for a successful transition when an ownership change occurs. Keep your executives and managers informed about your desire to sell and get their input on the matter. Their loyalty to the business operation is a strong selling point that raises the fair market value of the business. Provide plenty of opportunities for employees to grow and increase earnings so they will be more likely to stay for the long term.
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References
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