All The EXIT STRATEGY Resources You Need To Maximise Your Business Value
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9 Value Maximisers To Help You Increase The Value Of Your Business
Each of these elements plays a crucial role in making your business more attractive to potential buyers, thereby driving up its value. By focusing on these areas, you can ensure your business not only thrives in the present but is also well-positioned for a successful future sale.
VALUE MAXIMISER #1: FINANCIAL FITNESS
As business owners, our primary focus often revolves around income, whether gross revenue or net profit. However, a company's financial health isn't solely determined by these factors. From a buyer's perspective, the reliability of your financial figures is crucial. Therefore, substantiating these figures with trustworthy sources, such as financial auditors, is essential. Make sure you've normalised your income and balance sheets. And you have 2-3 years of history before sitting down with a potential acquirer.
VALUE MAXIMISER #2: GROWTH POTENTIAL
Entrepreneurs often take immense pride in the progress and transformation they've brought to their businesses, and rightly so. Perhaps you've garnered a business excellence award or successfully run a business for a decade. However, when it comes to enhancing the sellability of a business, the focus shifts towards future growth potential.
The key question becomes: given what you've accomplished so far, what can this business evolve into in the future? Essentially, boosting the growth potential score of a company requires a focus on its future prospects. Is it possible to replicate your business model in a different location? Can you tap into a new customer demographic? Affirmative answers to these questions not only indicate business growth but also contribute to creating a business that's attractive to potential buyers.
VALUE MAXIMISER #3: OVERDEPENDENCE
A business owner must maintain independence from three key groups: customers, employees, and suppliers. As an entrepreneur, it's risky to overly depend on a single person or company from each category. Potential buyers may perceive this as a risk, doubting the business's ability to operate effectively without your direct involvement. To score well in this aspect, you must ensure a healthy diversification among your customers, employees, and suppliers.
VALUE MAXIMISER #4: RECURRING REVENUE
The ladder of recurring revenue is a critical factor in determining a business's sellability. This involves a potential buyer assessing the company's sustainability once the owner steps down. There are different types of recurring revenue, which are critical aspects buyers consider when purchasing a business. Enhancing your business's sellability score in this area involves elevating your business's position on this hierarchy. The higher your business ascends on this ladder, the greater its overall value.
VALUE MAXIMISER #5: CASH FLOW
Whether your company is a cash drain or a cash fountain, one element remains crucial – cash flow. This is a universal concern for all businesses. A potential acquirer will examine the ability of your business to generate cash to fund growth. It involves strategies like timely collection of receivables and extending payables to ensure smooth cash flow. Implementing these measures can significantly boost your score in this aspect.
VALUE MAXIMISER #6: UNIQUE VALUE PROPOSITION
Standing out amidst a sea of businesses can be one of the most formidable challenges for an entrepreneur. To build a sellable company, one must establish a unique value proposition. This allows you, as the business owner, to dictate the pricing of your product. The ability to control pricing stems from your uniqueness.
But what does being unique entail? It means you can generate higher margins and invest more in your business's sales and marketing aspects. Once the business successfully connects with customers in various ways, it begins to gain significance. And these factors will contribute to enhancing your business value.
VALUE MAXIMISER #7: CUSTOMER SATISFACTION
Naturally, the goal for everyone is to achieve customer satisfaction, including your potential acquirer. When evaluating a business, buyers are interested in its future performance. It's essential to start quantifying this aspect to build a robust customer satisfaction score. Rather than simply asking your customers if they're satisfied through a survey, allow them to provide NPS ratings. Investing in tools to measure customer satisfaction can aid in managing this aspect effectively. Recognizing these areas can lead to an increase in sales through customer loyalty and repeat business.
VALUE MAXIMISER #8: LEADERSHIP TEAM
The concept here revolves around your business's reliance on you as the owner. The fundamental question is whether the business can operate effectively in your absence. This is often a top concern for potential buyers. Therefore, as a business owner, you need to evaluate the current processes. Are they solely in your head, making you the go-to person for all information? Or have they been documented and made accessible for everyone's reference, ensuring a smooth transition when you step away? Building a leadership team can help distribute responsibilities and knowledge, making the business less dependent on a single individual and more resilient in the face of change.
VALUE MAXIMISER #9: SALES & MARKETING
In addition to the eight value maximisers mentioned above, having a robust sales and marketing team is paramount. A well-functioning team can ensure a steady pipeline of leads and demonstrate a proven ability to convert these opportunities into loyal customers. This is a critical aspect of a business that potential buyers often scrutinize. Buyers are keen on identifying businesses with strong sales and marketing capabilities, as these are indicative of the company's potential for growth and profitability. A business that can consistently attract and retain customers will likely be more resilient, sustainable, and, ultimately, more attractive to potential buyers.