- March 17, 2017
- Posted by: admin
- Category: Finance & accounting
Whether you are selling or business or looking to drum up interest among investors, improving your business’s value is a distinct priority when trying to put your best foot forward.
Unfortunately for business owners, methods of increasing their business’s value are not always intuitive. Subtle accounting practices can mean the difference between a tempting business listing and one that looks like a weak performer. Other times, a business owner will neglect to make investments that seem small to them but can have a big impact on projected value.
To help you sort through which actions can help and which actions can hurt your business, consider these tips from a certified valuation advisor in Las Vegas.
Improve Profits by Boosting Revenue and/or Cutting Costs
One of the most important metrics of your business’s viability is its profits. After all, profits are the most direct indication of how much a business will “make” in a given year.
Since profits are revenue minus expenses, boosting the former or reducing the latter can both have a positive effect on your profit’s metrics. Finding ways to cut costs is often the easier method of the two to focus on since creating efficiencies in your company translates more revenue to profits.
Consider cutting “dead weight” in your operations to reduce costs. This can refer to a product or service line that consistently falls short of revenue projections, but it could also mean eliminating part of your business process that does not generate concrete value.
Diversify Your Customer Base
Having most of your revenues come in from one account or one customer group sends a red flag to business buyers. While this account can indicate the strength of relationships the business has or their ability to keep customers satisfied, the risk of losing a significant chunk of revenues to one lost account can sour impressions from earnings statements. After all, what happens if that client’s business folds, or they completely change their offerings and need to look to other solutions providers?
Try to expand your business by spreading out your revenue sources. This effort will better-equip your company to weather mishaps like losing a blue-chip client, making it appear less risky overall.
Enhance Your Cash Flow
Profit metrics are important for evaluating your business’s earnings potential, but cash flow is just as important. Businesses that tie up their cash flow in large scale inventory purchases, for instance, signal risk no matter how much value they are generating. What happens if they cannot sell the inventory, or something happens to damage it?
Businesses that operate like this must find alternate ways to keep their cash flowing rather than getting tied up in significant investment risks. Shortening the billing cycle for accounts receivable and making purchases on credit rather than cash can both have a positive effect, for instance, boosting the amount of liquid capital your business has available.
Demonstrate Repeatable Processes and Routines
Business buyers and investors who see demonstrable, documented business methodologies can quickly grow confident in that business’s ability to repeat successes.
An excellent example is the Jimmy John’s sub chain. Every franchise is given a manual and a printable punch list document that literally tells you everything you need to know about running the shop, from mixing tuna to opening in the morning to ensuring that everything is clean after the lunch shift ends. Because any person can pick up these documents and instantly start performing actions that uphold the brand, buyers have more confidence that revenues and successes are not just a fluke, but something that can scale in the future.
Work With a Certified Valuation Advisor in Las Vegas
Putting all of the above tips into practice may be trickier than it sounds without the expert guidance of an experienced valuation consultant. Working with someone who understand how values are calculated gives you access to individualized analyses and tailored suggestions on how to improve your business’s value.
If you need to improve the value of your business, you should therefore contact an experienced Las Vegas valuation advisor like Jamie Schwartz today. She can help you take action and dramatically improve the appeal of your business while reducing the appearance of risk.