How Can Increase the Value of My Business?

September 27, 2017

"What should I be doing now to make my business most valuable when I want to sell?" We get asked this question a lot, so I thought I'd post the answer. Here are the 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.

 

2. Happy customers.

They return, and their referrals are golden.

 

3. Great people in your business.

Your team should be stellar. Your people should be "on" 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.

 

5. Operational efficiency.

Your team's performance should be crisp, prompt, consistent, and at or above your customer's 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; provide more and better.

 

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 care in preparation of plans and actual results of operations.

 

8. Strong IT infrastructure.

If you don't have good information systems in place, buyers will deduct from the amounts they pay you to cover their future investment in such.

 

9. Robust pipeline of revenue opportunities.

Sales cycles vary, but keeping a big basket of potential work is great insurance against business downturns. No surprises.

 

10. Good facilities.

Your place of business and 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 accountabilities and expectations clearly defined, is a winning organization. Don't fall victim to the 'we all wear a lot of hats' mentality. Those organizations touting that are generally under performers, and accountabilities are difficult to pin down.

 

12. Consistent, predictable cash flows/profitability.

If you are doing 1 though 11 above, then you will have accomplished #12. Very important 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.

 

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.

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