You Can Maximize the Value of Your Dream Business for Your Exit!
Are you thinking about selling your business? If not, you might want to start. I mean, even if you are young and having fun, at some point you will want to exit. When you exit, you will want to maximize your returns.
Here are some things to consider:
It might seem obvious, but you want to improve your profitability. Whoever looks to purchase your business is going to want to see a history of profitability. As one of my mentors likes to say, “Revenue is an Ego number, Profitability is the Real number”. Can you show a trend of increasing profits? That adds a bit more value. This is why you need to understand your finances. There are three levers in your P &L for profit. They are Revenue, Cost of Goods, and Overhead.
One key to profit is driving revenue and to do that you must look, sound, and feel different than your competition. One mistake I see many owners make is they discount their services to “capture” the business. They see everyone else doing it so they assume… In reality, your potential client is looking for value and when you can differentiate based on the value that you offer, you can charge more for your services. There is a formula for this.
Your processes add tremendous value if they are well-defined and clear. A buyer wants to walk in and be able to follow a process for success. This is why so many owners go into a franchise. The franchisor has built a model that if you follow it, you will be successful. Document your systems to success. Your bank account will thank you.
The more of your revenue that is recurring, the larger the revenue stream your buyer can pay for. This is why you see more and more service firms moving to a subscription model. It evens out the peaks and valleys and it is recurring.
Develop a workforce that delivers. When you have a stable workforce that delivers high-quality results to your clients, that adds yet more value to the purchase price. Particularly today, we see the challenge employers are having trouble with recruiting and keeping good employees. This is culture, skills, and mindset development and opportunities. No longer are people an asset, they need to become partners.
Finally, spruce up the business. Make sure your records (financial, SOP’s, systems) are easy to access and easy to understand. If you have a showroom, make sure it is clean and presentable. I was recently in a garage where you literally did not want to touch the walls (even in in the waiting room,) because there was grease and grime on the walls.
In case you haven’t noticed, keeping these points in mind from the start of your business will help you grow your business as well. Check out the resources at https://ras-squared.com if you would like more information