A company’s growth is your growth. There is no doubt that you want your company to grow every year. The more it grows, the more profit it generates, and the better it is for your personal, employee, industry, and economic growth.
A company’s growth is measured by its worth. The net worth of a company is evident in how much sales it generates, the profit it makes, its intrinsic value, its growth rate every year, its customer base, and its growth prospects.
A company with a stagnant growth rate is not attractive to investors. If you plan to retire from your business and sell it, you must take measures to increase your company’s valuation. Keep in mind that this is not an overnight job. Increasing your company’s worth before undergoing business valuation in Colorado takes time and continuous effort.
This guide will help you learn what crucial tips you can use to increase company worth. With Wiley Financial Services’ proven track record, you can rest assured your company is in safe hands.
At Wiley Financial Services, our experts suggest the following ways to increase your company’s net worth.
How do you plan to see your company in the next five years? Do you have a plan?
A lack of a plan means a lack of vision. A vision states what you intend to do, how much growth you are predicting, what you are doing to achieve that growth target, how you intend to maximize your revenues and deal with expenses, and how much investment you intend to make in the future years, etc.
These are the questions every business owner must ask and have answers to. Any investor can see whether you are running your business with foresight or are just staying afloat.
If you want to grow, you must have a growth plan. It requires an in-depth study of the market, setting goals, and employing resources to achieve them. How you have done so far also helps you evolve a plan for the future.
It is often said in terms of investment that “one should never put all his eggs in one basket.” It also holds true for businesses and their revenue-generation model.
Revenue-generation models work on a pyramid model, often called the “Pareto analysis“. It states that 80% of your revenue comes from 20% of clients. However, no customer accounts for more than 10% of your sales. But it is risky, as losing one major client can significantly affect revenues.
We advise that you diversify your customer base. This can be crucial if you want to attract investors.
Investors will be skeptical of investing in your business if they see that your revenue is concentrated on only a few clients, and they might leave when they realize the company is changing hands.
Profits and cashflows are two separate terms. Cashflow refers to the cash left with you after paying all your expenses. For example, a firm might have millions of revenues and profits and still have negative cashflows due to factors such as longer debtor turnover ratio, negative inventory turnover ratio, etc., which results in more outflow of cash than inflow.
This requires encouraging customers to pay early, balancing creditor payments and debtor receipts, managing stocks and supplies, and considering the sale of assets no longer required.
When you establish a company from scratch, there is no doubt that several processes can’t work without you. Many owners take pride in the fact that they are the whole and soul of their company; major operations for the business can’t function without them.
Unfortunately, this fact proves to be a disadvantage when you are looking to sell your business in the future. In such cases, the business can be doomed if the owner sells or something unwanted happens.
Investors are reluctant to invest in businesses like this, as they might lose a significant customer base, and key business operations might fail once the owner is no longer involved.
To prevent this, you must invest your time in building a core team who can carry out the business as usual in your absence. This should not be taken as a sales tactic aimed at investors; having a strong core management team allows you to focus on business expansion rather than engaging yourself in day-to-day mundane business operations.
Operating a business is not easy, especially if you are in the manufacturing industry. Therefore, creating a “moat” for your business is essential to protect it from unnecessary lawsuits and competitors.
What are you required to do?
The points discussed above help you create a competitive edge, and it is not an overnight job. It requires a plan in place.
A business’s future can be perceived by its past performance. Your business practices ensure a solid track record of profitable business, which attracts investors. Investors aim to invest in a company with a promising future that shows considerable growth areas and, thus, increased revenues.
This all is part of a business valuation in Colorado that requires business valuers to predict future cash flows to estimate the business’s growth to a certain extent, which can convince investors of the company’s bright future. But only a proven past record can build the milestone for the company’s future profitability.
Whether you aim to sell your business or not, improving your company’s worth is imperative. It plays a significant role in boosting stakeholders’ confidence, securing a loan, and promising customers of long-term relationships.
The tips mentioned above would be best to follow from day one of establishing your business, but it’s always a good time to start increasing your company’s value.
For more information and valuable insights on improving your company’s net worth, contact Wiley Financial Services today.
Wiley Financial Services is a full-service accounting firm, specializing in Business Appraisals and Business Valuations, that has over 20 years of experience with a variety of industries ranging from restaurant, biomedical, manufacturing, advisory firms, nurseries, event design firms, IT firms, and many more. Wiley Financial is based in Oceanside, CA and we primarily service clients across the Western United States from our San Diego office.
