By Michael J. Kessler, Profitability Consultant and CPA
To read more about what Michael does, go to MichaelKesslerCPA.com.
As a business owner, your primary responsibility is to increase the salable value of your business. That’s right because, whether you are going to pass your business on to future generations or sell it to your employees or even divest to a third party, it can be very financially rewarding for you and your family.
So how can you increase the value of your business? Here are three of the best ways:
1. Strengthen the predictability of your revenue streams – That starts with marketing and ends with more marketing. Keep investing in the right marketing strategies especially during tough economic times. That’s when most of your competitors are running scared and slashing their marketing budgets – often times to zero!
I’ll share an example. It comes from an independent source knowing very little about business just yet – my youngest son. Prior to going on active military duty, he went to work for a home remodeling business in the Pacific Northwest. He was on the demolition crew, the roofing crew and the painting crew working on three or four large jobs per week. Throughout his ten months on the job, he always said how busy they always were. When I asked how everyone else in the remodeling industry was doing out there, he told me, after asking the owner, that many of his competitors no longer exist. Because even in the aftermath of the 2008 recession, his boss, the sole owner of the business, kept investing heavily in marketing while most of his competitors did not. This kept him first-in mind and highly credible with his prospects to get him a ton of new work over the past several years as well as recurring work from many of his customers. And that has created a powerful and growing referral network for his business.
Prospective buyers of that business would love seeing this – the higher the probability of predictable growth in your sales pipeline and revenue stream, the higher the premium they would pay if they bought your business.
2. Have systems in place that produce predictable results that are reproducible virtually every time – Every function in your business has a system. Whether production related, fiscal management related, sales & marketing related, HR related, virtually anything you do to operate your business should have a documented system. Prospective buyers of your business value turnkey systems that are simple to operate. They will more often than not pay a nice premium for your business if you have those systems in place and operating effectively.
3. Have a strong management team at all levels of the business – Prospective buyers see a one man show and they immediately perceive higher risk and thus a lower value in the business. Even the smallest businesses should have lower level people (even outsourced partners) executing their systems flawlessly. Prospective buyers generally don’t want to come in and have to reinvent the wheel. If they did, they wouldn’t have to pay you for the business!
So business owners, do everything you can to increase the salable value of your business because in the end it’s not about how much you make, it’s about how much you get to keep!
Michael J. Kessler is a Profitability Consultant and CPA with a completely fresh approach beyond traditional accounting. Mr. Kessler’s background is running small businesses which ultimately became employee-owned and then acquired by multibillion dollar public companies. Mike has been interviewed on NBC’s America’s PremierExperts® TV show, and has appeared on CBS, ABC and FOX Affiliates around the country. On April 28th at the Image of Success Networking Series event at Seasons 52 in Garden City, NY, he will present “Secrets to Making Your Business Soar into the Roaring 2020’s”.
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