How To Build A Valuable Business

There are many reasons to start a business. Some people do it to leave a legacy to future generations, and hopefully give their children a secure place to work (if they want to). Others do it for the challenge, or because it will make them more money than working for someone else would, or perhaps because they want more freedom and don’t want to have to work for an employer anymore.

Then there are some people who start a business simply to build it up and sell it on, making a good deal of money in the process. This is a good reason to start a business and can bring in many hundreds of thousands of dollars, or even more than that once the true value of the business has been determined.

Yet before you can sell your business, you need to make it a valuable asset. Here are some ways that you can build up a valuable business that someone will be willing to pay a lot of money for.

  1. Recurring Revenue

One-off transactions are great; they bring in money (and ideally profit) and keep the business moving forward. However, what is even better, and something that any potential buyer will be looking for, is recurring revenue.

Recurring revenue is transactions that take place regularly, set up to come in automatically. This might come in the form of a subscription, for example, where you offer monthly advice regarding investments in legal marijuana stocks, or perhaps you bake cakes and send out a box each month to those who have a regular subscription set up. Maybe it’s flowers, or socks, or a service plan.

Take a look at your business and determine where you can add these recurring transactions that will appeal to customers if you don’t already have them so that you can bring in a set amount of money each month. Once you have a number of these transactions in place, you will have a base amount of money that you know will come in, and everything else is a bonus on top of that. Not only is this good business practice, but it makes it easier to determine cashflow (and value the business).

  1. Your USP

Your USP is your ‘unique selling proposition,’ and it is what sets your business apart from the competition. This is potentially the most valuable asset your business has, and it is essential that you work on it, honing it to perfection, and including it in all of you marketing material, for example.

It is better if your USP isn’t you. That’s because, when you sell the business, you will no longer be a part of it (in most cases, at least). If it is you that people are coming to buy from, or you that has the skills required in your business and no one else, then a buyer might not want to invest their money.

If you believe your USP is actually you, rather than a specific aspect of your business, and you do want to sell one day don’t worry – you can put a plan in place that means you can train up employees using your exact systems. These systems can be valuable assets in their own right and could make a sale more likely.

  1. Watch Your Growth

We all want our businesses to grow year after year, but this is even more important if you are hoping to sell one day. What will make a buyer interested in your business is if you can show them evidence that your business is growing more quickly than others in the same sector.

Therefore, you should carry out regular market research to determine whether this is the case. You can look at other businesses’ accounts, for example, and see what their turnover and profits were compared to yours. It can also be a good idea to take a look at their social media pages – are there many followers? Are they always posting up fresh, new content? If so, they are clearly growing. These numbers and the information found on social media can be your gauge, and a measure to work with.

  1. Location And Markets

For some businesses, physical location can make them an attractive prospect to buyers. For others, it is the markets that they are able to reach that will make someone feel they want to buy the business and continue to make money from it.

The earlier you can set yourself up in a great location with a good amount of footfall, or in a prestigious or convenient place, the better. The more established you are in that place, the more valuable your business will be to the buyer.

The same is true for the online space. The longer you can show that you have had widespread reach, perhaps even global reach, and the more sales you have made from that, the more interesting your business will be to anyone who wants to buy something that is already making money, and that they won’t have to spend thousands of dollars in boosting to the next level.

  1. Customer Diversity

It can feel great to have that one big client that regularly pays all your bills and even salaries. However, whilst it may be a great boost to your business, having just one or two clients and customers that account for the majority of your income is not a good thing, and buyers certainly won’t look favorably on it. Imagine if that customer were to find what they need elsewhere, and stop using you, of it they shut down for any reason. What then?

Customer diversity is key in business, even if you aren’t intending to sell. Customer diversity means that you never have any one customer that accounts for more than 10 percent in your turnover. By keeping your accounts smaller, but having more of them, it is less of an issue if you were to lose one, two, or more, because you are not relying solely on them to keep your business running.