Business Value: How to Build It Today So It’s Ready For Tomorrow.
What do you want your business
future to look like?
What you do today inches you one step into the future or one step in the present and static.
If the future is more appealling, here’s where we recommend you focus your minds work so you can reap the benefits of business value!
All those years ago when Back to the Future was first shown in 1985 would you have thought the value in the film then was as valuable today (or more!). Creating value that lasts the test of time starts from day one or today. Predicting the future is difficult as there are so many competing and interchangeable variables, so focussing on what you do today with an eye on the future goal is the key!
If creating value in your business today, or a potential sale is in its future, we recommend focusing on these core areas from today:
Know how your business will be valued and its levers of that value
If you goal is to sell at a high market value knowing how the business will be valued at that future point (for example 4 x Net Profit) and working on the levers of that value today is crucial (for example the levers may include Revenue, Operating Costs, Asset Values, and Net Profit so your focus from today is to maxmise those levers every day in every decision).
Decision’s today matter tomorrow
Your decisions are best balanced on the needs of today and how they will effect the future particuarly on cash flow, debt levels, assets values, and profit. Maximising high value today and high return tomorrow is the sweet spot! Careful decision making alongside your Accountant is crucial.
Accruate, Organised, and Accessible Financial Information
Every business owner should know there numbers, but you should also be able to access that information with one or two clicks, one phone call, or one request. This information is normally crucial in daily decision making but it’s also crucial during a business negotiation for sale. If you’re not sure your records are as they should be, source an independant Accountant to complete an Audit and Report their findings to you, so you can make informed decisions on areas of business that need improvement.
Maximum Productivity and Efficiency, whilst minimising costs
Future buyers (alongside your Financials) want to see the current and potential opportunity of your business in terms of how effective it is in operations. How quickly can you generate revenue? How quickly can your produce your product or service? How many moving elements and parts are required, so is it scalable? How quickly can this cycle repeat which is called ‘throughput’? Therefore focus on optimising your operations through focussed streamlining, standardisation, and automation of work design, work flow, systems, and technology use.
Customer Retention
Systemising your customer information and customer journey to show that you can fairly easily action information or demonstrate how you can activate a marketing or sales action that a customer will respond to through a lever that drives your business (as mentioned above). Repeatable business with a predictable repetition point is business gold!
Asset Management
Knowing all the assests your business holds, their value, age, and maintenance records and costs will allow you to monitor their usage, costs, and forecast their expected turnover so you can decide if that’s an asset you will invest capital into. A buyer will consider your assets as a component of the sale, so working with your Accountant to have all these records up to date and easily available is crucial.
Strong Management
A strong Management team will not only improve the daily performance of your business, they will also improve the future value of your business. Buyers commonly love stable businesses which includes stable Management especially during due dilligence. They are a reliable source for information and can expediate results and decisions. It is also important to know the right time to tell your Management team that the business is actively for sale. This is for three key reasons,
i. if they are perceptive or consumate business people they will see signals that there is change and will wonder ‘why’, then expend valuable time and energy discussing or searching for answers that you can remove through effective communication (timeliness, meaningfulness, and thoroughness (but only what is needed and known at the time) are key),
ii. they will be crucial during the sale process which can takes months or years, so ensuring your business remains strong in operations, financials, employment, and customers is vital during the sale and due dilligence phase,
iii. their career, mental health, and financial livelihood through their employment with you is in your hands and many will need considerable time to replace the employment they hold with you today. They deserve respect, honesty, and communication that honours this. Anything less, is disrespect, deceit, and demeaning.
Review your Business, Plan for Improvements
Look at your business from a Buyers perspective and consider what you love, like, and don’t like, and then consider what you can do to improve these areas. Keep in mind the effort required, the time required, the cost required, and the impact generated before making a decision.
Brand Reputation
Most importantly, and perhaps leaving the best til last and that is - what is your business brand in the market? Is it something others admire, aspire to, or desire? Is how it is perspectived externally, how it is internally? Do you need to make improvements? Considering a Marketing and Brand Audit will enable an independent perspective and guidance for areas of improvement.
HOW WE CAN SUPPORT YOU
If a Business Sale is in your future and would like to plan your future value, Contact Us, and let’s put into place the actions that you can enjoy today and that prepares you for tomorrow, or you can download our store Business Exit Plan to consider your future business exit.
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Disclaimer - This information is designed to be general business and employment information. You should seek professional advice that is based on your business circumstances prior to its use. Purchasing and/or utilising any of our templates, tools, agreements, documents does not constitute professional advice including legal advice.