10 Ways to Grow the Value of Your Business

Whether Covid-19 has impacted your business or not, there are ways to improve the value of your business.  If you are looking to sell or just want to be running on all cylinders, these ten items will enhance your operations and will make you attractive in the industry and the community.    Not only is the value of the business increased, but profits follow suit with time after implementing these ideas.

  1. Invest in training programs for your people

One of the best things you can do is implement real training for your staff.  In today’s age, there are several sales management programs for salespeople, accounting systems training for your finance staff, and security training for your IT people.   If you do not have these staffers on your payroll and you do the work yourself-  fine-  then you should be furthering your education in each of these fields.   It is important for your staff (or you, the business owner) to be up to date on techniques used in today’s environment.   We grade training as high as maintenance programs on equipment (discussed later) when valuing your business.

2. Document processes in all departments and follow an ‘ISO’ outline for process management

ISO stands for International Organization for Standardization.   It’s a fancy way of saying “doing what you say you do”.   ISO certifies that a management system, manufacturing process, service, or documentation procedure has all the requirements for standardization.

Put clearer, it means your business follows a strict set of guidelines to document things like customer complaints (and how you handle them), maintenance logs, quality assurance, and inventory controls.

Even if you’re a small business you can document these things and follow your own guidelines along with an audit to ensure your staff is complying with operational guidelines.   ISO is an expensive investment- but some research will help learn the basics without immediately spending the money.

The bottom line is that ISO will help get your processes documented and reviewed.    It will also help you in the market, as most large companies won’t do business with a supplier unless they are ISO certified.

We care about documented processes in every department of your business.  If you don’t have documentation-  from employee handbooks to production controls- we will give you a noogie.

3. Buy a competitor’s business or similar operation

This is a great way to immediately gain value and market share in your industry.  If you’ve got some extra cash and looking to make an investment, why not grow by acquisition?   Acquiring another business can double your operations, and with the right staff in place you’ll be producing and hopefully selling more than you did.  Growth looks great to investors!

4. Clean up receivables balances

Cleaning up receivables (if this applies to your business) is a great way to show that you are a liquid company.   Having customers that honor their payment terms, and a system that proactively takes payments, tells any investor or banker that your business is strong in the cash game.

5. Clear excess inventory

Inventory can be a good thing until it’s a bad thing.    Depending on your type of business there are different ways to manage inventory.   Inventory is simply the quantity of raw materials, works in process, or finished goods that are waiting on the shelf awaiting processing.   Certain industries, such as non-perishables, can get away with some excess- but too much excess is tying up cash in the form of stuff on the shelf.  Only make what you need, and don’t order extra goods just because your vendor makes you a good deal this month.  We’ll ask “how do you plan to get rid of all of that product?”  If the answer is “I don’t know”…   noogie.   It counts against you when we need to add value to your business.  Have a yard sale, sell it on ebay, sell it back to your vendor-  don’t leave it on the shelf.

6. Update maintenance programs on equipment

When you buy a car, the best practices are to change the oil and rotate the tires.  Why not make sure that your equipment is kept up to date with all maintenance as prescribed by the manufacturer?   Maintenance keeps everything in line with warranties, as well as allowing it to depreciate properly.  If the equipment is valued at over $500, keeping a log of routine maintenance by a licensed practitioner will guarantee to any buyer that they are gaining equipment that works, and has value.   Remember, “an ounce of prevention is worth a pound of cure”.

7. Pay back debts

Pay the debts you can afford at higher interest rates than the returns on your investments.  That means  any credit card debt, personal loans, and unsecured debt owed in the company’s name.  This will remove notes payable and make your company more liquid-  an attractive characteristic to a buyer.

8. Have a financial audit performed and correct issues that arise

A financial audit isn’t just for publicly traded companies.  In fact, the goal of an audit is to test and stamp your financial reports for accuracy.   This credibility can go far when looking for a buyer as the due diligence process includes an intense review of your financials.   It could be expensive but budgeting for the expense annually will pay off years later if the IRS audits you, or if you’re trying to sell the business.  Lastly, the best practice is to have a separate CPA firm audit your books.  If the same CPA firm that prepares my reports is also auditing their own work-  credibility is of course lost.  

9. Review and upgrade systems where possible

Systems are a vital part of your business.   You (may) have a system for tracking sales, manufacturing process, human resources, IT, and accounting.  Your business may even be sophisticated enough to have an ERP (enterprise resource planning) system which ties all these together.   If you don’t have these systems it’s ok, but probably a good idea to implement one.   Nothing has to be wildly elaborate- many companies use Excel for a sales tool-  but we like to see systems in place.  Additionally, Quickbooks tends to be used by many small businesses today- which is fine for startups and microbusinesses- but at some point you’ll grow out of it.   Updated systems enhance the value of your business. 

10. Take out the trash

Both literally and figuratively, remove the trash from your office and operations.  When we go through a business to value it, we’re looking for the intangibles like culture, workplace safety, redundant processes, and things that just don’t make any sense.   If you have a management team that doesn’t get the job done, it may be time to upgrade.   If your people grumble about coming to work and don’t feel rewarded and motivated, we might have to make some changes.   Believe it or not, culture says a lot about your company-  and a satisfied workforce increases the value of your business.

If you or someone you know needs help, please reach out.  We’d love a conversation about how to implement any of these.

-Rob Simon | Principal, Vend Advisors

The #1 Ingredient in a Merger

People.

That’s right, it’s not about money, buildings, equipment, recipes, or products-  it’s all about people in a merger or acquisition.  

Why?

People run all of those processes.  Without people, and understanding the social and psychological issues within both the acquired and acquiring companies, the merger WILL likely fail.

Failure to recognize that a human pushes the button on the process that you’re acquiring WILL likely create bad feelings, could lead to sabatoge, and may even become an incurable cancer within the new business.   

So what do you do if you are either the buyer or seller in an M&A deal?

1. Be sure all processes in finance, operations, and sales are completely documented.
2. Align both organizations side-by-side and get to know the staff in each company responsible for key processes, including overlapping roles, vacant.roles, and/or people doing “double duty”.
3. Understand the accountability chart in each organization and how everyone reports to leaders.
4. Develop a clear plan to transfer knowledge from the acquired company to the purchasing company.
5. Create a project team to clearly communicate with team members of each organization as each step of the merger is completed.  
6. Align core people related processes- like HR handbooks, benefits, compensation, and reviews to be sure the new team is welcomed and acclimated.  

The more information the better, and transparency is key.   You’re buying a company because of the processes leading to additional growth for your current business.   Don’t be cut off at the knees because you didn’t think about the people!

Vend Advisors LLC and our sister company SharpCFO strive to deliver the most support when we are involved in a merger of any size.   We get people, processes, and product-  and our finance and operations brains are wired differently-  in your favor.  

If you or someone you know is thinking about buying an existing business, please contact us.   We have actual experience working in companies which were part of deals-  and we know how to help your people.