How to Increase Your Small Business Valuation

By Coach Jim | October 1, 2024

Whether or not you want to sell your business, it’s sound wisdom to have an exit strategy.  The tips in this article will allow you to sell your small business for the highest price and they will also make running your business easier and more profitable.  Here are some key questions to help accelerate your progress on this path:

When do you want to exit business?

Do you want to sell to family, outsiders, employees, or liquidate?

How much money (after tax profit) is needed to retire or a future venture?

Are you willing to owner finance?  If so, what percent or amount?

Are you OK with a transition period to set the future owner up for success?  If so, for how long?

steps to small business success - image of books how to increase the value of your small entrepreneurial company

Are the books current and accurate?  Is the reporting done within 15 - 30 days after the end of the month?

Are the key performance indicators identified and tracked at least monthly?  Does the leadership team follow up with decisions and action items derived from these metrics?  I always recommend at least a minimum of 1)  total revenue  2)  variable costs or cost of goods sold [COGS]  3)  fixed costs  4)  Profit.  You’d be surprised how many companies don’t even measure these.  Beyond the basics, consider marketing ROI, sales conversion ratio, retention, and production efficiency.

Is the company current on taxes?  What tax strategies can be implemented to be able to keep more of your hard-earned money?

What would happen to the company if you left for 30 days?  Ideally, the company would continue to grow with a strong leadership team running day to day operations.  What needs to be put in place to make that happen so you can relax and enjoy your vacation?

Does the company have adequate employees?  What’s the level of stress in the company?  What is your retention rate?  Turnover can be very expensive.

Is the website working for the company?  Is it professional, mobile-friendly, easy to find?  Informative and helpful?  Is it generating leads?

Full business plan with revenue model or proforma going out 2-3 years?  If you are thinking “what business plan”, it’s time to find it, revise it or create it.  If this sounds like an unpleasant task, contact us and we can help.

Do you have a strategic and effective marketing plan?  Ideally you have measurable return on investment [ROI] and multiple sources of new customers so you can grow profitably and responsibly.

Are standard operating procedures [SOP’s] and training in place?  Do you have career growth and development plans for every employee?  The number one success principle for entrepreneurial business success is to do everything you can to hire the right people and set them up for success.

Another value proposition is minimizing wasted energy.  Train and manage your team to be low drama, low reactivity, and proactive.  This leads to higher efficiency, better morale, positive energy and higher productivity.

Recurring revenue is a bonus.  If you have a seasonal business this will smooth out the peaks and valleys of revenue and profit.  Subscriptions, product sales, information products and automated services are all examples.