THREE TIPS FOR INCREASING YOUR BUSINESS VALUE BEFORE YOU SELL
Are you at the place in your entrepreneurial journey where you have decided it’s time to sell? Many business owners have a dream of selling their business someday. However, many of those businesses will never be sold.
Even if you aren’t planning to sell your business anytime soon, increasing the value of your business is never a bad idea. There are several keys to maximize the value of your business, and each requires strategic planning, strong management, and require the right timing.
Wherever you are in the journey, we’ve put together these tips to help you increase your business value before it’s time to sell.
TIPS TO INCREASE YOUR BUSINESS VALUE BEFORE YOU SELL
1) Develop a Recurring Revenue Model
If your business does not have a model that produces recurring revenue, selling your business could be much more difficult than those that do.
If your business revenue model does not include a recurring revenue pattern, you should at least make sure you have some form of contracts in authority. At GW | Business Valuations, we offer a tool to help business owners develop recurring revenue.
If you think that your company isn’t under normal circumstances to have a recurring revenue model – get creative! The businesses with the best value have developed a methodology of increasing their recurring revenue.
2) Avoid Customer Concentration
What percentage of your overall sales revenue did your largest customer represent last year? Was it over 50% or more like 16-25%? The next question you should ask yourself is this: What would you do if you lost your biggest client?
There are several risks for putting your cash flow into this type of statistical range. Any loss can devastate your revenue, profit & cash flow. Other risks include having difficulty diversifying over time and ultimately decreasing the value of your company.
3) Become a Passive Business Owner
Another crutch to the potential value of a business has to do with the business owners’ involvement in the business.
Ask yourself this question: How would your business perform if you were out of action for three months and unable to work? Answer honestly, would your business suffer a lot? Would it even survive without you?
The goal is to be an owner who is not essential to the day-to-day operation of the business. Business owners who are more removed from the operations.
Are you counting on the sale of your business for your retirement funds? If so, you need to make sure your business is sellable. To help you answer that question, we’ve created this short questionnaire.
Before you embark on increasing your business’s value, give yourself a true assessment and baseline of where you’re at currently.