August 31, 2012
What is the value of your business?
Most people answer that question in terms of the dollar amount they hope they could sell the business for. That’s one definition of value. But, the value of your business can also be expressed in its contribution to the community, employees, customers and vendors. Business owners often “value” their business because of the sense of accomplishment it gives them.
The fact is, you can increase the value of your business in many ways, and with respect to all of these definitions. Here are some ways to build value in each category.
Value in dollars and cents
1. Market share – Someone interested in buying your business will likely be looking for a strong customer base. If your company has loyal customers, the buyer will pay for that. Make sure that your sales aren’t too dependent on one or two very large customers. That increases risk. A diverse, faithful and growing customer base will drive up the value of your business.
2. Repeatable processes – A business set up to run smoothly without being overly dependent on specific people is a valuable business. The buyer can expect the wheels to keep turning after the transaction. That’s worth something.
3. Unique products or services – If you have patents or other exclusive rights to your products and services, and the market wants those products, you have value. On the other hand, if your products and services are easily replicable, a prospective buyer might find it easier to become your competitor than your purchaser.
4. Margins – Top-line sales figures are important, but the bottom line often matters more. Carefully manage your pricing, direct expenses and overhead. Your buyer will want a return, and good margins feed that return.
5. Cash flow – Do your customers pay on time? Do you have good payment terms with your vendors? Businesses that generate cash are more attractive and valuable than businesses that are frequently in need of a line of credit to operate day to day.
Value as a good corporate citizen
6. Providing opportunities – You already provide opportunities for employees and vendors. Perhaps you can also provide opportunities like internships or mentoring to high school and college students. You can provide content by speaking or serving as a panelist for community discussions. You have a tremendous amount of knowledge and experience in a variety of areas. Look for opportunities to share it.
7. Giving back – Why not choose a community cause that fits well within your corporate mission and culture and get your employees involved in a volunteer project? Give funds to help with expenses and outreach for the charity, and help the organization promote the value it brings to the community.
8. Employee involvement – Some of your employees may be very passionate about certain charities or causes, while others may not be as interested. Allow employees to take some time off from work to volunteer for their favorite cause. You’ll help the community and help your employees feel good!
Value from a sense of pride
9. Enjoying the moment – As a business owner, you’re likely pretty busy. How long has it been since you sat back and looked at what you’ve accomplished? Despite the occasional bumps in the road, you’ve likely been very successful. Take time to appreciate the journey and to acknowledge what you’ve done.
10. Groundwork for the future – Your business can outlast you if you put in place the people, systems and processes that allow it to thrive in your absence. What a legacy to leave those who have worked with you.
This article was originally posted on August 31, 2012 and the information may no longer be current. For questions, please contact GRF CPAs & Advisors at email@example.com.