When you want to transfer an SME, you obviously hope to maximize the sale price. To do this, place yourself on the buyer’s side. Consider the transaction as an investment to be made as soon as possible.
Also, in order to transfer a SME, it is necessary to prove that the activity generates cash flow. Be careful not to confuse profitability with cash flow. Profit includes all expenses such as depreciation of fixed assets. Potential buyers are more concerned about the money that ends up in the bank. So before you hand over a small business, you need to put in place various actions that increase your company’s cash flow.
Read also: Why many large companies need to acquire SMEs
4 procedures to launch before transferring a sme
1. Increase prices
When you run a small business, you often hesitate to raise prices for fear of losing customers. While this is certainly true for everyday consumer items sold in many places, it is not the case for high value-added products. If your product or service is unique, if your customers have repeatedly demonstrated their loyalty, gradually increasing your prices will not scare them away. On
the contrary, it may even increase the perceived value of your products. In fact, you don’t know the value of your brand until you raise prices.
2. Increase the return on marketing investment
Take a hard look at your marketing spend. Determine which channels are generating the best return on investment and focus your efforts on the best performing media. Don’t necessarily cut your overall marketing budget, refocus it on the best performing campaigns.
Typically, converting prospects into customers costs much more than retaining them. Try to work better on this aspect. Regular customers know your product and don’t need advertising to come to you. If they are satisfied with previous purchases, they are likely to come back to you.
3. Reduce sales costs
Regularly evaluate your cost of sales, which is the sum of the cost of goods and shipping costs (pick-up, packing and shipping). Look for ways to reduce each. Negotiate better prices with your suppliers and consider alternative suppliers if necessary.
Review shipping costs. Ask your carriers for discounts. Run lean shipping operations to avoid unnecessary fulfillment costs and excessive transit fees, such as dimensional weight charges, weekend delivery and inappropriate addresses. Remember that money spent on shipping reduces cash flow (and profits).
4. Reduce overhead costs.
Overhead costs add up quickly. Check the efficiency of your operations and identify excessive expenses, so you can reduce them. One example is payroll. As a business grows, owners often hire too many employees. Review your staff. As a business owner, this is a tricky problem to tackle, but consider that to pass on a small business at the best price, each employee should improve cash flow and profits.
Also consider software subscriptions, business subscriptions and other recurring payments, which can be downgraded or discontinued to reduce overhead and preserve cash flow.
Read also: Small business transfers on the rise in FranceTo
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