How Can a Business Exit Consultant Improve the Value of My Business?

Selling your business can be a stressful an arduous process that often times takes months, to potentially years to achieve. Whenever you are burnt out, thinking about retiring, or simply want to focus on another business venture, you need to start implementing processes in your business now.

The sooner you begin to make immediate and ruthless changes, the better off you will be when it comes time to marketing and working with prospective buyers for your business.

The vast majority of small businesses sell based on cash flow. Or another term EBITDA (Earnings before Interest Taxes Depreciation/Amortization.

Stick with me here. Buyers will base their valuations, and subsequent purchase offers based on a multiple of your EBITDA.

For smaller businesses (<$1M in sales), the multiples typically vary between 2.0x to 3.0x of your EBITDA.

So let’s say your business is doing $800K in sales and $200K in EBITDA. A buyer will take in other specific factors, such as recurring revenue, operational systems, and staffing to determine the multiple to apply to the $200K.

Let’s say a buyer makes an offer of $500K (2.5x EBITDA).

Instead of simply calculating your value now, look to the future when you actually want to sell.

If you say, I want to be retired in 24 months and completely removed from my business, then you need to focus for the next 18 months on maximizing your EBITDA.

If you relentlessly execute the strategies we recommend pertaining to sales/marketing systems, operational systems, pricing strategies, and labor productivity strategies, you can improve that EBITDA up to 70%.

Let’s be conservative here, and say you increase your EBITDA by 25% over the next 18 months from $200K to $250K.

Not only will the value of your business increase as a multiple of that number, the multiple buyers apply to your EBITDA will increase as well.

You’d be looking at a multiple closer to 2.7x if you are operating with $250K

So, when you first started, you could sell your business for $500K (2.5x * $200K EBITA).

Now, you can sell your business for $675k (2.7x * $250K EBITDA).

Your business exit value increased 35%! (i.e. from $500K to $675k).

That is the power of business exit planning, and the example I gave above is very achievable, and what we see frequently with clients.

If this is somewhat interesting to you, schedule a free 20-min exit planning diagnosis, no pressure.