There are a number of business attributes that can be secretly dragging down the value of your company. If you do an assessment of what the business is worth there could be factors silently dragging down the value of the company. In many cases, fixing the problems is relatively easy as long as they know what the problems are.
Here's a list of some of the most common "silent killers" that are decreasing the value of businesses when you may be considering a sale.
• Customer Concentration
A business should strive to have a diversified customer base so that no one customer makes up more than 15% of your revenue.
• Declining Gross Margin
If gross margin is declining as growth occurs a potential buyer may conclude that your competitive advantage is weakening and you have to compete on price to win customers.
• Supplier Over-dependence
Seek to have a variety of sources for your raw materials. If you are forced to buy from one supplier the negotiating leverage over you can drag down your company's value.
• Sloppy Financials
Keep your books clean. Nothing scares off a buyer faster than shoddy, inaccurate bookkeeping.
• Management Risks
Strive to ensure that your company runs well when you are away. After all, for a business to be valuable to someone else, it needs to survive when you are gone for good. If you have key employees, make sure they are locked into some sort of incentive plan that rewards them to stay beyond the sale of your business.
These are a few suggestions that can easily be repaired and can enhance the overall valuation as you prepare the business for sale.