9 Things to Increase Your Business’ Value
May 24, 2022 | Bonnie Elgie
After almost two years of remote events, the Business Transitions Forum team was eager to return to in-person conferences. Over the past several months, we’ve literally been coast-to-coast, with BTF Vancouver in November, followed by conferences in Calgary, Toronto, Halifax and Edmonton this spring.
Our programs focused on both the lessons learned navigating through the pandemic and the impact it’s had on business, to the outlook for the future. Many of the entrepreneurs we’ve talked with share that their transition plans have changed, with a typical exit timeline being consolidated down to a one- to three-year horizon. For some, the pandemic brought about new opportunities and growth, while for others, it was a difficult and challenging time.
As advisors shared their experiences with audience, one message rang out loud and clear and that is the importance of focusing on how you can build value in your business today, even if a sale is not in your immediate future. Growing your organization can be your secret weapon when looking to attract the right type of buyer for your business. Increasing revenues, market share or scaling operations will help make your business that much more attractive to potential acquirers.
In this issue, ATB Financial, one of the supporting partners of BTF Edmonton, shares “9 Things to Increase Your Business’ Value”. We invite you to check out the story here.
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The value of your company is partly determined by your industry. For example, cloud-based software companies are generally worth a lot more than printing companies.
However, when analyzing businesses in the same industry, we still see major variations in valuation. So ATB dug through the data available to us from our partners at The Value Builder System™ and found 9 things that can make your company more valuable than its industry peer group.
1. Recurring Revenue
The more revenue you have from automatically recurring contracts or subscriptions, the more valuable your business becomes to a potential buyer. Some form of recurring revenue increases your overall valuation.
2. Something Different
Companies with a unique product or service, difficult to replicate, are more valuable than a competitor that doesn’t have one.
Buyers looking to fuel their top line revenue growth through acquisition will pay a premium for your business, if it is growing much faster than your industry overall.
Older stagnant companies will often try to gain relevancy through the acquisition of a trendy younger company in their industry. If you are the media darling of your industry, expect to get a premium offer.
Imagine an oceanfront restaurant on a strip of beach where the city has stopped granting new licenses to operate. If your physical properties reside in a prime location, you’ll have interest from buyers who understand your industry.
Interested parties value companies that naturally hedge the loss of a single customer. Ensure no customer amounts to more than 10 percent of your revenue and your company will be more valuable than an industry peer with only a handful of accounts.
If you’ve mastered a way to win customers and documented your sales funnel with a predictable set of conversion rates, your secret customer-acquiring formula will make your business more valuable to an acquirer than an industry peer who doesn’t have a clue where their next customer will come from.
8. Clean Books
Companies that invest in audited statements have financials that are generally seen as more trustworthy and therefore worth more. You may want to get your books reviewed professionally each year even if audited statements are not the norm in your industry.
9. Happy Customers
Being able to objectively demonstrate that your customers are happy and intend to re-purchase in the future will make your business more valuable than an industry peer that does not have a means of tracking customer satisfaction.
Like a rising tide that lifts all boats, your industry typically defines a range of multiples within which your business is likely to sell for; but whether you fall at the bottom or the top of the range comes down to factors that have nothing to do with what you do, but instead, how you do it.
To learn more about how ATB can help you increase the value of your business.