How Can I Increase the Value of My Business?
Published on by Barnes Dennig in Transaction Advisory
One of the key questions that business owners frequently ask is: “What should I be doing now to make my business most valuable when (or if) I want to sell?”
Business owners have a number of options and activities that they can pursue today so that when the opportunity to sell arises, they can be in the best position possible. Here are a few of the key attributes of high value businesses:
1. Recurring revenues.
If you have customers who have regular, ongoing dealings with your company, you are way ahead of the game. Aim to maximize recurring revenues and keep customers happy.
2. Happy customers.
Speaking of keeping customers happy: they return, and their referrals are some of the most valuable building blocks in your business.
3. Great people in your business.
Your team should be stellar. Your people should be motivated and ready to give their “A game” every day. Your customers, present and prospective, should walk away from every interaction with any of your staff with positive vibes.
4. Happy people in your business.
If you expect your team to perform well and treat your customers with professional care, you must hire great people, train them, compensate them well, and treat them with great respect. Check out the resources page for industry specific compensation, benefits and benchmarking studies to see if your benefits are competitive
5. Operational efficiency.
Your team’s performance should be crisp, prompt, consistent, and at or above your customers’ expectations. Always.
6. Product or service superiority.
Give your customers a reason to select your company. If you are just like everyone else, you will not win. Someone is always cheaper, provides more or better products or service, or has a plan to do so soon. Stay plugged into the market and identify competitive advantages where they arise.
7. Robust financial planning and measurement processes.
A monthly financial plan with clearly defined revenue and spending categories is vital to keeping things on track. Absent that, your information will lack reliability, accuracy, and clarity. Buyers and banks will be reluctant to trust your data unless you show thoughtfulness and due diligence in the preparation of plans, and actual results of operations.
8. Strong IT infrastructure.
If you don’t have good technology and information systems in place, buyers will deduct from the amounts they pay you to cover their need for future investment in such. Learn more about internal controls, and what you need to make sure your technology and processes are equipped to compete in today’s evolving market.
9. Robust pipeline of revenue opportunities.
Sales cycles vary widely across industries and companies, but keeping a big basket of potential work is great insurance against business downturns. Make sure that you’re prepared to handle any surprises the market can throw at you.
10. Good facilities.
Your place of business and your equipment should be properly maintained and current, or your value will be discounted. The buyer will see this as a shortfall that they need to remedy and will deduct from the amount they offer you.
11. Clearly defined job roles and responsibilities.
A properly maintained organization, with accountability and expectations, clearly defined, is a winning organization. Don’t fall victim to the ‘we all wear a lot of hats’ mentality. The organizations touting that philosophy are generally under-performers, and accountability is difficult to pin down.
12. Consistent, predictable cash flows/profitability.
If you are doing items one through eleven well, then you will have accomplished number twelve. It is of paramount importance to possess and maintain clear visibility to future profits and cash flow. It’s all part of a well-run company with a good planning process.
Learn More and Contact Us
Depending on where your business stands relative to these value drivers, you may have a little or a lot of work to do to prepare for a sale. Remember, also, that most who buy a business will need outside financing from a bank or investors, and those parties are going to want to see all of these things to grant credit to your buyer. Contact us to speak with a member of Barnes Dennig Transaction Advisory team to assess your current situation at no charge, or call us at 513-241-8313. We look forward to speaking with you.
