Article

8 Ways to Make Your Company More Valuable in 2011

As we approach the end of the year, now may be the perfect time to plan and even reset your business goals for 2011. To start, let us go through these simple questions:

  • Do you know how much your company is worth?
  • Is the number you are thinking based on market value, earnings & analysis, what a friend told you, or is the number based on what you need to retire?

We need a solid starting point to measure from when setting goals and deliverables. Think of it this way. If you want to lose weight and go on a diet it is important to first know what you weigh before you set a target and timeline.

Once you have a baseline we can work on increasing your company's value.

Here are 8 things you can do to increase the value of your business:

  1. Redefine your market to be a "first-place" leader. Larger companies who want to buy private businesses like yours typically buy companies with market-leading services and products. If you narrowed your market focus could you claim market leadership? For example, instead of defining yourself as another commercial cleaning company, could you position your businesses to be the “leading movie and film studio cleaning business in Greater Vancouver”. Find your niche and own it.
  2. Implement contracts with survivor clauses. We just had a situation where the owner of a business we were selling passed away and his material contracts were not transferable. This caused a huge problem for the business moving forward. Make sure you move as many customers as you can to long-term written contracts that will survive a change in company ownership.
  3. Diversify your customers. If you lose your two biggest accounts what will happen to your business? What can you do to reduce your reliance on a handful of big customers?
  4. Work toward steady profit-margin growth. Can you increase prices or reduce costs to improve your profit margin? Businesses on the prowl for acquisitions like to see an increase in your margin, which is often a sign that you have something unique in the market.
  5. Give managers real responsibility. Do your managers come to you for advice in every aspect of your business or do they handle the problems themselves? Give your team responsibility to manage tasks on their own and if you can, take an extended vacation with a good team in place to make sure the company can run without you.
  6. Build a team full of “A”s. One of the worst things that can happen is to have employee turnover leading up to the sale of your company. With the start of the new year now is the time to replace anyone you don’t see as a long-term fit.
  7. Upgrade and update your website. When potential buyers develop an interest in your business, the first thing they will do is google your company name. Do you have a website? When was the last time it was updated? Do you have social media accounts including Twitter, Facebook Fan Pages and a Corporate LinkedIn account? Are they active and can your clients find you through multiple avenues?
  8. Develop a predictable, recurring revenue stream. Buyers in today’s market want to know how your business will continue to make them money. Models to achieving this include memberships, subscriptions, service contracts, licensing, online courses, etc. What do you currently have in place and what will you put in place before next year?

These are just some of the things you can do to increase the value of your business. For a more detailed plan, please send me an email.

About Mike Sommer

Mike Sommer is a Certified Business Intermediary (CBI) and CIO with Pacific Business Brokers and Pacific Mergers and Acquisitions. He has a Masters Degree in International Relations from the University of Copenhagen in Denmark.