Saturday, January 25, 2014

9 Tips for a More Valuable Business This Time Next Year

The beginning of a new year is a time of rebirth and resolutions.  It is a time to reflect on last year’s achievements and to set goals for the coming year.
Some people set personal goals like losing weight or quitting a nasty habit, and most business owners set business goals that focus on hitting certain revenue or profit targets.  If your goal is to own a more valuable business in 2014, you should select one or more of the following New Year’s resolutions:
  1. Take a two-week vacation without checking in with the office.  When you return, you’ll see how well your business ran without you and where you need to make a key hire or create a new system;
  2. Write down one process per month.  You know you need to document your systems, but you may be overwhelmed by the task of taking what’s inside your head and putting it down in writing for others to follow.  Resolve to document one system a month and by the end of the year you’ll own a more valuable business;
  3. Offload at least one customer relationship.  You may be your company’s best salesperson, but this can be a liability in the eyes of an acquirer, which is why you should wean your customers off relying on you as their point person.  By the time you sell, none of your key customers should think of you as their relationship manager;
  4. Cultivate a new relationship with a new supplier. Having a "go to" group of suppliers is great, but an over-reliance on one or two suppliers can create a liability for your business.  By spreading some of your business to other suppliers, you keep your best suppliers hungry and you can make a case to an acquirer that you have other sources of supply for your critical inputs;
  5. Create a recurring revenue stream.  Valuable companies can look into the future and see where their revenue is going to come from.  Recurring revenue models can vary from charging customers a small amount for a special level of service to offering a warranty or service contract;
  6. Find your lease (and any other key contracts).  When it comes time to sell your company, a buyer will want to see your lease and understand your obligations to your landlord.  Having your lease handy can save time and avoid any nasty surprises at the eleventh hour in the process of selling your company;
  7. Check your contracts and make sure they would survive the change of ownership of your company.  If not, talk to your lawyer about adding a line to your agreements that states the obligations of the contract "surviving" in the event of a change of ownership of your company;
  8. Start tracking your Net Promoter Score (NPS). The NPS is the best predictor that your customers will re-purchase from you and/or refer you, which are two key indicators of a healthy and successful company.  It’s also why many strategic acquirers and private equity companies use NPS as a way to measure the health of their acquisition targets during due diligence; and
  9. Get your business professionally valued. All goals start with a benchmark of where you are at today, and by understanding your company’s current value (from the perspective of a potential purchaser) you can identify which aspects of your business to work on to increase its value.
Many business owners will set New Year’s resolutions around their revenue or profits for the year ahead, but those goals are rudimentary.  Instead of just building a bigger company, consider making this the year you build a more valuable one.
Building a more valuable business becomes critical if you are planning to exit your business in the coming decade and want to maximize your net sale proceeds.  Contact us at or for an independent business valuation or to see if you qualify for our VSP Exit Starter Program in 2014.