Just because your business may not currently be open - or may not be running at full capacity - does not mean that you need to remain stagnant. Take this pause as an opportunity to work on your strategic planning, and increase the value of your business in the process. Whether or not you are considering selling your business in the next few years, the time to work on process improvements is now.
Today's message is from Cathy Durham, President of Capital Valuation Group, Inc., here in Madison, WI. Learn more about Cathy and her upcoming SBDC course on business valuation in the box below.
While quantitative factors - such as growing sales and increasing gross profits - certainly impact value, there are a number of qualitative levers that can also significantly increase your business' value. Read on for 5 examples, and keep an eye out for a few more later this week!
Value Lever 1: Leveraging Technology to Create a Paperless Office
Shifting from dependency on paper files to a more digital environment reflects a technologically advanced business, which improves efficiency as well as attractiveness to a potential buyer. During quarantine, you can leverage under-utilized staff to establish a consistent digital filing structure (including password protections where needed), and then scan and categorize existing paper files and resources. Accomplishing this reduces required physical file space, saves money on external storage and enables a more successful remote team as staff has ready access to needed information and resources.
Value Lever 2: Documenting Systems/Processes
Now there is time for you and/or your team members to document the systems and processes in your business. This exercise not only helps identify where there are inefficiencies, but also reduces dependency on key employees who may have processes “in their heads,” which creates risk if that key employee leaves.
Inefficiencies are identified by tracking each and every step of a process in your business from beginning to end. For example, follow a potential sales lead in the door, from how the customer found your business through the sales process. Identify each step and person involved to receipt of the order. Then look at the steps taken to fulfill the order, the invoicing process and how receiving payment is processed. Are there any redundant “touches,” steps or communications that could be eliminated? You can use employee time sheets or input from employees to document current and ideal workflows. Not only can this be useful to identify opportunities for streamlining to save time and money, it can uncover ways to leverage automation while improving customer experience.
Value Lever 3: Wrap Up Small but Nagging Business Issues
Now is a good time to get to the bottom of seemingly small but nagging business issues that require time to resolve but in aggregate could create cash flow or improve the business’ overall functionality. Projects may include such things as updating mailing lists, resolving old accounts or notes receivable, collecting on retainage, working through contingent liabilities, defining warranty issues, resolving unused gift certificates, identifying and resolving possible environmental issues, or establishing employee onboarding processes.
Make a list, starting with highest impact and lowest amount of work time. Think about if these things need to be done by you, or if you could delegate to a team member to keep your focus on the bigger picture.
Value Lever 4: Delegation
You may have noticed that each of the points above have mentioned your team. A business that is too reliant on the owner to personally run the company is less valuable to a buyer. Do you have the right team in place that allows you to delegate without major concern? While the owner often plays a critical leadership role, in order to be transferable, a business must be able to continue operations without the owner for an extended period of time. If you were unable to work for a month or more, would your business be able to continue without you? Do you have the technical and business expertise within your staff to continue serving existing clients while also continuing business development efforts in your absence? Have you identified a succession plan and do you have the right players on your current team to deliver on that plan today, if needed? Identify the gaps, develop your plan and wherever and whenever possible, delegate, delegate, delegate.
Value Lever 5: Employee Retention: Keeping Your Team Together
Now is an especially critical time to focus on maintaining and growing a strong culture and connection. Leveraging video conferencing to have a weekly update to your business “family” during work hours, if possible, can have significant paybacks. Reaching out with handwritten notes, email updates and phone calls is more important than ever. Encourage your leadership team to do the same.
Without these efforts to stay connected, it does not take long for staff to begin to feel disconnected despite accomplishing work each day. This is also a time of feedback for owners to recognize who on your team has a good attitude and strong work ethic. While we want to be careful not to judge people during stressful times (and varying personal responsibilities), as you work to strengthen your staff, you can identify rising stars and natural leaders who shine, even while facing uncertainty.
As an owner, managing your business as an investment really means you’re consistently looking at it as an outside buyer would. Whether you’re looking to transition ownership this year or in 20 years, the key is to stay focused on both the quantitative and qualitative factors, because both impact value.