How to Increase the Value of Your Business and Attract Buyers
The day may soon arrive when you’re ready to sell your business. You may even have a price in mind, based on similar businesses that have sold recently in your area. Yet, many business owners, after taking a close examination of their business in its current condition, become disappointed when they find out its true market value. That’s why it’s so important to plan ahead now and prepare your business before placing it up for sale in the future. So how do you increase the value of your business? Here are 7 important steps you can take now to boost the value of your business and sell it for a maximum return: 1. Increase profitability. The first step to take, so potential investors will understand the value of your business, is to get proof of continued increasing profits. If you can show them your profits will continue to trend upward, you can fetch a higher price. Finding opportunities to increase sales, reduce costs, and create efficiencies leading up to a sale will demonstrate an extra profit boost and impress buyers. 2. Create streams of recurring revenue. Find ways you can increase sales and revenue, especially recurring revenue, that will generate income for the new owner – right from the ‘get go’. This may include shoring up any pending customer or vendor contracts, giving the new business owner peace of mind that they will have consistent revenue flow as they get accustomed to running their new business. 3. Establish and document processes. When you Institute and document regimented processes, which enable the company to function effectively without your involvement, you will make buyers feel at ease. This can certainly increase the value of your business. Potential investors need to be convinced that long after you’ve made your exit, the business will continue to thrive and run smoothly. 4. Cultivate a high-quality workforce. Another way to increase the value of your business is by hiring top-notch employees. New owners don’t want to deal with employee turnover, especially when they’re new to the business. Experienced workers bring balance and stability and help to generate profit. You can increase your company’s worth by actively cultivating a high-quality workforce. 5. Position your products or services to stand out in the market. Businesses with differentiated products and services are uniquely positioned to dominate a part of the market. They have an advantage over their competitors and therefore, can command a higher price. You can do this by developing and promoting any intellectual property, patents or other unique feature of your products or services. 6. Identify and highlight tangible and intangible assets. It is essential to list and price all physical assets of your business, including furnishings, fixtures, equipment and inventory. But also consider the value of your intangible assets—things like contracts and agreements, customer relationships, brand recognition, and more. Every non-material asset that contributes to your company’s profit line has the potential to boost its price. 7. Mitigate your risks. Put yourself in the buyer’s shoes. Do whatever is possible to enhance your company’s value. Are your financial records accurate and up to date? Is your facility looking its best? Are there any loose ends that you need to tie up before you list your business? Increase the value of your business by giving buyers what they prefer a business that comes with low risks and high rewards. The best part about learning how to increase the value of your business is not only that you are prepared to sell it. As an added bonus, your sales and profits will increase right now. When you put time into shoring up the different elements that make your business stand out, it only becomes more stable, which will help your business command a higher price.
Why Pre-Approval Is an Important Step for Today’s Homebuyers
Being intentional and competitive are musts when buying a home this season. That’s why pre-approval is so important today. Pre-approval from a lender is the only way to know your true price range and how much money you can borrow for your loan. Peter Warden, Editor of The Mortgage Reports, explains: “The lender will check out your personal finances and issue you a letter confirming the amount you’re eligible to borrow. This not only gives you a firm budget for house hunting, but also lets sellers know you’re qualified to make an offer.” Why does that matter so much today? There are many more buyers looking for homes today than there are homes available for sale, and that’s creating some serious competition. According to the National Association of Realtors (NAR), the average home is getting 4.8 offers per sale. As a result, bidding wars are still common. Your pre-approval gives you a leg up in these situations. That’s because you know exactly what you’re approved to borrow before you write your offer, and it lets the seller know you’re qualified to buy their home. This helps both you and the seller feel confident in what you’re bringing to the table. And that puts you in a better position to potentially win a bidding war. As Warden puts it: “There’s another important reason to get preapproved, too. And that’s because there are way more buyers than homes in today’s market — which means you need to be ultra-prepared if you want to win a bidding war. Most sellers are getting multiple offers right now. And most won’t even entertain an offer without a preapproval letter included.” Every advantage you can gain as a buyer is crucial in a market that’s constantly changing. Mortgage rates are rising, home prices are going up, and lending institutions are regularly updating their standards. You’re going to need guidance to navigate these waters, so it’s important to have a team of professionals, such as a loan officer and a trusted real estate advisor, on your side. They’ll help make sure you’re ready to put your best foot forward. Bottom Line Getting pre-approved for a mortgage helps you better understand what you can afford and signals to sellers you’re serious about purchasing their home. Let’s connect so you have the tools you need to succeed as a homebuyer in today’s market.
Two Reasons Why Today’s Housing Market Isn’t a Bubble
You may be reading headlines and hearing talk about a potential housing bubble or a crash, but it’s important to understand that the data and expert opinions tell a different story. A recent survey from Pulsenomics asked over one hundred housing market experts and real estate economists if they believe the housing market is in a bubble. The results indicate most experts don’t think that’s the case (see graph below): As the graph shows, a strong majority (60%) said the real estate market is not currently in a bubble. In the same survey, experts give the following reasons why this isn’t like 2008: The recent growth in home prices is because of demographics and low inventory Credit risks are low because underwriting and lending standards are sound If you’re concerned a crash may be coming, here’s a deep dive into those two key factors that should help ease your concerns. 1. Low Housing Inventory Is Causing Home Prices To Rise The supply of homes available for sale needed to sustain a normal real estate market is approximately six months. Anything more than that is an overabundance and will causes prices to depreciate. Anything less than that is a shortage and will lead to continued price appreciation. As the graph below shows, there were too many homes for sale from 2007 to 2010 (many of which were short sales and foreclosures), and that caused prices to tumble. Today, there’s still a shortage of inventory, which is causing ongoing home price appreciation (see graph below): Inventory is nothing like the last time. Prices are rising because there’s a healthy demand for homeownership at the same time there’s a limited supply of homes for sale. Odeta Kushi, Deputy Chief Economist at First American, explains: “The fundamentals driving house price growth in the U.S. remain intact. . . . The demand for homes continues to exceed the supply of homes for sale, which is keeping house price growth high.” 2. Mortgage Lending Standards Today Are Nothing Like the Last Time During the housing bubble, it was much easier to get a mortgage than it is today. Here’s a graph showing the mortgage volume issued to purchasers with a credit score less than 620 during the housing boom, and the subsequent volume in the years after: This graph helps show one element of why mortgage standards are nothing like they were the last time. Purchasers who acquired a mortgage over the last decade are much more qualified than they were in the years leading up to the crash. Realtor.com notes: “. . . Lenders are giving mortgages only to the most qualified borrowers. These buyers are less likely to wind up in foreclosure.” Bottom Line A majority of experts agree we’re not in a housing bubble. That’s because home price growth is backed by strong housing market fundamentals and lending standards are much tighter today. If you have questions, let’s connect to discuss why today’s housing market is nothing like 2008
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