How To Avoid This Valuation Discount

Business Discount

 

The Swiss value their independence. They don’t use the Euro even though they live between France and Germany.  They never chose sides in the World Wars and avoided aligning with one geopolitical regime over the other. 

That’s why we use the name the Switzerland Structure to describe a business model that is set up to be free of a reliance on a key customer, employee, or supplier. 

A reliance on one customer or employee can hurt the value of your business, but its easy to overlook how one …

Read more…

Stop Selling Your Time

ExitAdvisor Stop Selling Billable Hours

 

If your goal is to build a more valuable company, stop selling your time. 

Billing by the hour or day means customers are renting your time rather than buying a result, which means that your business model lacks leverage. To grow, you need to either work harder or hire more people. Since it can take months to ramp up new employees, fast growth is just about impossible.

One of the eight factors that acquirers look for in the businesses they invest in is your company's Growth Potential. Sim…

Read more…

Protecting Against the End Run

 football player end run

A football defensive coordinator needs to protect against an “end run,” a tactical play where your opponent sends the running back wide around the offensive line to try to evade the oncoming tackle.

Just like in football, you have to defend against an end run coming from a supplier that chooses to go around you to get to your customers. The more of your supply you get from a single provider, the more vulnerable you are to that supplier deciding they don’t need you and instead deciding to go …

Read more…

Why the Future of Your Business Is Critical to Its Value

skyward acquisition story

As a business owner, you’re likely proud of the results you’ve achieved in the past, but when it comes to the value of your business, your future is critical. That’s why your growth potential is one of eight factors that drive the value of your business.

One metric that acquirers may use to evaluate your growth potential is your revenue per employee.

Alphabet (Google’s parent company) generates around $1.3 million in revenue per employee. Compare that to the advertising agency WPP Group, who…

Read more…

The Hidden Danger of Cross Selling

Anatomical Male Head Model with Neck.H03.2k

You've likely heard the adage that it is far easier to cross-sell an existing customer a new product than it is to find a new customer.

And if your goal is to grow at all costs, then cross-selling makes sense. 

However, all of that sales growth may not do much for the value of your company. If you cross-sell your existing customers too much stuff, it could make your business far less valuable.

When you cross-sell a customer so many things that they begin to account for more than 15–30% of y…

Read more…

3 Ways to Flip Repeat Customers into Subscribers


Repeat business drives the value of your company, and you can categorize these sales into one of two buckets:

  1. Reoccurring revenue comes from customers who purchase from you sporadically. They’re satisfied with what you offer, and they buy regularly yet not according to a specific timeline.
  2. Recurring revenue is predictable, and you get it from customers who buy on a cadence. Usually in the form of subscription or contract revenue, the main difference is your recurring revenue comes in on …

Read more…

How to Turn Repeat Customers into Subscribers

Many people mix up re-occurring and recurring revenue, but one is much more valuable than the other. 

Re-occurring Revenue

Re-occurring revenue comes from customers that have a re-occurring need for whatever you sell and buy from you on an unpredictable yet regular basis. 

Imagine a health food store. Customers come in to replenish their supply of vitamins when they run out. The owner is never quite sure when a customer will be back, but she’s pretty sure they will return when they run low …

Read more…

4 Reasons Why It’s Better to Own a Big Chunk of a Small Company

miniature-businessman-talking-together-about-financial-meeting-on-pie-chart-discussion-concept_t20_N0mRdp

Is it better to own a big chunk of a small business or a minority stake in a big company? 

It’s one of the fundamental questions all owners must wrestle with. Owning a relatively small slice of a big pie has worked out well for both Elon Musk and Jeff Bezos, who recently traded places on the list of the world’s richest person. Musk still owns around 20% of Tesla, and Bezos controls about 10% of Amazon, so they both have chosen to sell most of their company to fund their ambitions. The success o…

Read more…

10 Resolutions That Will Boost the Value of Your Business

Finally, 2020 is in the books.

Good riddance.

If your goal is to build a more valuable business in 2021, here are some New Year’s resolutions to consider:

  1. Stop chasing revenue. A bigger company is not necessarily a more valuable one if the extra sales come from products and services that are too reliant on you to deliver them.
  2. Start surveying your customers using the Net Promoter Score methodology. It’s a fast and easy way for your customers to give you feedback, and it’s predictive of y…

Read more…

The Most Critical Factor in Achieving Your Goals May Surprise You

As we roll through the fourth quarter of the year, you may be starting to consider your business goals for next year.

Given how 2020 has gone, maybe your primary ambition is to survive in 2021. Perhaps you’re going to create a recurring revenue stream or finally hire that general manager. Or maybe you’ve decided to start preparing for an exit.

Whatever your goals are, the most important thing you can do now is write down your plan to achieve them.

A Revealing Study

This point was driven ho…

Read more…