7 Things Every Business Owner Should Know
Industry & Revenue are Important – But Not the Only Things
As a business owner, you are familiar with your top line revenue and bottom-line performance figures, yet there is a hidden factor– The quality of these numbers. Consider investing in an audit to make sure these numbers are as defendable as you can. A buyer will come in and say great you got these numbers but how defendable are they? What 3rd party has really come in to scrutinize these numbers? Therefore, investing in an audit is one simple way to improve your business performance to a potential buyer.
Recurring Revenue Is Critical
Your company should be more predictable when it has recurring revenue. This can create a long-term value for each of your customers and in turn makes for a more valuable business for you! One recurring revenue model is one you may already be familiar with—The Subscription Model. You can sell a product or service as a monthly or yearly payment plan so that each customer makes continued and multiple payments for access to your product or service. Ta-Da! Recurring Revenue!
Focus on Selling Less Stuff -to- More People
It may be very tempting and even seem like it will be more profitable, at first, to expand beyond your original product and service areas when your customers seem to be likely to buy just about anything from you. The problem this creates is that of broad diversification could make you less attractive to a potential buyer. A buyer will not see your business as unique and even worth purchasing if they could quickly build it themselves.
Reduce Reliance on A Single Customer
A valuable business should have lots of smaller customers as versus one or two large ones. A potential buyer will not find your business worth purchasing if any of one customer brings in more than 15% of your business revenue. If you were to lose a customer or two each month that should not make for extreme drops in your revenue.
Reduce Reliance on A Single Employee
Typically, the main employee is yourself as the business owner. You can do every job in your company, you get things done well enough on your own and you may even fear that if you lose this control that things will not work well if you delegate to someone else. This was a great mind-set in the beginning of your business, yet this can hinder your business from growth and limit your ability to get the best value for your business should you wish to sell. Your business is an asset!
Reduce Reliance on A Single Supplier
Strive to be independent so that you become a more profitably business for when it comes time to sell your company. Do not be overly dependent on any one supplier. For a buyer reviewing your company to see you are overly dependent on any one supplier will lead them to discount your company because your business will be considered much too risky for them acquire.
Leave Some Field Left To Plough
A buyer only will purchase what they cannot easily create themselves so if you are close to having a monopoly on your product or services in your market, you may have a greater profit when you sell. Many times, founders think that market share is their goal. Yet, in the view of a potential buyer, this can decrease the value of your business if you have taken over most of the opportunity.