Unlocking Business Potential with Strong Recurring Revenue
Everyone loves recurring revenue and for good reason. When buyers see recurring revenue, they instantly know that a business is stable, has positive cash flow, and, importantly, has room for potential future growth.
There is no way around the fact that buyers want a business to be predictable. In short, buyers want to see consistency and stability at every level. Recurring revenue means that a prospective buyer can be confident that they will see income from the first day they take over the business. There is a powerful psychological aspect to recurring revenue that sellers should keep in mind, as they put themselves in the buyer’s shoes.
When a buyer sees that there is recurring revenue, they know that even if they are unable to develop the business as soon as they take over, there will be positive cash flow. Buying a business is a big decision, and recurring revenue can take some of the fear out of the equation.
Recurring revenue also serves to strongly indicate to buyers that your business offers goods and services that are consistently in demand. Any seller that wants to convince a buyer that their business is worth the asking price should focus on cultivating recurring revenue opportunities. There is nothing quite like recurring revenue to calm nerves and convince buyers that a business is worth a serious look.
Sellers should strive to have a business that has strong annual recurring revenue (ARR). ARR is a metric that measures the money coming in annually. Once your business has a strong ARR, don’t be shy about emphasizing that fact to buyers. A healthy number serves as a truly powerful indicator of your company’s current and future health and potential.
When your business displays strong recurring revenue, it points to the fact that your business is doing many things correctly. It shows that your business is able to consistently serve its customers well enough that they return again and again. This fact indicates that both your goods and services and your management and team members are performing optimally.
Summed up another way, recurring revenue is a quick and easy way for potential buyers to gain insight into the value of your company. Any seller looking to optimally showcase their ARR, or looking for ways to boost their recurring revenue, should consider working with a business broker or M&A advisor. Brokerage professionals understand all the different variables involved in helping prepare a business to be sold.
Copyright: Business Brokerage Press, Inc.
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Cultivating Success: The Impact of Business Brokers on Closing Rates
Business brokers and M&A advisors consistently improve closing rates. There are many reasons why this is the case and, in this article, we’ll explore some of the top reasons why brokerage professionals get results.
When it comes to selling a business, few variables are as important as how your business is presented. A key area of expertise for business brokers is in presenting businesses. There are many factors to consider when presenting your business in the best possible light. An experienced business broker can help you prepare your business for even the most discerning buyer.
Another key reason that business brokers are a great option for any seller is that they reach not only more buyers, but more qualified buyers. Brokerage professionals have years of experience in buying and selling businesses, and with that experience comes a long list of vetted buyers. When you start working together, they likely already have many qualified buyers in mind that they feel would be a good fit for your business.
A third reason sellers should consider working with a business broker or M&A advisor is that they are invested in your success. When your business is sold, these professionals stand to profit. In this way, the process of selling your business becomes a team effort, one that you can expect them to take seriously. After all, they only get paid if you get paid.
Selling a business is a very complex process, even for those with the most experience. There are rules, regulations, negotiation hurdles, and more that must be navigated. Everything from government regulations to spouses who may have a different opinion can, and do, play a role. An experienced business broker or M&A advisor has the experience to find solutions to almost any negotiation obstacle.
One of the most important reasons sellers should work with a business broker or M&A advisor is to gain focus. As the owner of your business, you have no choice but to stay focused on the day-to-day operation of your business. Far too often, owners place their business for sale and then become preoccupied with the sales process. Sadly, this can lead to a loss of revenue and overall business disruption, which in turn, decreases the value of the business.
Opting to work with a business broker or M&A advisor is an easy, and proven, way to dramatically boost your odds of achieving a successful sale. When all the variables are combined, it is easy to see why sellers who choose to work with a brokerage professional consistently enjoy high closing rates.
Copyright: Business Brokerage Press, Inc.
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Strategies for Maximizing Market Dominance: Key Steps to Boosting Business Value
At some point, you will need to sell your business. When the time comes to put your business on the market, it is in your best interest if your business has a dominant position in the market. Potential buyers will be far less excited about your business if you are playing catch-up to one or more competitors. In the end, maintaining a dominant market position will help you receive both maximum interest and top dollar for your business.
Take Steps in Advance
Preparing your business to be sold isn’t something that you do overnight. Instead, preparing your business for sale is a process that can take years of meticulous planning. Operating your business as though you will need to sell it soon is always a smart strategy.
Boost Your Customer Base
A key part of maintaining a dominant position in your market is to have a large number of customers. The logic is simple: if you have a large number of customers, then it only makes sense that your competitors have fewer customers.
A prospective buyer will find your business more interesting when you have a wide and varied customer base. Conversely, a business that depends on just a few large customers may make buyers nervous. The built-in vulnerability of having a handful of key customers will send many prospective buyers looking for the exit ramp.
Have a Growth Mindset
Achieving a dominant position in the market means that you are always thinking about growth. It is vital that you consider how to expand your business in both the short term and the long term. Additionally, it is important to realize that different strategies are needed for both short-term and long-term growth. You should always have a growth plan ready to implement.
Gain a Realistic Understanding of Your Business
Whether you have achieved a dominant position in your market or are striving to do so, it is essential that you understand your business’s strengths and weaknesses.
Far too many business owners turn a blind eye to the weaknesses of their business or overplay its strengths. One way to better understand these aspects of your business is to work with a business broker or M&A advisor who can evaluate your business from an outside perspective.
You want prospective buyers to be excited about your business and its potential for the future. Demonstrating that you have a dominant position in your market and that your business has room for potential growth will dramatically increase buyer interest and enthusiasm. Business owners looking to achieve top dollar will want to take the necessary steps to achieve a dominant position in the market.
Copyright: Business Brokerage Press, Inc.
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The Emotional Side of Selling Your Business
It is easy to get lost in the numbers when it comes to selling your business, but it is important to remember that the numbers only tell one side of the story. Both buying and selling a business come with significant mental and emotional ramifications.
Why is this so critical to understand? Sellers who are not emotionally ready might subconsciously take steps to interfere with the sales process. Typically, sellers have invested a great deal of time and effort into their business, and as a result, they may simply not be truly ready to sell. Before the day comes to put your business up for sale, pause and reflect on whether you are 100% onboard.
Let’s take a look at some of the questions to ask yourself so that you can decide if you are truly ready to sell.
Do You Have Future Plans?
Topping the list of emotional factors that you need to consider when selling are your plans for the future. If you don’t know what your plans are for after selling your business, you may encounter difficulties post-sale.
Far too often, business owners discover that they don’t know what to do with themselves after a sale has taken place. All the mental and emotional effort put into running a business has to be redirected once the business has been sold. It is crucial that before you sell your business, you have something new and exciting to work on in the future.
Do You Have a Strong Support Network?
A second emotional factor to consider before you sell your business is whether or not selling it will lead to social isolation and stress. It is very common for business owners to form long-term friendships and bonds with numerous employees.
Quite often, business owners begin to feel as though their employees are something like extended family. Suddenly not working with that extended family can bring with it a fair degree of social isolation.
It is not uncommon for business owners to have many of their social needs met at work. Once those friendships are gone, many business owners can feel isolated, and isolation can lead to stress and a sense of regret. It is prudent to make sure your social network is robust enough that selling your business doesn’t lead to unexpected mental and emotional stress.
Selling a business is a massive decision for most business owners. It is a prudent move to be sure that you actually do want to sell. Once your business has been sold, there is no turning back.
The last thing any business owner wants is to sell their business only to discover that they regret the decision. Don’t simply focus on the profit to be gained when selling your business, but also on the ramifications of that sale on your life and future happiness.
Copyright: Business Brokerage Press, Inc.
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Why Should You Buy an Established Business?
A pre-existing business is a proven commodity. A new business, regardless of how great your idea may be, will always have a future that is uncertain. You can hire many consultants and plan meticulously. Yet, even with the best ideas and most experienced consultants, your newly minted business could still quickly fail. A business with a long track record of success provides you with a degree of security and certainty.
It’s also important to note that an existing business has a myriad of established relationships, which are invaluable. Business is all about cultivating strong relationships and developing a positive reputation. An established business will have those relationships set up and ready to go. This can be tremendously beneficial and save you a lot of time and energy.
Whether it is suppliers, customers or key employees and management, this track record can help ensure your success. It will bring with it long-term customers, as well as an established and proven supply chain. Supply chain issues should not be overlooked as a key factor in successfully operating a business. Many new businesses find themselves in ruins over unforeseen supply chain issues. Opting for an established business can help safeguard against an array of potential disruptions.
Another advantage of buying a pre-existing successful business is that it will have a proven cash flow. Statistics¹ show that 82% of businesses fail due to cash flow mismanagement. Even with exceptional ideas, it can take years for a new business to take flight, but an established business should have positive cash flow from day one. No matter how well you plan, there is no way to know with certainty that your new business will generate the revenue you expect it to. An established business can provide proven cash flow, and that is so critical for the success of any business.
Finally, a business is only as strong as the idea and people behind it. An existing business will already have key people in place. You should look for one that has proven and reliable people.
Hiring from scratch is often much harder than it sounds. All too often a resume fails to tell the full story about a potential hire. When you opt for an established business, the previous owner has already vetted key team members for you and they have experience working in the industry and performing a certain role.
Again, new businesses fail way too often. Working with a business broker or M&A advisor and choosing to buy a proven and time-tested existing business will eliminate many headaches. This approach will dramatically boost your overall chances of success and provide you with peace of mind in the process.
Copyright: Business Brokerage Press, Inc.
¹ https://www.score.org/resource/blog-post/1-reason-small-businesses-fail-and-how-avoid-it
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