5 Ways to Improve the Value of Your Transportation Business
Whether selling your business is in your 1, 3, 5, or 10 year plan, it is always important to continually focus on improving the value of your business. And, yes, there are many ways to improve the value of your business in a down economy. Here are five to get you started.
Processes, Systems, & Procedure Manuals If what makes your business work is not clearly organized on paper, you are missing a chance to improve the value of your business. Processes, systems and procedures manuals help improve the value of a business in several ways. Once a process or procedure is established and documented, a business now has the ability to measure and refine that process. The attention to the small details of all aspects of running a business pays dividends on the bottom line while running it. A buyer will expect to see the demonstration of that attention through processes, systems, & procedures manuals and will be pleased to pay for it.
Make Sure Your Best Clients Really Are Your Best Clients
I read an article this past week in Inc. Magazine about a young business owner who discovered that he was losing $50,000 per year on his “#1 account”. He had two options: Drop the $300,000 per year account and create $4,000 per month in new cash flow or go work out a new service agreement with the 10 year customer. The owner eventually worked out a new agreement that adjusted pricing to current industry standards. Although disappointed to see significant discounts end, the customer was happy to make changes because he knew he could not get the same value elsewhere. Ensuring that you are maximizing the profitability of key customer relationships will improve the value of your business. Eliminating customer relationships that cost you money will also improve your business value. *The above change of just $4000 per month in cash flow could have improved the value of the owner’s business by as much as $144,000 to $200,000.
Multiple Points of Contact and Non-Competes
Make sure your customers are accustomed to dealing with multiple points of contact from your business. This creates stability for the future of those relationships should their ever be a change in ownership. This puts future buyers at ease and raises the value of the business. How easy can your employees quit and compete directly against your business? Do you have non-compete or non-solicitation agreements in place. The more protected your business is from your own employees, the more valuable it becomes to a future buyer.
Financials Organized and Updated
The ability to obtain the most current financial information about your business at the push of a button gives owners the ability to make necessary adjustments and timely improvements. If you do not have this ability, you are missing an opportunity to increase the value of your business. The absence of this ability communicates to a buyer that you are not serious about the financial management of the business and you may not even know what problems may exist in the business. No future buyer expects you to have a perfect business. But if you can present the current and past financial performance with perfect clarity, you will improve the value of your business.
Clear Plan for the Business’ Future Economic uncertainty can inhibit planning for the future for business owners. But there is always uncertainty. Be proactive. Make a business plan that addresses multiple “what if” scenarios with appropriate plans of action tied to each scenario. This will increase the value of your business in two ways. 1) Thoughtfully developing a plan to succeed moving forward will likely help you uncover and address some of the problems of your business that were hidden in a pre-recession world. 2) If you were to engage in discussions with a buyer for your business, having a well thought out business plan for the future makes your business far more attractive and valuable than a business whose plan may be “riding this storm out to see what happens.”
