5 Ways to Increase The Value Of Your Startup Before You Sell
Marla DiCarlo March 12, 2019

Selling a business with a history of success is much different than selling a startup.  Startups are unique selling challenges in that they are not established brands. Nor do most startups have an expansive list of loyal clients.

Making matters worse is the fact that most startup employees have been employed for a year or less so they are less likely to remain onboard through an ownership transition.

This is not to say it is impossible to sell a startup; some startups are more attractive than well-established businesses. Certain startups have an abundance of untapped potential.

Let’s take a look at what you and your staff can do to maximize the value of your startup prior to putting it up for sale.

 

1. Go Over Your Books With a Fine-Tooth Comb

 

This is the time to sweat the small stuff, especially when it comes to accounting. Most startups have somewhat of an accounting mess, partially because there is so much going on and accountants require fairly lofty salaries. Sloppy accounting practices will sway prospective buyers to move on to the next startup for sale.

Review your books in-depth before anything else. Put forth the effort to ensure your books are accurate so you are completely forthright when discussing the startup’s finances with potential bidders.

After all, no one wants to inherit business books plagued by significant accounting mistakes. Nor does anyone desire to purchase a business after being misinformed of its financial shape.

Some startup owners make the mistake of over-focusing on reducing the company’s tax exposure. Minimizing taxes for the next owner is important yet poor accounting practices can potentially be a deal-breaker.

Maintain your focus on cleaning up the books. Once you are certain the figures are accurate, you can shift your attention to tax minimization strategies for improved startup marketability.

Mind all the accounting details, make sure the books are accurate and you will be able to present the company’s financial standing in full confidence. This accuracy really is a valuable selling point that just might convince a potential buyer to enter a bid.

If reviewing your accounting seems too daunting of a task, consider outsourcing the work to an accounting specialist so you can fast-track your startup’s sale.

 

2. Substitute Family Members With Professionals

 

The average startup is centered on the founder. The founder works long hours and sometimes asks family members to pitch in when necessary. Though it is perfectly acceptable for family and friends to contribute, they should not hold official roles with the startup at or even near the time of sale.

Failure to replace family members who lack the background experience or who simply aren’t qualified to hold the positions they have in your business will give interested buyers the impression your operation is unprofessional.

Prospective buyers are looking for startups that hire people based on merit, not nepotism. Legitimate employees unrelated to you are likely to remain with the startup long after the ownership transition.

Alternatively, family members are inclined to jump ship as soon as they learn new ownership will take control of the company. When in doubt, consider how your workforce looks from the perspective of an outside party and make the appropriate changes for improved appeal.

 

3. Secure the Services of Key Staffers

 

Selling a startup requires some marketing and salesmanship. Meet with key personnel before attempting to sell your startup business. Explain your intention to sell the business.

Request that these essential employees agree to remain with the company through the transition so that the new owner has ample support.

If necessary, establish an employee retention initiative so you can guarantee the labor of your most important personnel through and beyond the ownership transition.

 

4. Distinguish Your Startup From the Competition

 

Those interested in purchasing a startup are not looking for a business that is similar to its competition. If you cannot distinguish your startup from other startups in your industry as well as the established companies, finding the right buyer will prove quite difficult.

If your startup is not that much different from others, consider altering your products and/or services to improve your company’s appeal. Even if this evolution does not spur a bid for your startup, it will diversify your offerings and possibly help you capture even more market share.

Innovation is particularly important. If you can present your business as a true innovator or at least as a group focused on bringing something new to the market, it will generate ample interest.

 

5. Document Important Business Processes

 

Prospective buyers need and deserve a full understanding of your startup to properly assess its value. If you have not yet documented and systematized your company’s operations, the time to do so is now.

Once business tasks are fully documented and organized, your business will prove quite attractive. Ensure all tasks and operations are repeatable and the individual who buys the business will have one less thing to worry about.

Automate as many processes as possible so the new owner can enjoy a graceful transition. Create operation manuals that explain business processes in-depth.

Even something as simple as establishing clear and cogent flowcharts that detail possible workflows will help enhance your startup’s appeal.

 

Moral of the Story: Shift Your Vantage Point

 

Use your mind’s eye to envision the perspective of those interested in purchasing a startup in your industry. Consider what a prospective startup buyer would like to see in terms of an office, business processes, personnel, accounting practices, key performance indicators, and beyond.

Follow the tips detailed above and you will be able to present your startup in a manner that appeals to those looking for their own business. In fact, all of your hard work just might inspire multiple bids at a higher price point than you ever envisioned.

 

 

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Editor’s Note: This article is part of the startup tools blog series Start Your Business brought to you by the marketing team at UniTel Voice, the virtual phone system priced and designed for startups and small business owners.

 

Marla DiCarlo
Marla DiCarlo CEO of Raincatcher

Marla DiCarlo is an accomplished business consultant with more than 28 years of professional accounting experience. As co-owner and CEO of Raincatcher, she helps business owners get their business ready to sell so they find the best buyer and get paid the maximum value for their business.

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