Good Values : Sound Startup Advice

In seeking startup advice, everyone wants to know how to create good value within their company, and you need to keep your end goals in mind as your startup your own business. We offer some tips to position yourself for good valuation when starting a business.

Let's assume your moral fiber is strong.

With
that out of the way, let's get down to values – that is, the price your
startup business might fetch if you decide to sell it. Our startup
advice: getting the best value for your business is not something that
just happens. It's something you make happen. Like good
values that come from a proper upbringing, good values in a startup
business come from a concerted effort on your part to build up the
inherent qualities of your company.

Whether
you're in your third year of growth or you're just starting a business,
here are some tips and advice we've gathered from people who've
successfully sold their companies:

Startup advice: maxing out the value

Some of the key factors that determine business valuation include:

  • Product line – how old are the products? How well are they respected in the marketplace?
  • Market share – how much of the overall market do you control?
  • Quality of your customers – what's their reputation and dependability in terms of future business?
  • Overall state of the industry – is it a growth industry or has it plateaued?
  • Intensity of competition – what is the degree of threat from the competition?
  • Team members – who is crucial to the ongoing value of the business? Who will stay onboard after the sale?
  • State
    of your financials – how does your balance sheet look? If you have
    large debts, they will detract from your company's price tag.

Startup advice: finding the best suitors

The
best buyer is a strategic buyer – one that sees added value in the
integration of your startup business with his or her company. The added
value could be:

  • Immediate access to customers that the buyer has not reached
  • Ability to sell a combination of products to the combined customer base
  • Significant integration savings due to elimination of duplicated activities

Startup wisdom from the trenches

Some things you should take into account as you design your ideal exit:

  • Loyal and longstanding customer accounts can positively affect your startup's perceived value
  • Don't buy into your own hype – most business owners think their company is more valuable than buyers do
  • Beyond
    the balance sheet, incremental value can be generated from assets such
    as your brand, trademarks, patents or trade secrets
  • To maximize your cash out, try to get your receivables
    as low as possible in the months before the sale, and keep an
    especially tight control over expenses
  • Get more money by taking a payment schedule based upon
    the future success of the company, but know that this method of selling
    your business has a higher potential for buyer abuse
  • Companies that have shown sustained high growth rates often claim a higher value at the time of exit
  • Be
    cautious about making yourself fundamental to the ongoing activities of
    the company – the more important you are to the future success of the
    business, the less valuable it will be to a buyer without you at the
    helm

Our Bottom Line

The way you handle
the upbringing of your business can have a big impact on whether it has
good values when it's ready for exit. So our startup tip to you is be
sure you have a clear strategy for building value in your new business.

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