Business owners have a lot running through their minds and frequently make decisions on the go. Working with hundreds of business owners, our experience tells us that if those decisions do not result in an increase in cash flow or an increase in business valuation then they are probably not worth making at all i.e. your decisions are highly inefficient. This is when we hear business owners complaining about working long hours and having little or nothing to show for it at the end of the day.
Business owners often tend to concentrate on revenue (or turnover)to seek growth.There isn’t enough planning done to maximise the value of the business which is arguably the most important asset you are working your butt off to build.
We believe that if you focus on building the value of your business; revenue, profit and cash flow will automatically follow suit.
Here are 5 ways you can take immediate action to increase the value of your business:
1. Review your existing client base:
- Ensure that you do not have a single client contributing to more than 20% of your business revenue. This is to prevent a huge negative impact on your revenue if your client chose to leave you. A potential investor or buyer would also see this as a risk if they had to buy the business and then loose the client;
- Increase the number of services provided to each client per year – if they have more services prescribed, there are fewer chances of them switching to your competitor;
- Ensure that you do not have many clients subscribing for a low-value service; instead, focus on increasing your average fee per client;
- Invest in client retention programmes such as client satisfaction surveys, loyalty programmes etc. Showing that you care will encourage long-term client relationships which in turn can fetch you top dollars.
2.Implement efficient systems and processes:
- There are tonnes of tools available online to streamline business management. Ensure that you adopt efficient tools to deliver your business service and manage your operations. Potential investors/buyers shouldn’t see the need to incur a huge administration expense to make your business efficient;
- Build systems that enable business owners to run the business from anywhere in the world i.e. dashboard reporting, online workflow monitoring etc.
- Automate your process for lead generation, sales and marketing of your business. Achieving sales and marketing automation can be invaluable as potential investors/buyers would pay top dollar if the business has established systems that can showcase a history of acquiring clients at a low cost
3.Pitch for Recurring Revenue:
- Convert your billing model from ‘Fee for Service’ to ‘Monthly Subscription’. This will ensure your cash flow is predictable, minimise your time spent on chasing debtors – all positive signs for a business in control of its cash flow.Investors/buyers will derive comfort from guaranteed future cash flow.
4.Good and Improving Cashflow
- Cash flow is the backbone of any business. It is important to fix any cash flow issues as a priority. No matter how good you are in delivering the services or how happy your clients are with your services, no one wants to pay top dollars for a business with poor cash flow.
5.Social Capital
- As clearly evident, it is valuable for a business to have a good online presence. Potential investors/buyers often look at a business’ online followers and check for good reviews online which will clearly demonstrate your business’ ability to acquire new clients. It takes a lot of effort and time to build brand loyalty online and buyers would pay top dollars for businesses with an established online presence.
If the above points have piqued your interest and you would like to learn more about increasing the valuation of your business, feel free to contact us. We are always happy to chat!