Mastering Business Ownership: Ten Tips to Boost Your Company's Value

Chip Schweiger: 0:00

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 have everything to do with how you do it. Welcome to another edition of Things Entrepreneurs Should Know, the top business podcast for entrepreneurs, founders and business owners who want to build lasting financial value and supercharge the growth of their business. Hey, if you've ever been mystified about what makes a company valuable and I mean like really valuable you may think it has a lot to do with what the company does, and to a certain extent, it does, but what's more important is how a valuable company does what it does. So today on the show, I'll give you the 10 things that will make your company more valuable than its industry peer group. Now, some of these will make a lot of sense, but others may be something that you hadn't thought about. Now, these 10 things come from transactional data of over 55,000 companies and multiple thousands of actual transactions, so they're the real deal. Even if you don't ever want to sell your company, focusing on these 10 attributes will help you create a really valuable asset to own. After the episode c heck out the show notes at teskpod. com. As you likely know, the value of your company is partly determined by your industry. For example, think about a cloud based software companies. They're generally worth a lot more than a printing company are these days. However, when we analyze businesses in the same industry, we still see major variations in valuation. So I dug through all the data that's available from my partners at the value builder system and I found the 10 things that will make your company more valuable than its industry peer group. So here we go. The number one thing that makes your company more valuable than its industry peers is recurring revenue. The more revenue you have from automatically recurring contracts or subscriptions, the more valuable your business will be to a buyer. Even if subscriptions are not the norm in your industry, if you can find some form of recurring revenue, it'll make your company much more valuable than those of your competitors. The number two thing that makes your company more valuable than its industry peer group is having something different. Buyers buy what they cannot easily replicate on their own, which means companies with a unique product or service that's difficult for a competitor to knock off are more valuable than a company that sells the same commodity as everyone else in their industry. The number three thing is having growth. Acquirers looking to fuel their top line revenue growth through acquisition will pay a premium for your business if it's growing much faster than your industry overall. Now the number four thing that makes your company more valuable than its industry peer group is having cash hay Tired. Old companies often try to buy sex appeal through the acquisition of a trendy young company in their industry. If you're the darling of your industry trade media expect to get a premium acquisition offer. The number five thing, location Baby. If you've got a great location with natural physical characteristics that are difficult to replicate think maybe an oceanfront restaurant on a strip of beach where the city has stopped granting new licenses to operate If you have something like that, you'll have buyers who understand your industry, interested in your location as well as your business. Now we've got five more to go and they're actually really important, including one near and dear to my heart. So keep listening. The number six thing that makes your company more valuable than its industry peer group is diversity. Acquirers pay a premium for companies that naturally hedge against the loss of a single customer. Ensure that no customer amounts to more than 10% of your revenue, and your company will be more valuable than an industry peer group with just a few big customers. The number seven thing is predictability. If you've mastered a way to win customers and you've 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 any industry peer who doesn't have a clue where their next customer will come from. The number eight thing that makes your company more valuable than its industry peer group is clean books. So companies that invest in audited statements have financials that are generally viewed by acquirers as more trustworthy and therefore the company is worth more. You may wanna get your books reviewed professionally each year, even if audited statements are not the norm in your industry. And this one is so important that you can think about it like two Ferraris sitting in a parking lot. One has a dirty engine cavity, it's not polished up and doesn't have any of its service records. The other one looks clean, has records of every oil change and has clear title of the one owner. Now, they're both Ferraris, mind you, but which one are you gonna pay more money for? Okay, the ninth thing that makes your company more valuable than its industry peer group is having a two IC A, what you may be asking. What am I talking about? Well, companies with a second in command who has agreed to stay on post sale are more valuable than businesses where all the power and all the knowledge are in the hands of the owner. And finally, the number 10 thing that makes your company more valuable than its industry peer group is drumroll, please. Happy customers. Being able to objectively demonstrate that your customers are happy and intend to repurchase in the future will make your business more valuable than any industry peer who doesn't have any 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 have everything to do with how you do it. Well, that about wraps up another edition of the things entrepreneurs should know podcast. Be sure to check out our website at teskpodcom, where you can find all the show notes and archive of our past episodes and other resources to help you grow your business. That's teskpodcom, and if you haven't done so already, I'd really appreciate if you take one minute to give us a review on Apple Podcast or rate us on Spotify. It helps out a lot to get this to more entrepreneurs and business owners. And if you've already done that, please consider sharing the show with family and friends, who you think might get something out of it. As always, thank you for your support. This is Chip Schweiger, reminding you that if you always do what you've always done, you'll always get what you've always got. We'll see you next time.