2021 is in the books and for many, it was a difficult year. Good riddance. Now that you are almost through the first month of 2022, having dealt with your first challenges in 2022 it might now be time to ponder on what you are going to focus on in 2022.
If your goal is to enhance the value in your company this year in anticipation of selling, here are some things to consider:
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. Look for ways to optimize cost and enhance efficient delivery. Finding efficiencies in the business will lead to better financial performance for the same level of revenue.
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 your company’s growth in the future. Having a clear understanding of why your customers buy from you is important so you can leverage that into gaining new clients.
Sell less stuff to more people. The most valuable companies have a defendable niche selling a few differentiated products and services to many customers. The least valuable businesses sell lots of undifferentiated products and services to a concentrated group of buyers. Customers who buy more from one supplier typically are more loyal, being less likely to leave.
Drop the products or services that depend on you. If you offer something that needs you to produce or sell it, consider dropping it from your offerings. Services and products that require you to suck up your time and cash and don’t contribute significantly to your business’s value.
Collect more money upfront. Turn a negative cash flow cycle into a positive one and you boost your business’s value and lessen your stress load. Finding a way to get deposits upfront to cover the cost of materials services on longer-term projects will help in managing cash flow. Many small businesses front costs for customers for months before getting paid, so progress payments and deposits will help to lower both stress and cash constraints.
Create more recurring revenue. Predictable sales from subscriptions or recurring contracts mean less stress in the short term and a more valuable business over the long run. Finding ways to productize your service or getting a commitment for regular consistent delivery of a product creates a more valuable business as customers who have committed to a subscription service are less likely to leave.
Be different. Refine your marketing strategy to emphasize the point of differentiation that customers value. Be relentless in highlighting this advantage. Finding your unique selling proposition that resonates with your target market can enhance brand image attract the right kind of customer.
Find a backup supplier for your most critical raw materials. Consider placing a small order to establish a commercial relationship and diversify the sources of your most difficult-to-find materials. Having secondary supply lines in today’s market is critical to the delivery of both services and goods. If we learned anything from 2021 it is that our supply chain system is more fragile than we thought and without supplies, it is difficult to deliver to customers.
Teach them to fish. Answer every employee question of you with “What would you do if you owned the business?” Your goal should be to cultivate employees who think like owners so they can start answering their own questions without coming to you. The mantra today is to train them or lose them. If you are not creating opportunities for your employees, they will go to where there is some.
Create an instruction manual. Document your most important processes so your employees can do their work independently. Systems deliver results and people deliver systems – if you don’t have solid work processes and business systems that are thoroughly documented and teachable, it will be difficult to scale.
Creating a business that can scale creates salable value. Here’s to building a more valuable company in 2022!
We’d like to hear your thoughts on this, please share in the comments and pass it on. Remember, only 1 in 10 owners exit successfully, will you? If you want to exit in the next 5 years and you aren't diligently working per your exit plan you are taking a huge risk. If you want an outside opinion on your exit readiness, and the things you can do to maximize value such as incorporating ESG, we have a pro-bono exit readiness assessment you can do in 5 minutes, that will give you some great insight, at no cost, no risk and no obligation. MExit – Value Builder PREScore - https://score.valuebuildersystem.com/prescore/proactv-business-solutions-inc/robert-welke