As a business owner, achieving success isn’t just about sustaining operations – it's about growing the value of your enterprise.
Whether you plan to sell, attract investors, or simply strengthen your company’s position in the market, maximising its value is an essential goal. The value of a business is typically calculated based on a multiple of earnings. But there is a lot more to value than a simple A x B = C calculation. Here are key insights and strategies every owner should know.
Keep Your Financials Clean and Consistent
Clean financial records aren’t just about organisation; they build trust and credibility with potential buyers or investors. If your business shows steady or growing profits over several years, with well-organised financial records, it instantly becomes more attractive. Up-to-date, accurate accounting makes it easy for someone else to understand and trust your numbers.
Building Recurring and Reliable Income
The stability of recurring revenue streams makes a business less risky and more appealing. A business that brings in income through regular contracts, subscriptions, or ongoing customer relationships is more valuable than one that starts from scratch every month. A business overly reliant on a single customer or product faces heightened risk, which can lower its perceived value.
Creating Systems That Run Without You
Businesses that can function independently are far more valuable. Documented processes, trained staff and smart use of technology mean the business can continue smoothly – even if you step back.
Developing a Strong Team
A competent and motivated team adds stability and credibility to your business. A team who understands their roles and are likely to stay after a sale, add real value. A good team makes the business more stable and less risky for any future buyer or partner.
Building a Recognisable Brand and Good Reputation
A strong brand and positive reputation in the community, and an active online presence increase perceived value.
Each of these strategies are designed to make your business not only financially appealing but also operationally efficient and desirable to potential buyers or investors.
Maximising business value isn’t just about adding to its strengths; it’s also about minimising weaknesses that can safe guard your business’s value and set it up for a long term success.
You don’t need to be intending to sell right now to benefit from these tips. Building value in your business is about making it stronger, more profitable and more resilient – after all, every improvement you make today is an investment in tomorrow’s success.
How can we help?
At Johnson Associates, we understand that running your business professionally and profitably for the benefit of the current shareholders is an all-consuming priority for owners and their management teams.
Value maximising strategies result from businesses that are established and run with a focus on long term success.
We can assist by helping you to establish the systems and processes that optimise business performance and mitigate risks to help you maximise value of your business.
Disclaimer – While all care has been taken, Johnston Associates Chartered Accountants Ltd and its staff accept no liability for the content of this article; always see your professional advisor before taking any action that you are unsure about.
JOHNSTON ASSOCIATES, Level 1, One Jervois Road, Ponsonby, T: 09 361 6701, www.johnstonassociates.co.nz
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