What is your most valuable asset?
For most Americans, their savings, their 401K, or their home is the most valuable asset they own. For business owners, the answer is slightly different. Your most valuable asset is likely your company. It can generate an income stream as long as you own it, and one day it can be sold.
According to Inc Magazine, up to 75% of small businesses will be sold in the next 8-10 years. Sadly, most business owners will not be properly prepared to maximize their company’s value at sale. Are you doing all you can to maximize the value of your most valuable asset?
How do you increase the value of your company?
Think about your home. Each improvement you make to your home can directly increase the home’s value. When we get ready to sell a home, we typically spend time and money making improvements to make it as attractive to as many buyers as possible.
With your company, the same concept applies. By making improvements, you can not only advance your company’s current performance, but you can directly increase your company’s value to a potential buyer. The outcome of this effort is building a company that is not reliant on you, the owner, for everything.
1. Build Structure
Build a company structure with managers in place and an owner-independent sales team that reduces your personal functional responsibility. When a buyer looks at your business, they will look at what functions they must replace when you leave. If you are involved in all the functional details of your business, the purchase will look a lot riskier to any potential buyer, lowering what they would be willing to pay.
Do you do business in more than one market segment? If you’re reliant on a single cyclical, “boom or bust,” market segment, a small number of key customers, or just a few products, your business will look a lot riskier to a potential buyer. Having a broad customer base where no single customer generates more than 5% of your revenue reduces risk – for you and for a prospective buyer.
3. Be Consistently Profitable
This one is a no-brainer, but the key word is “consistently” – being able to show you had more than just one great year. A truly valuable company has documented many years of excellent profitability and can project future profitability through their business plans. If you have a great record of net profit that can be backed up by a history of 3rd party facilitated, business plans, the value of your company can be calculated on future earnings, not just past ones – a huge difference.
4. Generate Recurring Revenue
Businesses that have profitable recurring revenue streams typically sell for more than those that don’t. Profitable recurring revenue streams reduce risk, increase peace of mind, and improve your company’s value. Having a large base of profitable maintenance agreements is a great source of recurring revenue that you should focus on growing.
A long-term goal that requires a strategic focus
We’ve given you four great action steps, but maximizing the value of your greatest asset – your business – is a big task. It a project that takes time and a strategic focus to achieve.
How do you keep your focus on this long-term goal while you are putting out fires and keeping your business running day-to-day? Consider adding a coach to your business team.
BDR Coaching can help you achieve your long-term goals
BDR offers customized coaching that can help you achieve your business goals. With your personal BDR Business Coach, you’ll have someone who can help keep you moving toward your long-term business goals while improving your short-term business results. We have specific programs that focus on helping you maximize the value of your greatest asset – your business.
Whether you’re nearing retirement (next 3-5 years), thinking about it (5-10 years out) or just getting started in your business, you owe it to yourself, your family, and your employees to consider adding a coach to your business team. The process of building a company with great value starts with you and starts now.