The problem for most family owned businesses is how to realize the maximum potential from the business at the time of sale and prior to that time how to develop strategies to improve the efficiency of the operation and how to improve total revenue growth without stretching the capacity of the enterprise or going too far out of the owners comfort zone. This article provides specific insight into what steps a small firm may take to enhance its valuation for the purposes of realizing a capital gain or for the purposes of realizing more profitability to fund retirement of the owners during transition to the next generation. This paper offers a model for implementing strategies to enhance the valuation of a small business for the purpose of realizing either higher profitability or a larger capital gain upon the sale or transfer of the enterprise.

Introduction

As small business owners get closer to retirement, they face a haunting question. What can they do to enhance the profitability of their business while still keeping the business within the size and scope of their personal comfort zone or what can they do to enhance the value of the business from the standpoint of a buyer? This article addresses those issues along with advancing a new approach to valuation of a small business.