Seven Steps to Building Company Value
By Trip Holmes
Prepare to Sell in the Near Future or in the Years to Come
After more than 35 years of advising middle-market family business owners in multiple areas, including exit strategies, succession planning, capital investments and divestitures, and especially in buying and selling businesses, I always come back to the question I’m most often asked:
“How can I maximize the value of my company?”
Well, it’s not easy, but it’s more than doable. You have to plan and execute, make fearless decisions with regard to both growth and risk. If I had to distill the advice that I routinely give business owners, it boils down to the areas I’ve listed below. You’ll notice at least a couple of themes—embracing change and modernizing.
Communication
As part of your planning, you need to re-evaluate your company’s target market for products or services. Many companies, including my own, have experienced at least some change in this area in the wake of the COVID-19 pandemic. When you take the time to study your market, as it now stands, it’s important to diagnose your messaging. Is your marketing up to snuff for the long run, whether that’s another year or another five years? If your market has changed, your message needs adjustment!
In with the Old—and the New
Building, implementing, and maintaining a CRM system is a core pillar of building the value of your business. I should know, as I think of my database of thousands of customers, prospects, advisors, and friends as my cache of business gold. Faithful diligence to my database enables me to reach those who have seen my results and increases the likelihood that those folks will share opportunities with their friends and clients. I’m here to tell you—you can have it all, streams of revenue defined by old friends and new prospects alike!
Differentiate
You can never, ever stop innovating. Yesterday’s titans who rest on their laurels are today’s dinosaurs —they’re extinct. Those who build value over time do so through innovation. Prospective buyers love it when you look for and uncover niche services or products that draw a sharp distinction from your competition. Innovate to survive in the bad times and thrive in the good ones as you build to the exit!
Go Digital
So many companies in the middle market lag their larger competitors and even some boutiques. If your industry, on the whole, doesn’t invest in marketing via online content and promotion, that’s an Achilles heel for you to exploit in the cause of building value. Too many business owners in the middle market play to their competition in this regard, thinking it’s wise to save the money. But unlike some industries that rely completely on online marketing, if you find yourself in one where you’ll be the only game in town, stand tall. Odds are that you’ll see faster results and push so far ahead that your peers will never catch you!
Don’t Discount Social Media—It’s Powerful
Many business owners are still dismissive of investing time and/or financial resources in social media. It’s such an easy way to stay top of mind with “your people”—friends, clients, advisors—as well as the prospects you want to join the ranks of “your people.” As long as you manage your efforts attentively, as you would in other marketing and operational aspects of your work, there’s relatively small cost and low downside attached to this tactic. It’s the perfect complement to CRM-style marketing, and often a single new customer or transaction can give you the necessary ROI on months of investment. There are few areas of your business capable of this mix of risk and reward!
Track All Advertising
In an age dominated by digital means of marketing communications, your marketing and especially your advertising should be subject to continuous tracking, evaluation, and fine-tuning. The beauty of digital is that everything, and I mean everything is trackable. Gone are the days of simply hoping somebody sees you in the Yellow Pages or your full-page ad in the news section of your local or regional newspaper. Even print advertising is now usually coupled with digital, because that’s where the real value is for advertisers. Less hoping, more seeing is believing!
Technology Is Your Friend
In so many ways relevant to modernizing your business to build value, technology is your friend. And, it’s your friend who keeps on giving great returns in value add year after year. Whether it’s adding an e-commerce distribution channel, explainer videos to more viscerally connect your offerings with prospective customers, or incorporating payment apps and other software to streamline financial and operational challenges, you simply can’t gobble up enough technology. The more you can automate, the more efficient and profitable you’ll be, and buyers just can’t get enough of companies committed to improving this way over time!
These basic steps are big enhancements to any business, and buyers will give serious consideration to these “off-balance sheet” assets. Believe me, by implementing these action items, you’ll increase cash flow, which almost always equates to an increased business valuation!
As you consider selling your business in the coming year and beyond, we are here to assist with your company’s growth and strategic planning. Give us a call, and let’s get started!