Why building value into your business is so important
It is said that from the very minute you start or acquire a business you should be planning your exit. This is very sound advice, but in reality a large proportion of people live in the moment, dealing with the everyday business challenges and defer the thought of exit planning until the last minute, at which point they have potentially not maximised the full value for all their years of hard work.
A lot of business owners can tend to focus just on generating profit within their business, this chase for short term profit can potentially undermine the value of their company. There are numerous examples of this, from using cheaper materials that can lead to quality issues and damage the reputation of the business, to saving money by not bringing in high calibre managers who can take the business forward growing it and reducing the businesses dependence on the owner.
So whilst short term profitability and strong financial performance are important, it needs to be balanced against the impact on the reputation and the scalability of the business.
As well as robust financial performance in terms of profit and cash generation, recurring revenues from a broad range of customers makes the business more attractive to potential acquirers, the more customers that buy something regularly, the better it is.
It is the change in mind set from Business profit to Business value that is important. If you are taking all of the steps to grow a valuable business it will ultimately deliver increased sustainable profit growth.
Focusing on building a more valuable business will ultimately give you the freedom to choose what to do with it. You can step up as chairman and let others manage it, so you can come and go as you please. You might choose to hand it down to your family knowing it can continue to operate successfully. Alternatively, you can sell it and realise the maximum value when you exit.
Sometimes though life doesn’t always allow us to do things in our desired time frame. So if some unexpected event occurs, having a well structured valuable company provides for every eventuality.
Do you feel like you might need a little extra support and advice? Get in touch, I’ll be more than happy to provide a free business health check for your business to discuss any queries you have.
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