How to Maximize the Value of Your Business

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If you own and operate a business, increasing its value should be your number one priority. There are many tactics, such as cutting costs, which you can implement to drive you towards your goal.

According to a 2015 Sageworks study, businesses with less than $5 million in revenue experienced, on average, 7.8 percent annual sales growth. If you’re in a tech or healthcare based industry, 20% revenue growth may be common, according to a 2017 Kauffman Foundation report.

It’s important to benchmark where you are. Proactively searching for new opportunities will set you apart from the competition. Here are three ways to maximize the value of your business.

Optimize Cash Flow

Staying on top of your cash flow is crucial. If you haven’t done so already, I’d suggest incorporating a cloud based accounting platform to streamline your financial management. As you expand, you’ll need access to your financials, P&Ls, balance sheet, and cash flow statement, on demand.

Instead of bringing the accounting in-house, you might want to consider outsourcing those functions to a third party. Bringing on a fractional CFO and a remote bookkeeping team will help you stay on track while controlling costs.

Growing your revenue while increasing your margins will get you to where you want to be. This is incredibly important if you’d like to obtain an equity infusion or sell the business as a part of your succession plan.

Purchase Assets

There are cases to be made for leasing assets. However, if you’d like to maximize your business’s value, owning assets is the way to go.

If you finance the asset, it ends up on your balance sheet and you can deduct the interest on the loan. Be sure to consult with your tax advisor.

It’s also important to utilize lines of credit and supplier financing. Have a conversation with your bank and several suppliers. By negotiating terms in advance, you’ll be in a stronger position when you need to access those funds.

This is a great way to leverage your cash to invest in additional business assets.

Develop New Revenue

It pays to tighten up your service experience. After all, it’s less expensive to service an existing customer than it is to acquire a new customer.

In addition, a single customer should not contribute more than 20% of your revenue. If so, you are at risk of a serious cash flow problem should that customer decide to look elsewhere.

Consider tapping into your network of suppliers to ask for referrals. Your suppliers should be familiar with the products or services that you offer. Educate them on who your ideal customer is. This is a long-term strategy that can lead to significant revenue.

You should also look at partnering with businesses, in different industries, who sell to your customers. These alliances can yield attractive results. Make sure you have an agreement in place to define the nature of the partnership. Be sure to consult with your business attorney.

There is a multitude of ways to grow your business. Find out which ones work for your and put your resources behind them. With a little creativity, your growth will exceed industry benchmarks.

Consider working with a business advisor who can help you design and implement a growth strategy. With the right team in place, you’ll reach your professional goals sooner than you think.

(Levar Haffoney is a 2016 Network Journal 40 Under Forty honoree. He is a principal with Fayohne Advisors LLC. You can connect with him at www. fayohne. com, LinkedIn and Facebook.)