There are two questions that I hear on a regular basis. First: What is my business worth? Second: How do I improve the value of my company if I plan to sell in 2024? The answer to question #2 is, “Just follow my five easy ways to boost the value of your company.” When you do that, the answer to question #1 will be, “Your company will be worth more than it is today!”
What is your business worth?
At VBB Advisors, we are always happy to share everything we know about recent operator transactions - who the buyers are, what the selling price was based on, the terms of the deal and other details that can enlighten an operator who is planning to sell their business. Of course, the actual value of your company requires a careful, but efficient valuation process, completed by our team. We think this is a critically important part of the selling process and we use the most sophisticated methods on the market.
How can you improve the value of your company if you plan to sell in 2024?
1. Focus on revenue - Since many deals today are based on total annual sales, this would be a good time to ramp up your sales effort with pay per click advertising, referral programs, hiring a telemarketing firm, adding an experienced sales rep and offering special incentives to your account execs. Offer long term incentives to large prospects such as an accumulated product credit after 18 months of operation, which will not kick in until after you have sold your company.
We have seen clients of ours add a million dollars in annualized sales ($90,000 a month in new business) in the year prior to their sale, which can translate to well over a million dollars added to the selling price, especially with today’s multiples.
2. Focus on account retention – Again, with gross sales being so important in the valuation process, an operator who is planning to sell needs to hang on to every account that makes sense. We witnessed a client of ours losing a little bidding war on a $30,000 per month pantry service account just six months before the sale of their business. The contract was up and our client was stubborn and unhappy that the customer was going to drive his margins from a healthy 45% to a much thinner 30%. While the drop was admittedly painful, the lost account, occurring so close to the sale of their company, was brutal.
The buyer of the business was paying over $1 for every dollar of annualized sales. Losing the $360,000 in annual sales, dropped the sales price by over $400,000. The moral of the story – do what you need to do to keep business if you are planning to sell.
3. Make a real effort to “build the ticket” – Sometimes an operator is so busy running their company, they put off those important sales building projects. Now is the time to take action, even if it means adding a couple of customer service people to drive a sample program. Pass out flavored creamers, chai latte, premium tea, local coffee and energy drinks. Ask your favorite product broker rep to help with sample support or even onsite support.
Every sample item that sticks will enhance your sales and the value of your business.
4. Raise prices – Set a goal to increase prices to some degree at every account. Send a general announcement in your “customer newsletter” or as an attachment with invoices that notifies the customer that: “Due to wholesale price increases, select products will be subject to price increases after January 1. For more information on how this will affect your account, please contact your account rep.”
If you hear from more than 5% of your clients, that would be a shocker. In the recent Automatic Merchandiser State of the OCS Industry Report, the survey revealed that 19% of operators simply absorbed price increases. Do not be a part of that group!
5. Take a special look at non-performing accounts – It takes work to deal with those customers who were once spending $700 a month, but now can’t seem to top $200. It’s especially troubling when that customer is using your equipment but buying products from office supply and warehouse stores.
Here is the easy solution: If their contract calls for a brewer rental when they don’t purchase minimum product amounts, start charging it. If they aren’t being charged for delivery or filter changes, start charging. Also, check their prices. Are they priced like a $700 a month OCS account, or a $175 a month account? Price them accordingly.
One of three things will happen. The $175 account will increase to $300 a month and be far more palatable.
Or – the client will contact you for an explanation, at which time you can explain that you can’t support the service on what they are spending, and they need to spend more. Set up a dollar minimum. You might lose the account. In this rare case, not a great loss. In most cases, you will keep it and see the value of the account increase.
Our goal – to help you maximize the value of your company
I know this is all very practical advice coming from a business broker, but it illustrates our approach to helping clients get the highest price possible for their business when it is time to sell. We spend a lot of time positioning our clients to maximize the value of their company. It is all part of the VBB Advisors approach.
Take that first step – right after you get back from the CTW Show
Buyers come to me because they know that I serve sellers who have thoroughly and thoughtfully considered their exit strategy with my help. That is the type of seller that you want to be – a seller who has their ducks in order, has taken steps to make their business as attractive as possible and a seller who values their employees enough to make a deal that everyone will feel good about.
Take that critical first step. That is often the toughest one to take.
Order my free 2023 Exit Strategy Planner. At the very least, it will provoke some thought, and this is a good time to think about your future.
Whatever your reasons are to sell your company - the timing, a sense of frustration, the desire to enjoy life or an interest in rewarding yourself for years of hard work – VBB Advisors can help you realize your goals.
I am Mike Kelner, the leading sell side intermediary in the convenience services industry. Let’s sit down and have a conversation. Use this appointment scheduler to set up a meeting with me.
Or – give me a call at 704-942-4621.
