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Paula Fargo

Increasing Your Sign Company’s Value

Make hay while the sun shines.

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WE’VE SPENT THE past few months methodically going through your selling options when it’s time to think about moving on. There are other options if you’ve decided you want to leave your business, including just shutting it down, selling off your assets/building and paying off your debtors. However, that all sounded too grim to me, so let’s just pretend that’s not an option for now.

Unless you are selling your business to a family member and aren’t trying to bolster the asking price, take steps to increase the value of your signshop BEFORE you start shopping for a buyer. Paying attention to the value of your shop will serve the dual purpose of possibly getting a higher offer for your shop and allowing you to make more money while you still own the shop.

First, let’s think about how organized your shop is, both physically and financially. If you wanted to buy a signshop, which would you look more favorably on — a shop that was messy, dirty and disorganized and that had unclear, questionable financial statements — or one that is tidy, squared away and clean, with clear and sensible financials?

It’s a rhetorical question, don’t bother answering — we all know the correct response.

The question you should be answering, however, is which camp does your shop fall into?

Let’s just assume many of you are in the former group to one extent or another — I mean, who doesn’t have room for improvement?

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What can you do without driving yourself and your coworkers crazy, yet still make some positive changes?

On the physical side of things:

  1. Clean up! Go through each area of your shop and throw away stuff that hasn’t been used in decades (we all are guilty of keeping things longer than necessary). Enlist your team to come in on a weekend day or stay late one evening and pay overtime. Bring pizzas, play music, make it a laid-back atmosphere. Put people in teams and give awards for the best job. Take “before” and “after” pictures that your folks can be proud of. Post them on social media.
  2. Nominate a person at your shop to ensure that, once everything is neater, things stay that way. Give incentives for a good “inspection” on Friday afternoons. Additionally, your team will most likely enjoy working in a physical environment that is clean, neat and organized, and should even be more productive and efficient if all tools and supplies are stowed away logically and tidily.
  3. Give a once-over to your equipment and see if you can get rid of something, rehab something or replace something that makes sense for your operation.

On the organization side of things:

  1. Consider creating an Organizational or Accountability Chart showing the different positions in your company, and then adding people’s names in the position boxes. Don’t have a “Nancy” box if Nancy does a bunch of stuff. Add the boxes for the responsibilities Nancy has and put her name in each box. A new owner is going to need to know all the functions performed at your shop and how they fit together. A “Nancy” box is not helpful.
  2. Create an Asset spreadsheet, listing all your company’s assets along with any other information you have (when purchased, serial number, under-service contract, cost, etc.) This may sound daunting; however, you WILL need something like this when you sell your business. Look at this task as if you were creating a list of all the good things your company has and why you can ask for the price you will ask. (Pro tip: Contact your accountant to get a Depreciation Schedule you need to file with your taxes every year, and that will be a good starting place).
  3. Get a list of all of the items that a buyer will need to see when considering your shop and start accumulating them (I have a list I worked off of. You can email me at paula@paulafargoconsulting.com if you’d like a copy). This is surprisingly time consuming and you’re much better off doing it now while you can rationally think about your responses and take some time to “shine them up” a bit, rather than when you’ve got a hot prospect who is breathing down your neck for 50 different pieces of information.

On the financial side of things:

  1. This is the trickiest and possibly the most challenging part of the haymaking. First, you’ll want to gather the three most recent years of financial statements (internal and from your accountant) and tax returns (business and personal).
  2. I recommend you look at all these documents with a critical eye as if you were the buyer of your business and come up with questions that you might have, so you can start preparing your answers.
  3. If your financial statements are too complicated (more than a two-page balance sheet or income statement), you should get rid of or combine unused/lightly used accounts.
    If your statements are too light, think about what details might be requested, work with your accountant or bookkeeper to add them, and start using and restating them, if you can’t do it yourself.
  4. Once you start to get a good handle on your financials, you’ll be in a better position to improve your bottom line. Remember, your asking price will be some multiple of your net profit/owner’s compensation, and the higher you can make that number, the more you can request.
  5. In the simplest of terms, there are only two ways to increase your bottom line: sell more at the same profit level, and/or lower your expenses.
  6. There are Ratio Studies available that can help you with structuring your financial statements as well as determining what your ratios should be. (You can start by looking here for some past studies.)

It’s a good idea to think about this entire pre-sale process like staging a home for listing on the market. You want to show your business in the best possible light, emphasizing the positives, showing what’s strong and how much money a new owner could make if they bought it.

In the next column, we’ll get a little more into the weeds of completing the list of buyer items needed to sell your business and the specifics of what you’ll need to do to get the best asking price for your treasured asset.

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