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How to increase the value of your business
So, you’ve got your business off the ground, it’s well established, and everything is swimming along nicely. What’s next? Maybe you’re ready to take it to the next level and you need to raise funds to achieve that? Or perhaps you’ve been at it a while and are now looking for your exit strategy.
In both scenarios it’s worth considering the value of your company and whether it’s as good as it can be, or if there’s more you can do to improve its worth to prospective buyers or investors.
A good place to start is by analysing the value of your business to see where it’s currently at. At ActionCoach, we have teamed up with the Value Builder System, which helps you understand and improve your company’s worth.
The Value Builder System calculates business performance based on a number of key factors that drive the value of your company.
These include:
Financial performance:
What is your top line revenue and bottom line profit, in terms of the actual figures and the quality of the reporting, i.e do the numbers stack up and can you defend them if scrutinised?
Growth potential:
Although trading history and past successes are important, prospective investors or buyers will be more interested in your company’s plans for the future. This includes possible future revenue streams, expansion plans, new market opportunities and so on.
Independence:
Make sure your business is not overly reliant on any one customer, supplier, or employee. There needs to be good diversification all round. The same applies to you as the owner. Is your company overly reliant on you? Could it survive easily without you or do people have to come to you for many of its processes and functions? Improving the value of your company could include documenting processes, training other members of staff and sharing access of systems so that business can continue in your absence.
Working capital:
Sometimes the day-to-day cost of running a business is disproportionately high, which means that any potential buyer would have to consider not only the price they would pay to own the company, but also how much it would cost them to continue operations on day one. Improving your working capital to ensure you generate as much cash as possible can help improve your value. This could involve streamlining systems to bring costs down, as well as initiatives to make more money.
Recurring revenue:
Any good, high value, business proposition comes with recurring revenue that doesn’t rely on ad-hoc purchases or seasonal trends. This could be things like consumables, subscriptions, or contract revenue.
Customer satisfaction:
The reputation of your business is also very important to potential buyers or investors. Is your company one that people want to do business with? Capturing customers’ views and benchmarking satisfaction levels can help you to evidence a more attractive proposition.
To find out more about improving the value of your business and to register with the Value Builder System, contact Juliette Ryley ActionCoach today.
