Which is perfectly possible…in fact, at least double
Yes, because if yours is like most owner-managed businesses, it’s run as a personal cash generator and lifestyle support scheme. This is fine until retirement looms or a divorce or partner dispute arises, or an unexpected offer is to buy it is made.
One of these events will definitely happen to you one day and when it does, will you be in a good place or will you be one of the 250,000 small businesses that close every year with nothing to show?
“a Scout must prepare himself by previous thinking out and practising how to act on any accident or emergency so that he is never taken by surprise.”
So said Robert Baden-Powell, founder of the Scout movement and victorious army general.
Because lives depended on it.
Today, it’s Bear Grylls saying it as Chief Scout and lives still depend on it as his TV exploits show.
And as a business owner, your lifestyle and security depend on you being prepared.
So, how could you make yourself ‘prepared’, without a load of hard work, more cost and going short on personal income?
Well, let’s say your business is worth £50,000 today but could be worth £500,000. And the gap could be closed within 3 years, would a little of that be a fair trade?
Assuming yes (on your behalf) let’s take a look at how big businesses manage to achieve and maintain such high values to see if we can imitate them economically…
The average big business sells for 14x pre-tax profits. Yet I have seen small businesses making £50K pa close down for only £50K instead of selling as a going concern for £500K+
If you were buying a business, you would look carefully at everything before deciding to make an offer and every time you found a shortfall in some aspect you would make a reduction in your offer because that is something you would have to invest in fixing, post-acquisition.
And if there were a lot of these, you would walk away because of too much expense, hard work and uncertainty.
This is why I have seen business owners failing to sell such a business, even paying to get rid of it, having so loaded it with problems through 30 years of lifestyling that it had a negative net worth on sale day.
No one would wish to be in such a place, but many are.
So, let’s see what we can learn from the big businesses that have such high values and make their owners rich.
Here’s what they have in place:
Knowing that to stand still is to move backwards, activities that work together in the form of marketing; customer care; technology investment; people development; financial management.
Such as these:
- New customer acquisition
Customers leave all the time and don’t just need replacing but adding to. So marketing brings a stream of new enquiries that convert to orders.
Exploring new markets and product opportunities ensuring that they aren’t left behind when: new competition arises; buying trends change; distribution costs change; markets restructure; opportunities arise to be exploited early.
- Customer retention
Nurturing each one, making it hard for them to leave. Never take them for granted by account managing to stay in touch with their attitudes, perceptions and needs.
- Product development
Continuously improving the customer experience to raise usability; needs fulfilment; value perception; pricing. Keeping customers close and securing new ones through referral.
- Data production & review
Measuring key indicator performance to spot early trends, enabling early corrective action and profitable decision making.
- People productivity
Managing the workforce as a human capital asset for high commitment; sustained output; low turnover; retaining vital skills and knowledge within the business.
- Profits & cashflow
Maximising margins through smart buying; intelligent pricing; thoughtful cost control; intelligent management of funds.
Developing systems that: automate everything repetitive; enable remote access into all the key areas of the business; managed from afar through a committed team.
- Exit value
Knowing what the business is worth, who would pay top dollar for it and how to sell it at any time.
The same approach as having your house always in good repair so always saleable at the best price.
Your business should always be more valuable than your house.
Sounds impossible, or too much like hard work?
It needn’t be if you imitate these strategies with the practical tricks that we know and pick them off one by one during the next 3 years.
Be aware – the cost of not doing these things, in the long run, will be a worthless business and a glum retirement.
Knowledge is power. The more you know the better you’ll succeed.
Most of what I have instanced above are easy to implement. And if you can’t or won’t, your economical AI Business Advisor® will do it for you, helped by low-cost apps.
Your first step is for free and takes 15 minutes by…
Booking a free assessment here to learn what your business is worth, what it should be worth and how to close the gap.
Another AI Business Advisor® service…
“Solving your business problems quickly and affordably”
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