Don’t like your value here are three Ways to Improve EBITDA
Referencing the first point, what can a seller do if the market price for a business doesn’t meet expectations? Kelly recommends three methods to increase EBITDA (Earnings before interest, taxes, depreciation, and amortization). Increasing EBITDA increases the value of your business. The more valuable the business is, more buyers will be interested in buying it.
- Change how the company performs. Increase margins and volume and undertake other business practices to grow your business’s bottom line, and improve EBITDA.
- Grow through acquisition. Acquire a company or companies with products, services, market, equipment, personnel, and technology that benefits the organization and improves EBITDA. Some companies go as far as using the cash from a dying business to buy a business that has a better future. Ultimately, they sell or discontinue the original product or service offering.
- Retain an exit planner to help build value over 3-5 years.
- Take Kelly’s fast track for building value with Kelly’s Value Enhancement Program (VEP). Kelly’s VEP is perfect for business owners that have a shorter timeline than what an exit planner would work on. Whether Kelly takes a business to market or not, owners who completed the Value Enhancement Program implemented a majority of Kelly’s recommendations. Kelly provides a fresh set of eyes and expert advice to help business owners add value to their company.
Different Buyer Types Produce Different Value
When setting expectations for an expected purchase price for your business, consider the following buyer types and the outcomes they represent:
- A publicly traded company can potentially pay the most.
- A strategic buyer potentially will pay more for a company than a nonstrategic buyer will pay. For example, a strategic buyer may be a competitor. The competitor may want to expand its products, services, technology, geography, or intellectual property. However, if the company is not performing well, a competitor may buy the company for a number of reasons for a lower price as well. So, it can go both ways.
- A Private Equity Group (PEG) potentially will likely pay more than a strategic buyer. For example, a PEG that owns a competitor may want to expand its portfolio in this industry. If a PEG needs your company enough, it can pay a very high price for your company.
Estimate of Value Determines What a Business Is Worth
Lastly, Finally, Kelly advises business owners not to go to market until their expectations align with their M&A Advisors’ estimate of value. Kelly’s Estimate of Value (EOV) are completed by a Certified Business Intermediary (CBI) with decades of experience. The EVO is a 2- to 4-week personalized process based on industry best practices. Kelly tells sellers what their businesses are worth, sometimes higher or lower than sellers’ expectations. When expectations align with the end result, a satisfying deal can be reached.
Kelly helps clients make sales decisions based on the best interest of their business, their families, and their future. Contact Kelly Business Advisors today, 920-737-2579, to discuss the sale of your company or request an Estimate of Value.