Actionable ways to build the value of your business
Last week I ran my weekly live masterclass on the actionable ways to build the value of your business, following on from our Expert Interview with the corporate finance expert Barry Lee.
So I wanted to follow up with a summary of that workshop with all the elements you should be considering right now to start building the value of your business.
Start with the end in mind
No matter where you in your business journey, what do you WANT for your life, when might you want to sell? How much money do YOU need to be financially free? And do you have an idea who might be likely to buy your business one day?
Why it’s a good idea that you start building value right NOW!
The things that are attractive and valuable to a buyer are also very attractive and valuable to you right now and in the future, whether you sell or not.
A valuable business makes and keeps more profit, it has more cash, it has a healthier balance sheet, and it’s growing your personal wealth all the time
A valuable business can invest in your pension, in growing the business, or in other investments – all things that will grow your personal wealth, and whilst you’re building the value of your business.
You might have a change in circumstances and find yourself wanting to sell. This might be due to health, family circumstances, you might fall out with a business partner, or fall out of love with your business.
And you might get approached out of the blue by someone wanting to buy your business – so you want your business to be valuable and saleable, rather than have to walk away because you’re not ready yet.
So what IS valuable to a buyer?
- Growing your profit year on year
- Improving cash flow
- Solid financial information and control
Customers and revenue:
- Recurring revenue
- Contracted revenue (this is the most valuable)
- Diversified customers, which means that you’re not reliant on one or a few key customers
- Customer retention – do your customers buy again and again, or do you have to keep hunting down new ones?
- Showing you have capability to bring new products or services to market
- And a solid marketing process that consistently brings in sales
People and processes
- A business that is NOT reliant on you and can run without you is always super important to a buyer
- Slick, repeatable routines and processes
- Employee engagement and retention – no one want to buy a business where the staff are miserable and keep leaving!
Potential and strategic areas
- Scalability – has your business got the potential to scale from where it is now?
- Differentiation – what is your USP, how are you different or better than your competitors
- Have you got a strategic plan
- Brand and reputation
- Low risk of commoditisation and competitor disruption
- Intellectual property
So WHAT exactly can you do to build the value of your business, on a practical level?
- Firstly, make yourself redundant – remove yourself from day to day operations
- Put processes and routines in place, document them and make sure everyone follows them
- Grow your gross and net profit margins
- Focus on customer service and retention
- Strong financial control and reporting
- A having clear vision and strategy for the business
Then you should measure the right things, often
Find out how your business would be valued and then track your value at least quarterly.
Make sure you’ve got amazing financial information, with graphs, and key performance indicators so you’ve got the full story (not just a crappy profit and loss report from your accounting system)
Measure your customer retention, average order value, how often your customers order, make sure you always know what percentage of your turnover your biggest customers are, no one should ever go over 10%.
Measure your recurring and contracted revenue every month.
Measure team retention, and their happiness and engagement using an online staff survey.
And measure your progress towards your vision.
It’s always worth building the most valuable business you can, because this will build the BEST business you can. For now, and for your future.
It’s too important to leave to chance!
Ps you can catch the whole live workshop on replay here
EXPERT INTERVIEW: SUSAN HALLAM MBE – How to successfully scale and sell your business (NB note new content)
April 22nd 2pm
Join me as I interview the one and only Susan Hallam MBE, founder of Hallam, the multi award-winning digital agency.
Susan started Hallam over 20 years ago and grew her business to become one of THE most respected digital agencies in the UK, recently winning Google’s TOP digital agency in Europe, Middle East and Africa award.
We’ll be discussing:
- Susan’s story from working alone for many years before deciding to scale
- How she planned for her exit from the business
- The hardest parts about creating a valuable business
- How she managed to make herself “redundant” from her business
- Growing a management team that could take over from her
- The biggest mistakes she’s made that we could avoid
- The best things she did to build value
- And what it’s been like to go through the sale process and move on to a new life after Hallam.
It’s going to be a fascinating and valuable discussion; if you’re an ambitious business owner this isn’t one you want to miss!
Robert Craven What the high performing businesses do differently to the rest
May 5th 12.30pm
Robert Craven is a first-class international keynote business speaker, digital agency expert, author, and business growth consultant.
Known for his no-nonsense approach to business growth, Robert has worked with agencies globally and is the author of 10 business books (2 have a foreword by Richard Branson no less!) and counts Google and Barclays among his clients.
In this straight-talking event, we’ll be discussing
- The magic triangle of top performing companies
- Why relying on a business sale is high risk
- Why the best performing companies spend the least on marketing
- The big problem with the famous entrepreneurs and how they tell their story – why the big success stories are actually very rare and we need to know what we really want from our business rather than chasing an impossible ideal
- Why there are very few differences between the highly successful companies and those who fail
Known for his rants and unique perspective, this will be a highly engaging and fascinating interview!