How To Maximize the Value of Your Business and Prepare for Exit

How To Maximize the Value of Your Business and Prepare for Exit

As a business owner and an expert in the day-to-day operations of your company it is important to understand the drivers for the value of your business at every part of its life cycle. At some point all owners should develop an exit strategy, and having maximized your value from the early years will help that transition process.

1. Financial Performance

Keep track of your company’s history of producing revenue and profit combined with the professionalism of your record keeping. Access to historical data and quality records gives insight on growth trends and the need for expense control and will make the process easier when seeking loans for growth or the eventual sale of your business.

2. Growth Potential.

What is the projectable rate of growth of your business? Growth is essential but you need to have a projected plan to manage the growth and understand the markets you want to access. Buyers must see how the business can grow to maximize the sales price.

3. What is your Switzerland Structure?

It is important to understand how dependent your business is on any one employee, customer or supplier. Dependence on one revenue source or one supplier has the potential to create havoc for you should either of those relationships fail. Diversification of revenue and supplier sources can provide greater stability for your business.

4. The Valuation Teeter Totter.

Control is vital for the fiscal health of any business. Look for areas that have a cash suck or a cash spigot.

5. Recurring Revenue.

What is the proportion and quality of automatic, annuity-based revenue you collect each month? Revenue is the lifeblood of your business but without recurring revenue you will be chasing new dollars each month just to get back to even, which will hinder your growth potential and the value of your company.

6. Monopoly Control.

How do you differentiate your business from the competition in your industry? By understanding your competitive edge, you give yourself the greatest opportunity for growth and improved value.

7. Customer Satisfaction.

Keep an eye on your current customers and how often they repurchase from you. How often do they refer new business to you?

8. The Hub and Spoke Scenario.

As the business owner you are the driver of the company, but life happens. Do you have a plan on how your business would perform if you were unexpectedly unable to work for a period of time? Contingency preparedness plans will keep your business running smoothly should disaster or the unthinkable happen.

Carl Grimes, founder of Confidential Business Intermediaries, an Arkansas-based, family-owned company. He stresses these principles from the Certified Value Builder System to help your company survive and increase in value, protect equity and earn you more money when it's time to exit, which CBI has helped more than 850 business owners do since 1994.