How to Systematically Increase Your Business’s Value
November 29, 2021 - 8 minutes read
Creating a sellable business means breaking free from your emotional attachment and learning how to increase business value. Buyers won’t see the long nights, hard work and initial investment that you made in the business you love.
Buyers want to see value.
You know how to run your business and the systems that you have in place. But, unfortunately, buyers do not know these systems.
If you want to sell your business in the near future or even in ten years, you can follow the tips below to systematically increase your business’ value.
Accelerate Your Business’ Value Using 6 Proven Tips
1. Create Recurring Revenue Streams
Recurring revenue is predictable, reliable and offers stability. If you don’t have recurring revenue yet or it’s just a tiny part of your business, it’s time to sit down and:
- Review your business’ products
- Review your business’ services
- Analyze the competition’s offerings
Finally, you’ll want to determine whether you can transform any of your current or potential products and/or services into a recurring revenue model. Traditionally, it costs between 5 to 25 times more to acquire a new customer than to retain current customers.
Creating recurring revenue channels will empower you to build a stable business that sells.
Buyers want stability. In fact, in the third quarter of 2021, the average sale price for businesses rose by 17%. However, a change in buying behavior was noted. Buyers opted for stability instead of value.
Plus, you’ll have financials that you can rely on without needing to spend a lot of your capital on acquiring new customers.
2. Systemize Your Processes
Your business has processes that you put in place. When you sit down at your desk, you can perform these tasks from memory and almost on autopilot. But would someone else be able to do the same? Probably not. Business value relies on systemizing your systems.
When a buyer acquires your business, they want to sit down with:
- Properly documented systems to follow
- Automated processes
Ideally, when you document your systems and everyday tasks, you want to be able to hand them off to a buyer and have them start effortlessly replicating the processes.
3. Decouple Yourself From the Business
You’ve worked diligently to build your business, but are you the brand? If your face is associated with your company and customers know you as the brand, it’s time to begin removing your business’ dependency on you.
A few ways to do this is by:
- Removing yourself from marketing and sales material
- Slowly build the brand without you being the face of the business
- Begin delegating tasks
Buyers are interested in businesses that can run and function based on the brand that you’ve built and not solely on the owner’s personal brand or processes.
4. Focus on Brand Loyalty and Reputation
Building on the last point a little further, you need to build brand loyalty and reputation if you want to reach your business goals. There’s a good chance that you don’t know who the CEO or founder of Nike is, but you know the brand and the quality shoes that they manufacture.
Worldwide, the company has a net income of $5.7 billion, and their customers continue coming back due to brand loyalty.
You, too, should focus on:
- Brand loyalty
- Brand reputation
A few steps that you can take to build your brand are:
- Focus on quality and value
- Interact with customers and clients
- Remain consistent or continue improving
- Focus on customer service and experience
- Offer incentives, such as loyalty programs
- Create a workplace employees love
- Guarantee products and services and honor your guarantee
Additionally, you want to collect and use data to your advantage. For example, survey your customers to uncover areas where you can improve or pain points that you can solve. When you begin building brand loyalty and reputation, you’re positioning your business for long-term success.
5. Increase Profitability and Cashflow
Annually, you need to find ways to maintain or increase profitability. You also want to take this time to review your financials (more on that below) and increase your cash flow. A few of the tasks that you want to complete at this time are:
- Review the profit margins of your products and services
- Remove products or services that are the least profitable and don’t account for many sales
- Introduce new offers that fill customer needs and can generate more revenue
Business value demands that you maintain a LEAN business where you remove the waste and focus on what’s working best. In theory, some products or services may seem like good options, but your customer base may not respond to them as expected.
When you reduce offers, you can also improve cash flow by eliminating items that have low profitability or may not sell like they once did.
6. Maintain Clear, Concise and Accurate Financials
Finally, you can increase business value through your financials. Buyers review financials as a means of determining the health of your business. If you don’t maintain clear, concise, accurate and up-to-date financials, you don’t know the health of your business.
Run reports to see your true profitability and expenditures.
Working with an accountant or bookkeeper to keep your books as accurate as possible will empower your business decisions, whether you plan on selling the business in the future or not. The data you maintain on your business’ finances will allow you to make decisions based on facts rather than assumptions.
If you cannot show your business’ value through your financials, your chances of having a sellable business are slim.
Final Thoughts
Increasing your business’ value is never a bad idea. Even if you don’t plan on selling your business, you never know what the future holds. If you get sick or can no longer run your business, taking the steps above today will help you sell your business faster while maximizing your sale price.
Plus, by systemizing your business, you’ll make it easier to delegate tasks and grow your business in the future.
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