The Benefits of a Profit Boost!

Sometimes in selling your business, milestones mean everything. When you announce major profit gains, it can make your business look so much more attractive to a potential buyer and this week RTA Business Consultants outline why.

It’s an obvious conclusion to reach isn’t it? The more profit you are making, the stronger your business, the more opportunity there is for growth. Even then, there are levels of degree when it comes to how influential profit margins are with potential buyers.

The Differing Benefits of Profit

There are two types of profit boost- gradual and spontaneous. Both have value in any strategy to attract a buyer to your business. A gradual rise in profit margins suggests a long term business model that is perfectly positioned to make money sustainably. This is an attractive to a buyer because it shows them that purchasing your company will provide them with a secure opportunity to grow their own venture.

The benefits of gradual profit rises are obvious, however the benefits of spontaneous profit boosts are not to be ignored either. A company will see a spike in profit levels usually after the introduction of a new product or service that has diversified their business.

There are benefits to this type of profit rise too, and it all relies on timing. Timing is a key issue – when is the right time to sell your business? If you put it on the market just after a profit spike, it shows buyers that now is the perfect time to buy your business and capitalise on your heightened profit capability.

LG Electronics: A Case Study

We can see how this plays out in the case of LG Electronics. The technology company recently reported a profit jump of more than a staggering 300%! Consequently net profit at LG Electronics measured 93 billion Korean Won in the first quarter of 2014. It stood at 22 billion Won the previous quarter.

Notably, this profit boost came at a time of great change for the electronics firm, as strong demand for its smartphones and TV’s were responsible for sales. Plans to expand its product range and introduce its new G3 smartphone later this year are set to keep profits high.

It’s important to remember that because of this news, LG shares rose 2.9% to 71,000 Won in Seoul this week. We see a direct correlation – a bump in profits made the company much more valuable in the blink of an eye.

If this exploration of profit margins should remind you of anything, it’s that timing is everything when you are looking to sell your company. At RTA Business we always suggest waiting for the time you can make the most money from selling your business.