Selling Your Business? 6 Ways to Increase Business Value Before a Recession
An economic downturn will impact the sale price of your business.
Accepting a lower price for your company can be a bitter pill to swallow. However, you can take action to minimize the impact of a recession and sell your firm successfully.
If you can make changes to increase the value of your business, a slowdown will have a smaller impact on your sale price. Before you start making changes, make sure that you have systems in place to support growth.
Structure for Growth
To scale your business, you need systems in place that allows you to maintain efficiency as you expand. Without proper structure, you’ll spend too much time and money managing growth.
Accounting software: Companies that scale must process more transactions in less time, and that can put a strain on your accounting system. Embrace automation, and integrate accounting software with your invoicing, payroll, and purchasing systems.
Budgeting process: Create a formal process for budgeting, and complete the budget before the start of the next fiscal year. Get input from everyone on your team, and compare your budget to actual results each month.
Procedures manual: Document every routine task you perform in a procedures manual. Using a manual eliminates confusion about performing a particular task, and it’s a great training tool for employees.
Once you have these systems in place, you can grow your business with confidence. Next, consider your business from a buyer’s point of view.
Why Your Business is Valuable
What makes your business value to a purchaser? Here are some key factors:
- Competitive differentiation and uniqueness in the market
- Track record of growing sales, positive cash inflows, and net profits
- Recurring revenue streams with automatic customers
Also keep in mind that the purchaser may be one of your competitors. Competitors know your business well, and they have experience in the same industry. As a result, they understand the value of your business, and the potential for growth after purchasing your company.
A competitor can use industry experience to market your business effectively. They understand the marketing messages that are effective, and how to move people through the sales process.
Here are six approaches that you can consider for business growth.
1. Carve out a profitable niche that is repeatable and teachable
Focus on a particular niche, and become the preferred business for that niche. If you specialize in a niche, you can dig deeper to find out what customers want, and how to meet their needs. Your target market is smaller, and you can be more creative in your marketing efforts.
Assume that a clothing manufacturer decides to focus on the outdoor hiking and biking niche. The business can perform in-depth market research with hikers and bikers to uncover their specific needs. With that knowledge, the manufacturer can design a marketing campaign to reach the target market.
If you’re successful with the niche business, you can teach a buyer how to meet the needs of your customers. If the processes are teachable, your business is more attractive to the buyer.
2. Create a disruptive product or service that grows profits
Disruptive ideas change how consumers solve a particular problem, and these ideas have tremendous value.
Uber and Airbnb are two recent examples. Uber disrupted the taxi business, while Airbnb changed how people view hotels.
If you implement a disruptive product or service, you can maximize market share. Customers are also willing to pay more, and you can sharply increase company profits.
A business that disrupts an industry can demand a high sale price from a potential buyer.
3. Increase your share of a market
Put a strategy in place to increase your share of an attractive market. Consider the markets that you compete in, and identify the market with the best potential for growth. Implement a plan to boost your share of the market by increasing your marketing efforts or by competing on price.
Let’s assume that clothing manufacturer determines that the outdoor hiking and biking market will grow by 15% per year. If the manufacturer can increase market share from 6% to 18%, the company will benefit more as the overall market grows.
If a recession happens, a high-growth market may not suffer as much of a decline. Focusing on the hiking and biking market puts the manufacturer in better revenue position, should a recession occur.
4. Build repeat business by adding product offerings
Offer your best customers more products that meet their needs.
The clothing manufacturer can survey their best outdoor sports customers, and find out what they need. Once they have the data, the firm can create new products to satisfy needs and to grow total sales.
Your best clients are fans of your business, and they’re more likely to answer a survey and provide feedback.
5. Management team incentives
The value of your business is connected to your management team. Your managers have the experience to make smart decisions that increase profits.
Losing a valuable manager has a financial impact, so give your managers incentives to stay. Incentives may include deferred compensation and stock options.
Your management team will help to guide the business through a recession, and they should have incentives to stay during a downturn.
6. Get attention and generate interest
Take a look at your entire marketing process, and make improvements that help you to get attention and generate interest.
Customers should be able to easily navigate your website, so they can review your products and services. If you sell using ecommerce, make sure that your online checkout system is clear and easy to use.
All of your marketing strategies (web, print, e-commerce, social media) should present a consistent message about your firm. Your logos, color usage, and text must present the same message.
This solidifies your brand in the eyes of your customers, and the consistent message will drive more sales.
Find a Trusted Advisor
Taking action to increase the value of your company may feel overwhelming. Work with Raincatcher to increase the value of the business you’ve created, and to negotiate an attractive sale price. Use Raincatcher as a trusted advisor, and sell your business with confidence.