It’s easy to understand why, as busy business owners, we often neglect to analyse how our business is performing. Unlike answering an email or making a sales call, there is no immediate benefit to doing it.  But that doesn’t mean we shouldn’t; knowing your business value is important.

Conducting a thorough analysis of your business and understanding its key drivers enables you to track performance over time and will give you a greater sense of its value. You can also compare yourself to your competitors and see how well your business is performing within the industry.

Knowing the value of your business is highly beneficial. Not only can you track performance and set goals, but you can also identify your chances of selling.

An excellent analysis tool to measure your business’ “sellability” is my Value Builder Assessment. Your overall score reflects your performance on 8 key drivers, which are statistically proven to improve your company’s value.

Through an analysis of tens of thousands of businesses, I’ve discovered that companies who achieve a Value Builder Score of 80+ out of 100 receive an offer to buy their business that is 71% higher than the average company.

But what are these key drivers, and what exactly do they mean?

The 8 key drivers used to determine business value and ‘sellability’ 

Key Driver 1: Financial Performance

Financial performance is the heart and soul of most businesses. Minus a few exceptions, your business needs to generate revenue to survive, but properly analysing financial performance isn’t easy.

You need to look over your history of producing revenue and profit, combined with the professionalism of your record keeping. Knowing where to start can be confusing and overwhelming, which is why my Value Builder tool is so helpful. It will ask you a series of questions, and depending on your answers, it will generate a score detailing how well you measure and keep track of your financial performance.

If selling your business is part of your long-term plan, financial performance is a hugely important driver. The easier it is for an outsider to look at your record-keeping and gain a decent understanding, the easier it is for you to sell your business. A potential buyer will want to see a clear record of your revenue, costs, and profits.

A top tip I always share with my clients to help improve their record-keeping is to ask for feedback. What I mean by that is to approach the people who use your record-keeping system. This could be an accountant, an employee, or yourself. Ask what frustrates them about the systems and how difficult it is to input data or find a specific document. Using this feedback, you can work towards improving your system and, subsequently, improving its usability.

Key Driver 2: Growth Potential

The second key driver is your growth potential. In other words, the likelihood of growing your business in the future and at what rate.

The more growth potential a business has, the more attractive it is to potential investors, and my analysis tool considers your current market when giving your overall score.

Unsurprisingly, many things can impact your business’ growth potential, including (but certainly not limited to):

  • Your capability to grow (How quickly you’ve inputted new processes, taken on new staff, and met demands in the past)
  • How unique you are (Every business needs a unique selling point that will help it stand out from competitors)
  • How replicable your business model is (Could a competitor easily copy your business model and threaten your place?)

Many of my clients have seen their growth potential increase because of coaching. They become aware of processes that can increase productivity, they are challenged to devise new add on products or services, and they are made aware of new opportunities.

If your business’ growth potential is a cause for concern, book your 1-hour free coaching session to learn how I can help.

Key Driver 3: Switzerland Structure

The Switzerland Structure is named so because it replicates the neutrality of which the Swiss are so proud. It means to create a structure within your business where you are not dependent on one employee, client, or manufacturer.

It’s unavoidable for small businesses to have a crucial support team or person that plays a vital role in day-to-day operations. It’s also very likely to have larger clients who play a significant role in cash flow.

However, what makes a resilient business is when there is a limited emphasis on these key players.

Being reliant on a specific client is a risky business model. If the past year has taught us anything, it’s just how quickly things can change. Identifying these weaknesses using the Switzerland Structure means you can put plans in place to decentralise management, attract more clients, and create pitches to help retain significant clients.

The more resilient and less reliant a business is, the greater chance it has of successfully selling.

Key Driver 4: Valuation Teeter-Totter

What we’re looking to identify with this key driver is whether your business is a cash suck or a cash spigot. If you’re unsure which category your business falls into, ask yourself:

  • Do I find myself short on bills and cash because I’m not bringing in enough profits?
  • Am I comfortably making enough money in sales to pay all my bills and myself? And am I experiencing sustained, level growth?

If you answered yes to the first question, your business is a cash suck. If you answered yes to the second question, your business is a cash spigot.

Understandably, everyone wants their business to be cash spigot. It must keep the teeter-totter in your favour, and when a seller recognises that the scales are tipped in your favour, they will be more inclined to buy.

If you did discover your business is a cash suck – all hope is not lost! It is not a quick fix, but you could improve your cash flow by changing your approach to payments. Consider the following:

  • Could you ask for payments 100% upfront?
  • Could you spread payments equally throughout the project?
  • Could you secure a deposit upfront?

These could help your overheads and ensure you’re on the path to make your business a cash spigot.

However, if the answer for all the above is not possible, get in touch. I’d be happy to help you move away from being a cash suck.

Key Driver 5: Recurring Revenue

It can cost five times more to target a new customer than retain an existing one. With this in mind, a successful, sellable business will have various add-on products/services that can help keep valuable customers.

My Value Builder Assessment will ask specific questions that’ll invite thought about what possible add on services you could offer. And if you do have additional services, it’ll force you to ask whether you’re actively selling these to your existing customers.

If retaining customers is something you struggle with, I’d suggest adopting the simplest retention strategy there is—a loyalty programme. For example:

  • Buy five meals, get the sixth free
  • Make a purchase every month for a Christmas present
  • Book a block in advance for a cheaper fee

The possibilities, as they say, are endless, and the results make it an extremely worthwhile tactic. If a potential buyer down the line identifies that you can successfully retain clients, they’ll be confident in their decision to invest.

Key Driver 6: Monopoly Control

Monopoly control of a market is extremely rare and equally as valuable. Whilst almost all companies cannot be a monopoly in their market, that doesn’t mean they shouldn’t constantly strive for differentiation.

A unique selling point can set your business aside from your many competitors. Knowing what makes you unique, what sets you aside from your competition, and understanding why your customers come to you instead of a competitor gives your business a strategic advantage.

Aiming to constantly differentiate from your competitors will force you to continuously deliver a needed service that is unlike anything else on the market, which will be a positive factor for a potential investor.

Key Driver 7: Customer Satisfaction

Customer satisfaction is a difficult driver to measure but is easily calculated with my Value Builder Assessment. As a business owner, customer satisfaction should be something you are constantly striving for. It’s what keeps your customers coming back to you and will likely determine whether they refer you.

If you find that a small number of new leads come from referrals, there are ways to encourage your referrals. Start by brainstorming how you can incentivise them.

Could you offer a monetary reward or freebie for the client who refers you? Or could you offer a discount for people who are referred perhaps? When you’re confident your service is worth referring, adopting one or both of these techniques should encourage more referrals.

Key Driver 8: Hub and Spoke

It’s something that no business owner wants to consider, but how would your business perform if you were unexpectedly unable to work? This is what I mean by hub and spoke.

These unlikely events do happen, and when you have clients, employees or even family members dependent on your business, you must have plans in place. Analysing this will encourage you to start contingency planning and ensure that it wouldn’t be the downfall of your business if something were to happen.

Moreover, relinquishing control and decentralising leadership helps to make a business more robust. And as I’ve touched on already, the stronger a business, the more valuable it is to a buyer.

If you want to sell your business, it must be able to function without you.

Even if selling your business is a long way down the road, these 8 drivers should still be considered, analysed, and worked on. A potential buyer won’t just look at the here and now. They’ll want to understand how resilient and robust the business has been in times of adversity.

So, start strengthening your business today. Take the first step to understanding your business value and worth by using my Value Builder Assessment.