If you’re thinking of selling your business, you probably want to consider the areas that might add the most value to it. Some ‘advisers’ will tell you to reduce costs, such as on your marketing spend, or how much you take in salary and dividends from the business, which in the short term will make the business look more profitable, but the truth is, as soon as a buyer looks a bit more in-depth to the business, they’ll uncover these areas, and they’ll just adjust their offer accordingly. In most cases they’ll just walk away.
The buying and selling process is built on mutual trust, so by falsely representing the business operations like this, it’ll just make any potential buyer wonder what else you’re trying to hide.
So we’ve done a list of 10 areas that you can develop, to increase the value of your business.
Sell Sell Sell.
If the business doesn’t make a sale, there is no business. If your focus is taken away from the frontline of the business, instead focusing on trying to find a buyer for your business, then you need to put someone else in place to run that part of the business for you. Now for this example, we’re talking just about sales, but the same goes for any area of the business.
If you normally spend your time in a ‘manager’ role, you’ll have to replace yourself with a new ‘manager’, or else your business will just suffer until you do. Remember, if you don’t have customers in the business, the business will be worthless anyway. You ideally want to try and ramp up performance in all areas of the business. This is part of the process toward removing yourself from the day-to-day operations. One of the main reasons a business owner won't achieve a sale, is because ‘they are the business’ - in other words, without them, there is no business.
Clearly understand what makes your business different.
Understanding what makes you different in the market, is the first step to growing your customer base, and increasing your profitability. Write down what makes you different, & then start communicating it to the market. If you know what makes you different, you can also use this to attract any potential buyer.
An upward trend in Sales & Profit.
If you can show a consistent level of growth in the business, across both sales and profit margin across a five year period, it demonstrates to a buyer that its a safer bet.
When talking about growth, many businesses focus solely on sales, and that means that profit suffers. You might grow by £1m in sales, but end up with less overall profit, than you had prior to the growth.
Focusing on the right metrics to measure is the key. Set targets that are broken down by quarters, months, and even weeks. If you have a full time sales staff, you could even break these targets down by day. If your previous target were say 10 sales a day, by increasing to just 11, you’ll grow by 10% without doing much additional work. If you continue this trend in the following month or quarter, to say 12 sales per day, you’ll very quickly grow the business with consistent growth every month. A side effect of doing this, will mean your sales staff will always be looking at ways to improve, ways to reduce the time it takes to make a sale.
We’ve written numerous articles on developing your vision for the business, but the main point to this exercise is long and short term planning.
Start with your longer term vision, say 15 years into the future, then work it back to 5 years, 3 years, 1 year, Quarters, Months, & Weeks. As well as planning, you’ll need to make sure you have the resources in place to reach each milestone. There’s no point in having a goal to achieve 100x your sales figures, if you don’t have the staff or resource to achieve it.
Without the resource in place, it’s just a dream. It doesn’t matter if your plan is to sell the business within the next 12 months, you need to be driving toward a shared vision for the business that every member of staff clearly understands. This way, when a buyer takes over, the business continues to operate, and although they may want to tweak the plan slightly, it isn’t a case of major planning and starting from scratch. Remember, a buyer isn’t interested in running the business, they’re an investor, and a shareholder in your business.
A shareholders role is to ask its management team to develop a plan, that achieves certain criteria based around share value and returns. A shareholder is less interested in how the business gets there, as long as it gets there. Based on their experience, they may help and give advice on other routes to help the management team get there faster, but they aren’t really there to consider the HOW. So you need that plan operating before a buyer enters the arena.
For many small businesses, marketing is done via scatter-gun approach. Adverts placed randomly. Different forms of marketing with no real awareness of the results. Look at your previous Marketing activity, and analyse what results you achieved from it.
Set a new marketing plan, according to your new 3, 5, 15 year plan for the business, and strictly measure each activity, and the results it achieves. If one activity is not performing, drop it and try something else. Understand what works best, and drop the rest. By the end of this process, you should know predictably how much it costs to secure a new customer through a particular medium. As we’ve already mentioned, don’t just reduce your marketing budget to increase perceived profits. It can be reduced, but only after you can achieve the same or better results.
Marketing is an investment, not a cost. If you know that for every £1 you invest in marketing, it generates £200 in sales, you can quite predictably allocate resources more effectively throughout the year, to reach whatever target you want. Look at how you can expand your customer offering. Look at approaching new markets for your existing offering. There are hundreds of ways to increase your marketing, and you should test and try out at least 20, before understanding which work best. Even then, you’ll have a benchmark to work to, and you should continue to try new ways, whilst maintaining those stable & proven methods. As you discover a better more efficient route, bring it into the system.
There are 5 ways to improve your profit:
Increase the Number of Leads
Improve the conversion rate
Increase the number of transactions
Increase the average transaction value
Improve efficiency in all of these areas to reduce cost.
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