Today’s post is from our guest, Jock Purtle. You can learn more about Jock in his author profile below the article.
The ability to build a strong brand is essential to the success of your business. It gives people something to hold onto, and it’s a major driver of improving customer loyalty.
Building your brand is something that should be at the top of your list, and you should be using all possible strategies to help make it a success.
However, the importance of branding goes beyond just the here and now. It’s also important for if you decide to sell your business.
There are many reasons to sell a business. Perhaps you are looking to retire, move on to another project, or maybe you simply are unable to continue running your company.
No matter what, having a strong brand will have a big impact on this process. Here’s how branding can affect the sale of your business.
Building Buyer Interest
When you go to sell your business, the best possible scenario you can hope for is to have multiple interested buyers. This increased competition helps drive up prices, which will make your payday that much more exciting.
And while business value is the real way to know what you’ll be able to get for your business, having a strong brand certainly plays a role.A businesses brand helps create a higher perceived value which builds buyer interest in the business. Click To Tweet
This is because people associate strong brands with successful companies. Even without looking at their financials, we all know companies such as Coca-Cola, Toyota, and McDonald’s are worth a lot of money just from their powerful brands.
While it’s unlikely you’ll get to this level you can build your image up as a strong company that performs well in its specific market. It can be a brand that people can trust and the amount of interest in your company once it goes up for sale will be much more significant.
When someone goes to buy a business, what they are really doing is making an investment. They want something that will provide good returns while they own it but that will also sell for a profit when the time is right.
So when investors look at businesses, they want to see more than just its current profitability. They want to get an idea as to what it will look like down the road. One of the best ways to project the future of a company is through its brand.
Strong branding is a good sign that the company is in good health and will continue to be so in the future. It’s also a good sign the company is poised for growth. The increase in funds that comes from one company buying another can often be enough to create new sources of revenue, increasing the company’s profitability over time.
Generally speaking, companies with strong brands make more money. Recognition and loyalty usually translate into more sales, and this has a direct link to the price you’ll ultimately get from anyone looking to buy your business.
A lot goes into determining the value of a business, but generally speaking, a business is worth 2.5 times its yearly revenue. As a result, it doesn’t take a lot of math to figure out that the more money your company brings in, the more it will be worth when it comes time to sell.
However, this “2.5x” rule is just a starting point. It gives you a number to work with that you can try to improve upon once you get into negotiations. But once again, a strong brand plays into your favor here.
It gives you a bargaining chip when dealing with potential investors to help you drive the price higher, and you’d be surprised how well this works. People interested in buying a company will be willing to spend more on a company with a strong brand, as this usually gives the company a stronger outlook for the future.
Showing Management Practices
There’s a lot more that goes into figuring out a company’s value than just numbers. There are a handful of less-obvious factors that can have a big impact on the offers you will receive for your company.
Among these factors include management practices and business process, as well as long-term strategic planning.
Building a brand is not something that happens overnight. It takes a lot of planning, time and dedication—you’ll need to change directions multiple times as you get a better idea of what works and what doesn’t. All of these things line up nicely with these factors that help to drive up the value of your business.
Having a strong brand is proof that your business possesses the type of attributes needed in a company for it to accomplish long-term goals. It shows you aren’t some leaderless startup but rather a highly efficient business capable of accomplishing large-scale goals.
This is worth its weight in gold to investors, as it shows them they will be taking over an operation ready for success. They may make some changes to the structure of the company, but with the shell already in place, they will be more willing to make offers at or above the price determined during valuation.
It shouldn’t take much to convince you that building a strong brand is good for your business. It helps shape your organization into something well-positioned for both present and future success.
Hopefully, you now see how branding offers value to your company beyond just the present moment. It prepares you for a higher valuation and eventual selling price when you make that leap to sell your business.