How Valuations Jumpstart Business Growth
An unrealistic idea of what your business is worth is ultimately going to end in heartbreak. Owners who do not understand the metrics buyers use to value businesses often struggle to sell their companies at their desired price and in a timely fashion.
The best way to avoid this scenario is to know today what your business is worth. A professional valuation puts you in the shoes of a business buyer. Just as importantly, a valuation helps your business grow by facilitating more informed decisions.
With that in mind, let’s review some immediate steps for jumpstarting the value of your business — and ultimately laying the groundwork for a successful exit.
A Six Step Action Plan for Building Business Value
- Have a comparables analysis performed as part of a business valuation. Doing this can help you measure your business performance against other enterprises in the same industry. By looking deeply at past transactions, you can glean insight into why a company sold at a high or low multiple.
- Ensure that efficient business processes are in place. Too often business owners get caught in the trap of trading their time for money. For a business to truly scale, this connection must be severed. The enterprise must have efficient business processes and systems in place to ensure it can grow and succeed without any single person at the helm.
- Improve your financials. Working to increase margins and generate cash flow will not only make your business much more attractive to buyers, it will help create optimal conditions for growth, as a company becomes less reliant on debt and more capable of reinvesting into its future.
- Develop true competitive differentiators and articulate your value proposition. What separates your business from its competitors in the eyes of consumers? Understanding this question — and clearly communicating these differentiators along with your value prop — are critical steps toward generating new business and developing deeper bonds of loyalty with existing customers.
- Diversify your revenue stream. Just as buyers flinch from businesses that are overly reliant on one entrepreneur, they recoil from businesses that generate too much revenue from a single client. If you want to avoid a potentially crippling blow — and significantly enhance your business value — take steps to diversify your revenue stream.
- Make sure a new buyer will not have trouble finding a bank loan to buy the business. A professional valuation will include steps to make sure your business qualifies for competitive bank financing and guarantees by the Small Business Administration.
A business valuation is more than just a number — it can also provide a detailed roadmap for enhancing the value of your business, ultimately leading to a timely sale at an attractive price.
Following the six step action plan outlined should be your first step toward realizing this objective. As part of that plan, OwnersWeek can provide you with a comparables analysis as part of our free business valuation.
By contacting us today, you can start the process of discovering the true value of your business and glean valuable insight into how to increase that value.