5 ways to increase the value of your business – even if you are not selling.

Preparing early can give owners more time to address risks and improve performance, but changes require investment and do not guarantee an increase in business value.

Here are 5 key tips that will help you build the value in your business until such a point you are ready to sell…

1. Robust Financials

Strengthen the financial evidence

One of the most important ways to increase the value of your business and its attractiveness to potential future buyers is to keep a comprehensive, well documented and regularly updated list of the below financials:

1. Increasing Profitability – Sustainable profits may support value, but buyers also consider risk, cash conversion and investment needs.
2. Recurring Revenue – Repeat income can support predictability where retention, cancellation terms and margins are evidenced; it does not guarantee future cash flow.
3. Diversification – Reducing reliance on a single customer, supplier or product can reduce some risks, but expansion also needs commercial justification.
4. Robust Financial Controls – Running a well-managed, healthy business requires the use of strong financial controls. A business needs to be on top of its revenue sources, expenses, cash flow, etc. If you don’t know where your money is going, it could soon be gone, so regularly assessing and strengthening these where necessary is a must.
5. Create a Documented Business Plan for Growth

Always have a comprehensive business plan and keep it current. Even if you are not thinking of exiting your business anytime soon, the further one plans ahead, the more time you have to grow and enhance the value of your business. That is why it is important that your business plan should include a list of objectives and detailed financial projections of the company’s goals for future success. It’s all about giving yourself and your employees an understanding about where your company’s growth is coming from, documenting this in writing and continuing to refine and measure the results accordingly.

1. Increase Barriers to Entry

Defensible intellectual property, customer loyalty and well-structured agreements can support competitive advantage. Their value depends on enforceability, commercial demand and the cash flows they help generate.

1. Create Repeatable Systems and Processes

Documented, repeatable processes can reduce dependence on individuals and support a smoother handover. Their effect on margins, cash flow and continuity depends on implementation and the people responsible for operating them.

“Let systems run the business and people run the systems. People come and go but the systems remain constant” – Michael Gerber, The E Myth Revisited.

1. Maintain Key Employees

Fully trained and qualified employees are worth their weight in gold for any business owner. If you can actively cultivate a high-quality workforce and empower your staff, you can increase your company’s worth and reduce the risk of high employee turnover. In addition, by giving prospective buyers a well-trained and highly skilled team to work with once they take over provides a great deal of stability and assurance for the new buyer.

Review these areas against their costs, risks and measurable commercial benefits. Better preparation may support saleability but does not guarantee a higher price.