5 ways you can improve your profitability as part of your Exit Strategy

As you approach the point of exiting your business, it is important that you understand the direct relationship between your business profits and the business valuation. As these valuations tend to be based on a multiple of the profits, if you can increase your profitability as you approach your planned exit of the business, you can increase the valuation for potential buyers.

In this article, we will consider 5 ways that you can improve the profitability of your business to achieve the desired outcome.

Expand Sales Efforts

Are you optimising your sales opportunities? Could your business benefit from introducing new, more profitable products and/or services? Would sales increase if you had a more focused/driven sales team? Would it make more sense to acquire another business with strengths in this area?

Utilise Your Existing Customers

As well as focussing on getting new customers, you should also focus on selling more to your existing customers and this can be achieved through the improvement of customer management techniques.

Review Your Productivity

Productivity measures how efficiently inputs (such as your direct costs e.g. labour) are used to produce a given level of output. A review of this area of your business and better management of your inputs can help improve your gross margins.

Review/Renegotiate with Your Existing Suppliers

If possible, you should seek to reduce your cost of sales by renegotiating more favourable terms with existing suppliers.

Invest in a Management Reporting System

Having a detailed understanding of the relationship between the numbers of your business, rather than just the numbers, will help you get a more accurate understanding of your business’ financial performance when compared to industry averages. A good quality reporting system will help you to measure performance against plans and budgets helping to prevent unwelcome surprises.

Planning to exit your business is a new process for many business owners – seek professional help and guidance from experts and professionals who can share their experience and knowledge with you along the journey.

Blunt advice from Yorkshire Powerhouse

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