For many business owners, July is a time of reflection on the previous year’s business, for plotting new growth and setting budget targets to match. After considering last year’s achievements, business resolutions and KPIs are set for the year to come. Unlike the resolutions you may make in January (where some set personal goals like losing weight or quitting a nasty habit), now is the time most business owners focus on obtaining revenue or profit milestones. We suggest adding another resolution to the list … that of making your business more valuable.
What steps might you put in place to help you build a more valuable business in Financial Year 2017? Consider making one or several of these ‘mini-resolutions’ to incrementally help you build your business’ value as the year goes on.
- Take a two-week holiday without checking in at the office. When you return, you’ll see how well (or poorly) your business performed and where you need to upskill staff or create a new system.
- Write down at least one business process per month. You know in your heart that you need to document your systems to prepare your business for sale, but you may be overwhelmed by the task of taking what’s inside your head and putting it down in writing for others to follow. Resolve to document one system a month and by the end of the year you’ll own a more sellable company.
- Transfer at least one major customer relationship. If you are like most business owners, you’re still your business’s best salesperson. This ‘single person strength factor’ can be a liability in the eyes of a potential business purchaser, which is why you should wean your customers off relying on you as their point of contact person. By the time you sell your business, none of your key customers should think of you as their relationship manager.
- Cultivate fresh relationships with new support suppliers. Having a “go to” group of suppliers is great, but an over-reliance on one or two suppliers can create a liability for your business. By spreading some of your business to other suppliers, you keep your best suppliers hungry and you can make a case to your potential acquirer that you have other sources of supply for your critical inputs.
- Create a recurring revenue stream. Valuable companies can look into the future and see where their revenue is coming from. Recurring revenue models can vary from charging customers a small amount for a special level of service to offering a service contract.
- Find your lease. When it comes time to sell your business, a buyer will want to see your lease and understand your obligations to your landlord. Having your lease handy can save time and avoid any nasty surprises at the eleventh hour in the process of selling your company.
- Check your contracts and make sure they will survive a change of business ownership. If not, talk to with solicitor about adding a line to your agreements that states the obligations of the contract “surviving” in the event of a change of ownership of your company.
- Start tracking your Net Promoter Score (NPS). The NPS methodology is the best predictor that your customers will re-purchase from you and/or refer you, which are two key indicators of a healthy and successful company. It’s also why many strategic acquirers and private equity companies use NPS as a way to measure the health of their acquisition targets during due diligence.
Most business owners will set New Financial Year’s resolutions around their revenue or profits for the year ahead, but those goals are blunt instruments which reflect only on the ‘here and now’. Instead of just building a bigger company, consider making this the year you build a more valuable one.