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One of the big questions I frequently get asked is my number one tip on how to build company value.
Now, as you'd imagine, this can be a tough question to answer because every business is different. So instead of picking on one thing, we're going to share our top 10 tips to help you maximise the value of your business.
Interestingly, if you follow these, you'll probably find yourself a lot happier and more profitable.
Step 1: Stop Chasing Revenue
Stop chasing revenue! A bigger company is not necessarily a more valuable one, especially if the extra sales come from products and services that are too reliant on you, or they are just inefficient to deliver.
Step 2: Measure Customer Satisfaction
Start surveying your customers using the net promoter score. It's a fast and easy way for your customers to get feedback. And it's predictive of your company's growth into the future.
Step 3: Sell Less to More
Sell less stuff to more people. The most valuable companies have a defendable niche, and selling a smaller range of products or services to a bigger audience will add a lot more value to your company. Or put it another way, the least valuable businesses sell lots of undifferentiated products and services to a concentrated group of buyers.
Step 4: Reduce Owner Reliance
Drop the products or services that are dependent on you. If you offer something that needs you to produce or sell it, consider dropping it from your offerings or find a way to phase it out over the coming year.
Our guide on 8 Steps to Running Your Business on Autopilot also offers more ways to create an owner independent company.
Step 5: Collect Money Upfront
Collect more money upfront. Turn a negative cash flow cycle into a positive one, and you'll boost the value of your business and lessen your stress load.
Catch up on our Cash Flow Series to gain more clarity on this:
Article 1: How Cash Flow Can Cripple Your Business
Article 2: Planning to Sell Your Business? How Cash Flow Impacts Your Business Value
Article 3: Feeling the Pinch? Six Cash Flow Strategies to Bridge the Financial Gap
Step 6: Build Recurring Revenue
Create more recurring revenue. Predictable sales from subscriptions for recurring contracts mean less stress in the short term and a more valuable business over the long run.
We’ll show you 9 different ways to set up a recurring revenue model, and if you thought it might not work for your industry, you might be surprised, there is a model for every kind of business.
Step 7: Know Your Competitive Advantage
Refine your marketing strategy and emphasise the point of differentiation that customers want and are willing to pay a premium for, then be relentless in highlighting this advantage.
Step 8: Avoid Concentration Risks
Find a backup supplier for your most critical raw materials, consider placing a small order to establish a commercial relationship and diversify the sources of your most difficult to find materials.
Check out our video on Concentration Risk and how it can also relate to customers or staff.
Step 9: Develop Employees to Think Like Owners
Teach them to fish!
In other words, answer every employee question with “What would you do if you own the business?” Your goal should be to cultivate employees who think like owners so they can start answering their own questions without coming to you.
Step 10: Document Your Systems and Processes
Create an instruction manual! Document your most important processes so employees can do their work independently.
So that's it, the top 10 tips to build company value! Start focusing on this in your business this year and build a scalable, valuable and saleable business.
Good Luck.
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