Give Yourself the Gift of a Business Checkup
It’s the holiday season, and the time of year when business owners start to think about the next year, and in the case of the end of this year, perhaps even the next decade. Maybe it is time to sell your business and move on, or even work on growing your business before you sell. Whatever your motivation, this time of year is a great time to do a business checkup and determine just how well you are doing. There are a few steps you can and should take to help you gather data to make the right decisions about the future of your business.
The Essentials of a Business Checkup
When we talk about a business checkup, what do we mean? Well, to know the health of your business, you need to know what revenue is coming in and from where, where you are spending it, if your business is growing or shrinking, and whether or not you are making a decent profit.
The other part of the checkup is the health of your industry. What does the future look like for what you do? Is the market growing or shrinking? What kind of competition do you face? These all factor into the potential of your business to continue to earn money.
That means you will be looking at projections, at least for the next year or even beyond. In order to do that, you need to take a close look at your business right now.
Evaluate Your Equipment
This is an important step for several reasons. First, if you want to sell your business anytime soon, you will need to decide whether to replace your equipment or sell it. For example, the state of California has new regulations that all commercial vehicles must have engines that are 2010 or newer in order to improve emission standards and reduce pollution.
That means if you are a landscaper and your fleet of trucks is aging, you may have to look at replacing them regardless of your future business plans. If you are going to sell your business soon, you can sell it without the trucks you own, but you’ll get a much lower price if the new owner must provide their own fleet.
If you don’t feel comfortable assessing the value of your equipment on your own, consider a professional valuation. You may be surprised by what you already have.
Evaluate your Technology
Nearly every industry is being disrupted by the addition of new technology and big data. Where do you stand in this new environment? Are you gathering data about your customers, clients, and even your competition? Are your computer systems and POS systems up to date? What about your office equipment and the computers there?
The truth is, companies that are growing in today’s market are embracing technology, that that is what customers and clients are looking for and even expect. It is also what a potential buyer for your business will be looking for. If you are behind the times, you may get less money for your business than you anticipated.
Value Your Real Estate
Do you own real estate as a part of your business? Then you should know what it is worth both as a part of your business and if sold separately. What if you held on to that property, and leased it back to the new owner of your business once it sells? How would that affect your income and your taxes?
Even if you lease, real estate is important. Have you looked in detail at your lease? Would the terms you have pass on to a new owner, or would they need to negotiate your own lease? Many experts recommend that you negotiate your lease before you even start the process of selling your business, as this is often the reason a deal will fail.
Location is always key to your business success. Check to make sure yours is secure no matter who owns your business in the new year.
Perform or Get a Business Valuation
Finally, the key to a business checkup is to know at least generally what your business is worth. Many businesses will perform or have a business valuation done annually: it helps them see growth year over year and often informs them of areas where improvements could be made.
This is also the first step in selling your business. Many business owners do not know what the actual value of their business is, and even more often they have no exit strategy in place at all. Having one is important not only when thinking about selling your business but in case of emergency or even a disaster like illness, disability, or even in the case of the business owner’s death.
At Rogerson Business Services, we offer a FREE program called Seven Steps to Valuing Your Business that includes some great tools to help you assess where you are now. If you are looking for a more professional valuation or need one so that a potential buyer can look into financing like an SBA loan, contact us here. We offer professional business valuations on several levels completed by a Certified Business Broker.
It’s important that you know the health of your business going into the new year and the next decade. How well you are doing now and how well you are likely to do going forward will determine the value of your business and what you can ask for it when it is time to sell. It can also help you determine if you should sell now or later. The data a business valuation will provide enables you to make a more informed decision.
Ready to sell your business in California, or just have questions about the market and what to expect? Need a professional business valuation by a Certified Business Broker? Contact us here at Rogerson Business Services here today. We’d be happy to talk with you about your next steps.