Why are you trying to grow the value of your small business? Well, maybe you want to sell it at some point in the future. Or maybe you want to merge it or go public with it. Maybe you’re looking for investors. Whatever reason you have, the idea is to reach maximum value growth within your company. Yet, no one will find any value in your company if your company isn’t financially stable. Inevitably, your company’s financial volatility or stability serves as an external indicator of the business’s health and well-being. So just how do you build financial stability in a small business?
First and foremost, you need to create a recurring, predictable revenue stream. Now, before you tell me that you can’t do that in your line of business, I’m going to tell that there is a way to create recurring revenue in every industry. You may have to get creative. However, there are ways for you to institute monthly, quarterly, or yearly subscriptions to a product or a service you provide.
The second thing you can do to build financial stability in your small business is to broaden your customer base. Don’t get me wrong here; I’m not telling you to market beyond your niche. I’m telling you to have a business based on more than one customer. If you have one customer who gives you 80-90% of your business, you have a great customer, but you don’t have a transferable, sellable business. Instead, work to have 800-900 customers who provide you with 80-90% of your business.
The last simple step you can take to build financial stability in your small business is to build a business centered around the team, not the owner. Oftentimes, business owners want to wrap the business around themselves. They want to be the final authority on everything that happens within the business. Yet, what happens if a passive investor purchases your business and isn’t there to answer employee questions or doesn’t know the answers to the questions? You must build a team that has learned from your sage advice but that can operate without you present.
So as you are growing your business’s financial division for maximum value, you must stabilize your finances. You can accomplish that feat by creating a recurring revenue stream, broadening your customer base, and building a team-centric business.
For more information on business finances and many other business growth articles, don’t miss our NEW series: Growing Business Value.