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Does your business have a sustainable competitive advantage? Have you had the chance to look at how you do things currently? Do your actions translate into a continuous increase in your business’s value? Just because you’ve operated a certain way for a period of time doesn’t mean it’s the best way to move forward. If you’re looking to optimize and derisk your business, you have to be open to doing things differently. Any business at any point should be taking a hard look at their business model to see if they can significantly increase the value of their business. Here are four major areas to consider: 1. Build sales engines that drive repeatable and high-margin revenue Featured Video An Inc.com Featured Presentation Business owners don’t necessarily need to chase revenues on a one-time basis; they just need to establish a recurring or reoccurring revenue that can help predict future cash flows. The key is to be predictable and low risk. These two things can to increase an owner or potential buyer’s confidence and therefore will increase your business’s value. After all, the business value is largely defined by a buyer’s ability to predict its future cash flows. 2. Optimize, optimize, optimize Second, owners need to focus on optimizing every core level and process of their business. Identify activities that are not generating the majority of your profit and remove or refine them. That’s what optimizing and derisking your business delivers—being more profitable and more efficient while improving the likelihood of improved future cash flow. In my recent piece, “Why You Need to Lock Down Your Financials,” I shared that businesses should spend 80 percent of their time looking for ways to drive more business value (forecasting, decision making through scenario planning, identifying and vetting opportunities, and derisking the businesses) and 20 percent examining historical data for future improvements. 3. Enable your team execute flawlessly Let’s assume it’s difficult to execute flawlessly. Just because it’s difficult doesn’t mean it’s not possible. Build your team to pursue it and give them the technology to enable it. This is how you will differentiate yourselves in the marketplace. Stand out from the crowd by pursuing flawless execution instead of accepting anything less. A top-notch business has ambitious employees and a great customer experience. Business leaders should provide their team members with the time, tools, and technology needed to flawlessly execute core processes driving the customer experience. A high-quality team wants to delight customers, which drives enjoyment and satisfaction from their work. We want them to go home at night and feel like heroes. It’s all about setting the highest standard and finding ways to get there, instead of explaining why you can’t or they won’t. 4. Prepare for “step-change” acquisitions A step-change acquisition is a fast way to fill a gap to increase value. When you acquire a new business, you may be acquiring people with unique skills and abilities, a product or intellectual property your business doesn’t currently have, or the possibility of entering new markets that would take your business a long time to develop organically. Owners can significantly enhance their business models through step-change acquisitions. However, acquiring and integrating companies requires a different muscle. This is not for the faint of heart. Acquisitions can potentially bring a business to its knees, and owners must be ready to face this challenge to be successful. Upgrade your management team before you walk down this path. These four major areas will deliver the greatest value increase from a buyer’s perspective. Remember too, a great business you can sell is also a great business you can keep.
