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5 ways to increase the value of your business – even if you are not selling.

Increasing the value of your business can only be a positive move. The rule of thumb is that the longer you have to prepare, the more control you have over the value of your company…

Here are 5 key tips that will help you build the value in your business until such a point you are ready to sell…

  1. Robust Financials

One of the most important ways to increase the value of your business and its attractiveness to potential future buyers is to keep a comprehensive, well documented and regularly updated list of the below financials:

  1. Increasing Profitability – Increasing your company’s profitability will increase its value and in turn result in future buyers being willing to pay more for a company that can generate a profit and demonstrate that these profits are still increasing.

  2. Recurring Revenue – Building recurring revenue streams will increase the value of your business and reduce risk. Recurring revenue will give potential buyers comfort that they will have a consistent revenue flow while they get acclimated to the new business.

  3. Diversification – Whether it’s about your products, customers or suppliers, it is important to always diversify your business. A concentration of revenue is a recipe for disaster; however, diversification reduces these reliance’s and in turn reduces the risk for yourself and potential buyers.

  4. Robust Financial Controls – Running a well-managed, healthy business requires the use of strong financial controls. A business needs to be on top of its revenue sources, expenses, cash flow, etc. If you don’t know where your money is going, it could soon be gone, so regularly assessing and strengthening these where necessary is a must.

  5. Create a Documented Business Plan for Growth

Always have a comprehensive business plan and keep it current. Even if you are not thinking of exiting your business anytime soon, the further one plans ahead, the more time you have to grow and enhance the value of your business. That is why it is important that your business plan should include a list of objectives and detailed financial projections of the company’s goals for future success. It’s all about giving yourself and your employees an understanding about where your company’s growth is coming from, documenting this in writing and continuing to refine and measure the results accordingly.

  1. Increase Barriers to Entry

The more barriers to entry you can create in your business, the more valuable and distinct it will be from it’s competitors. Barriers to entry can be created though intellectual property, such as trademarks, economies of scale, customer loyalty, supplier or distribution agreements, etc. If you find those unique elements in your company and use it to separate yourself from your competitors, you are making the business more valuable and attractive to potential buyers if you one day decide to sell.

  1. Create Repeatable Systems and Processes

If you build repeatable systems and processes in every level of your business this ensures the success of the organisation is not dependent exclusively on one person. Implementing teachable processes in place ensures your customers, vendors, and employees enjoy the same experience each time they interact with your company. It also means if you decide to sell, there is less risk for the buyer as it demonstrates that your business can maintain its profitability and stability after you have gone. In addition, companies that have strong systems and documented processes typically have more efficient operations, which translate to higher margins and stronger cash flows.

Let systems run the business and people run the systems. People come and go but the systems remain constant” – Michael Gerber, The E Myth Revisited.

  1. Maintain Key Employees

Fully trained and qualified employees are worth their weight in gold for any business owner. If you can actively cultivate a high-quality workforce and empower your staff, you can increase your company’s worth and reduce the risk of high employee turnover. In addition, by giving prospective buyers a well-trained and highly skilled team to work with once they take over provides a great deal of stability and assurance for the new buyer.

Although these concepts may sound simple, the difficulty for business owners is staying focused when you are being pulled in different directions with the day to day challenges of business. However, if you focus on improving these five key areas of your business sooner rather than later, the increased value and potential rewards are worth the extra effort for everyone involved.

If you are interested in finding out more about each stage of increasing the value of your business, speak to one of our experts at Vexus

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