Although you can’t turn a low-value firm into a nationwide juggernaut overnight, there are immediate actions you can take to enhance your company’s value. We provide insights into how to increase your company’s value before an upcoming valuation.
Rome wasn’t built in a day, and the same principle applies to building value in your business.
Sound fundamentals, a strong brand and a bright future are the three pillars of high-value businesses. Of the 5.5 million private sector businesses in the UK, many managing directors will be thinking about maximising value in anticipation of an upcoming merger or acquisition.
Although you can’t turn a low-value firm into a nationwide juggernaut overnight, there are immediate actions you can take to enhance your company’s value. In this guide, we provide insights into how to increase your company’s value before an upcoming valuation.
How can the value of a business increase when preparing to sell?
Balancing short-term growth with a long-term vision is the key to entrepreneurial success, but not when preparing to sell. In this case, it’s about putting on the best face for your business and demonstrating the long-term appeal to a potential buyer.
Refinancing your debt to take advantage of more favourable rates, cleaning up bad debt and renegotiating long-term contracts with suppliers are just some of the actions companies can take to elevate their value.
Moreover, simply having a well-prepared business sends enormously positive signals to any buyer. The less work a buyer has to do to make their merger or acquisition a success will command a premium.
We Can Support with Business Valuations
How to increase the value of your business before valuation
UK business confidence remains positive for every company type and size in recent quarters. Plus, every UK-listed company reported an average confidence rating of +17.0, illustrating opportunity even today.
2025 and the years ahead provide opportunities for entrepreneurs to improve their valuations and maximise the fruits of their labours. Here’s what you can do to increase your business value now.
1. Upgrade your valuation multiple
Valuation multiples are among the most common ways of valuing a company. Relying on a multiple of earnings approach means the multiple chosen will dramatically hit what your final valuation is.
Since there’s no scientific formula for valuing businesses, multiples are typically agreed with the buyer. Part of the thought process will depend on the industry, but things like sound financials and capital investments can increase or decrease that multiple.
2. Start early
Quick fixes for long-standing business problems are akin to papering over the cracks. Entrepreneurs with an exit strategy focus on business valuations long before they enter negotiations with prospective buyers.
Commissioning regular business valuations and setting targets is the best way of eventually hitting a number you’re happy with. The more time you have to address your valuation, the higher the chance of success.
3. Differentiate yourself
The most valuable businesses are those that enjoy a differentiated market position. Examples of factors that indicate a differentiated market position include:
· Customer experience
· Niche expertise
· Innovative products/services
· Outstanding brand
For example, Apple’s differentiation is in its consumer electronics and culture of innovation. What makes your business stand out from the rest of your market?
4. Build a management team
Businesses often suffer long-term because they rely entirely on the founder. Once the founder leaves, the house of cards collapses because nobody can step into their shoes.
Begin training your staff and enriching your management team with the ability to act independently of you now to increase your firm’s value. Why does it matter? Simply put, a business that can succeed without the owner is more straightforward to merge with or acquire.
5. Generate operational efficiency
One of the core value drivers is an efficient and scalable production system. Optimise successfully, and you’ve set the stage for increased profitability and management growth.
Start by looking at the functions of your staff. Outline the processes, controls, and procedures and pinpoint areas where you can eliminate excessive cost or waste.
6. Improve your growth potential
Buying or selling a business isn’t the end but a new beginning. Prospective buyers seek opportunities with one eye on the future. Companies with high growth potential indicate they can increase production, expand, and report greater profits.
Even though you intend to leave, build a credible growth plan long after you’re gone. Putting in the scaffolding to achieve this, even if it won’t be realised before you leave, shows the achievability of your plans and a business positioned for lightspeed.
Again, there’s always value in laying the groundwork because you’re making the transition simpler for a prospective new owner.
7. Create more recurring revenue
Recurring revenue is precisely what it sounds like. This type of revenue is the best revenue because it’s an element of stability acting as a counterbalance to the economic volatility that threatens the futures of businesses in every sector.
Anything you can do to reduce your business's risk will increase its valuation. Generating a dependable income is highly attractive, and you can strengthen this by introducing subscription-type models and locking clients into long-term contracts.
Likewise, it works the other way. If you can refinance your long-term debt or lock in favourable rates with suppliers, you’ve provided predictability and stability for the foreseeable future.
Certainty translates to pounds.
8. Retain key personnel
Prospective owners want a seamless transition from one owner to the next so they can hit the ground running. Bringing in an entirely new management team rarely succeeds, which is why buyers often want the surety that previous senior figures will remain behind to assist with the transition.
Ideally, this will mean skilled workers remain with the company after the sale. Alternatively, it could mean these figures remain behind for a determined period to train new operators in how the business runs.
Make any highly skilled employees a key selling point for your business as part of the valuation. Naturally, if you’re in an industry with a shortage of skilled operators, this will have an even bigger impact.
9. Improve internal cash flow processes
Cash flow is a constant headache for businesses of every size. If your company struggles with keeping its cash flow in the black, it will work against you in a valuation.
Review your cash flow processes and ask yourself whether they’re working against you. For example, you might consider reducing standard payment times on your invoices or requesting a change of terms with your suppliers.
Of course, it isn’t always that simple. Some companies might find that they require overhauls in several areas to find efficiencies, including but not limited to cutting staff numbers, better cash flow forecasting, or improving inventory management.
10. Have options
The actual market value of your business is defined by the market. Multiple independent valuation agents may analyse your business and arrive at radically different conclusions.
Working with a single buyer means you’re beholden to a single opinion because your business is only worth what someone is willing to pay for it. Attracting multiple interested buyers changes everything from the multiple used to value your business to the final offer received.
Create a bid-like atmosphere to drum up competition by reaching out to a business broker with experience in supporting businesses going through mergers and acquisitions. They’ll support you in identifying potential buyers and attracting them to the mix.
If you’re working to improve your business valuation, partnering with an experienced broker or valuation agent provides clarity and targeted advice on changes you can make.
At Hilton Smythe, we’re proud to provide bespoke guidance on helping businesses maximise their potential. If you’re ready to drive your firm’s valuation higher, speak to the team today.