Are you working towards selling your company at some stage in the future? Or are you the central figure in your company and everyone - customers, suppliers and staff come to you rather than anyone else who may work with you?
If you are looking to sell or looking to give yourself more freedom of choice about how you work, be that stepping back from full time work, or simply to put yourself in a position whereby you can take a holiday without worrying if the business will survive without you, there are eight factors that you can work on that will increase value in your business.
For your company to be valuable or even sellable there’s a lot more to consider than just the bottom line such as will your customers continue buying or will a competitor start chipping away at your margins?
It’s important to understand what drives up or undermines your company value. And there’s a way to find out – using the Sellability Score.
‘The Sellability Score was created by a team of researchers led by John Warrillow, author of the international bestseller Built to Sell: Creating A Business That Can Thrive Without You. The book inspired a movement of entrepreneurs who recognize that the ultimate test of a business is not how big it is, but how valuable it can become’ http://www.thesellabilityscore.com/
They identified, through research on over 6,000 businesses, that there are eight factors that you can work on that will increase the value of your business
These eight factors are ways to help you evolve your business to give you freedom of choice – to sell, to be able to work sensible hours for the same or more revenue, or to stand back from it almost completely, or even as simple as to be able to go away for a two week holiday without worrying about whether the business is going to implode without you there.
So what are these eight factors? I must emphasise that these aren’t magic wand/quick fix answers in the majority of cases. These are areas that you work on over time building value that way. Beware anyone who says they can wave a magic wand and give you overnight success.
1. Financial performance
This is particularly important if you are looking to sell. You will need to show any potential purchasers that your sales and profit projections for the future are based in sound historical fact. They will have in their minds what return they want on your business and also how risky they think it is. And not having comfort over your projections increases the risk to them and therefore decreases the value of your business and what they are prepared to it’s also incredibly valuable for you as a business to have budgets and forecasts and measuring performance against your budgeted figures.
Action: Create a budget and measure performance againstof my big mantras is – What gets measured gets done. If it’s written down and reviewed, then it’s far more likely you will hit your targets
This is how scalable your business is or how easy is it for you to grow your business. This may sound an odd statement, but the secret to scaling is to sell less stuff to more people! Too many of us fall into the trap when starting out of trying to offer your services (vast) to everyone. It rarelyability to scale is dependent on you
– being able to teach others your skill
– having products or services that lead to recurring revenue
– aligning your products to your most valuable customers
Action: Review your products and services against these criteria. If they tick all three boxes focus on them and if they don’t tick the boxes, think about either how you can develop them so they do, or possibly contemplate not offering them.
3. The Switzerland structure
Maintaining neutrality. i.e. you shouldn’t be over dependent on a customer, supplier or employee.
You should not have a customer who makes up more than 15% of your revenue, and you should be able to switch supplier. The overreliance on an employee, could be you by the way!
Action: Review your customers, suppliers and employees to see if you need to take any action to reduce your dependence on them.
If you live in the Surrey area and want to know more, I am running a free half day Freedom Workshop in Reigate on 10th June. If you are a small company with three or more employees then this could be for you. Details and booking here
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