Keeping the value of your small business high is important, as if you intend to sell it at some point in the future, you will want to get as much as possible out of it. Here are five ways for keeping the value of your business high:
- Having a diverse base of loyal customers
Customer diversification is a key component for convincing the potential buyer in the low-risk potential of your business. When a business has a small customer base, losing a customer can equate to a large loss in revenue, which is of course undesirable. In addition, if you are able to demonstrate that your customers have some sort of loyalty to your business, this will increase the value further. Loyalty of a customer means mitigated risk of low demand and thus a higher value for your business.
- Employee substitution flexibility and a competent management team
Buyers do not like when they see that a company’s success depends on a few employees. In that case, a potential buyer faces risk of being an owner of a company where the actual “bargaining power” is in the hands of a few employees. So, make sure that the structure of your business allows for a flexible substitution of staff. A highly competent and skilled management team will increase your business’ value, especially in cases where a buyer does not want to directly get involved in the management of the company and needs managers that can be counted on.
- Growth strategies
An investor is always interested in the growth potential of a firm. In order to prove that your company operates in an industry which has a potential for growth you will need to provide a well worked out business plan to the investor (buyer) which demonstrates your company’s growth potential. As well as demonstrating a sector’s lucrative nature, providing a history of growing revenues will signal your company’s growth potential and will help to boost your company’s value. Remember that to a potential buyer, revenue growth of your company is more important than profit growth because the former directly signals that your company is special—that it has something which makes it unique in the eyes of customers.
- Branding and reputation
It is no surprise that branding should be one of the most important parts of your company’s marketing strategy. A brand is equivalent to credibility and a good reputation for the company, which are valuable assets to a potential buyer. Having a brand implies that your company is unique and thus can offer a product or service which is valued by the customers and which cannot be obtained elsewhere.
- Financial statements
Financial statements are the most objective representations of your firm’s standing. Moreover, audited statements represent the most credible documents about your firm’s financial conditions to a potential buyer. Hence, maintaining your financial statements in order and providing accurate information will lead to higher valuations of your firm.
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