According to the Exit Planning Institute, 76% of all business owners plan to exit their business in the next 10 years. The biggest shocker for most of them is that their business is not worth what they thought it was. When we decided to sell our company in 2005, I began to search for information about how to increase the value of your business.
It took us two years to sell that company and over those two years we began to focus on these things in our business, I think they will help you as well.
How to Increase the Value of Your Business
Start Surveying Your Customers Using the Net Promoter Score Methodology:
I would bet you have completed a survey for a purchase you have made or after a phone call you have completed. These surveys ask tons of questions and take way too long to complete and they are useless. You heard me – useless. Fred Reichheld discovered that there was really only 1 question that could add value to your business and that was about whether they would refer you to their friends and family. The Net Promoter Score Methodology takes this question and formulates a prediction for buyers of your business as to how good your projected revenues will be. We help our clients create these simple surveys and help them utilize the score to predict a value for a buyer.
Sell Less Stuff to More People
The most valuable companies have a defendable niche selling a few differentiated products and services to many customers. The least valuable businesses sell lots of undifferentiated products and services to a concentrated group of buyers. I think that one of the curses of an entrepreneur is our constant ideas. Uber makes a killing very focused on one service.
Drop the Products and Services that Depend on You
If you offer something that needs you to produce or sell it, consider dropping it from your offerings. Services and products that require you suck up your time and cash and don’t contribute significantly to your business’s value.
Collect More Money Up Front
Turn a negative cash flow cycle into a positive one and you boost your business’s value and lessen your stress load. When thinking about how to increase the value of your business, cash flow should be a big part of your focus. When someone buys your business they will pay you of course but then they immediately need cash flow to keep the business they just bought working smoothly. Thus, cash flow is important for the sell of your business.
Create More Recurring Revenues
Predictable sales from subscriptions or recurring contracts mean less stress in the short term and a more valuable business over the long run. For many business owners, this seems a dream. One form of recurring revenue is online products. I have written many blog posts on this blog about creating online products. Check out 3 Digital Products You Can Sell Online
Be Different
Refine your marketing strategy to emphasize the point of differentiation that customers value. Be relentless in highlighting this advantage. There are a thousand different ways to market your business but they all come down to one thing and that is getting clear on your marketing message. Your message should be simple and direct. It should also speak to the thing your client is already looking for. It has to play into every one of your marketing strategies. Check out the headline for Bottom Line Bookkeeping Solutions – Real-Time and Accurate Numbers to Help You Grow Your Business. That is exactly what business owners want when it comes to their financials.
Find a Backup Supplier for Your Raw Materials
Consider placing a small order to establish a commercial relationship and diversify the sources of your most-difficult-to-find materials. I have a friend who is a roofer. When the hurricanes hit Louisiana in 2020, his supplier was destroyed. It took him a bit of time to get set up with another supplier. If he had already had relationships with multiple suppliers he probably would not have missed all the jobs that passed him by.
How to Increase The Value Of Your Business: Teach Them to Fish
Answer every employee question of you with “What would you do if you owned the business?” Your goal should be to cultivate employees who think like owners so they can start answering their own questions without coming to you. In my business, we call it “Michele Brain”. Every time I make a decision in my business, I explain why I made the decision.
My challenge for you is to take one of these ideas and start. Don't think you can fix them all immediately. The biggest mistake you can make is not to start!!!!
Want help to get started? This is what we do at Decisive Minds. Book a time for us to talk about how we can do that together.
