Sales Tips for Driving Business Valuation

A reader writes, "I'm in my late 40's and the owner of a small business - with no plans to sell for at least 10 years.  When I do sell, I don't want to say, 'I wished I'd known (fill in the blank) 10 years ago. If I had, my business would be worth a lot more today.' When it comes to sales, what advice can you offer to business owners wanting to get the maximum value when they do sell?"

For a knowledgeable answer to your thought-provoking question, I turned to business broker Chris Bond, Area Director for Murphy Business & Financial Corp.

Chris says, "As a business broker, I sometimes have the unenviable task of breaking bad news to my small business owner clients, namely that the company they've worked so hard on (and in) isn't worth as much as they had hoped."

You Are a Salesperson

"There are several things an owner can do," Chris says, "but first off, accept that you're a salesperson."

He goes on to explain this means you may want to have a sales metric by which you measure the success of any given day, week, and/or month. Did you book an appointment for a new opportunity? Did you contact five latent clients with an unexpected thank you for past orders?  Perhaps you did something nice for someone knowing that a referral for you could result at any moment? As we all know, it's the little things we do that tend to add up to a lot of business.

"Which is more important," Chris asks, "avoiding the disappointment of hearing 'no' from a sales prospect or running the risk of delaying retirement for years? An owner who wants to eventually sell the business is wise to work on proactively selling his or her goods every day.  Those who don't do this run the risk of saying they coulda / woulda / shoulda boosted their profitable revenue while they had the time and energy to do so... and then miss the opportunity to enjoy their retirement while healthy."

Involve all Staff Members

All that said, be sure it's not just you doing these healthy selling behaviors.  You'll benefit by having your whole staff understand that there are sales opportunities all around if they have alertness to that fact. Your office manager can ask a caller if there's any other help needed; your service tech can keep an eye out for cross-selling opportunities; your driver can ask for referrals to neighbors who could very well be new customers.

Build a Sales Team

It's ideal if you actually build a day-to-day sales staff, as hard as that can be to execute. Business buyers are keen to understand how likely the sales effort will survive your sale of and transition out of the business, so having a productive sales team goes a long way toward allaying concerns that you are the business.

Watch the Percentages

One drag on business value occurs when the company is beholden to one or two major accounts. If you step outside your day-to-day role and think like the potential buyer of your own business, strongly consider the risk profile of the customer mix. If any one account represents more than 20 - 25% of the revenue pie, it's likely to hurt the perceived value of the business. Ideally, no one client will make up more than 10% of the mix; if this isn't your reality it may be time to set a goal to capture enough new business in the coming months to improve the look and feel of your revenue stream.

Final Thoughts

Sticky, dependable top-line revenues are of course only one factor for a business that will likely be acquired.  Other factors are historical profits; the supplier mix; the state of the economy in markets served; the management team and its likelihood to stay on post-transaction; and competition, among other major factors. But if there is but one thing you can do today, try a positive change you can make to enhance revenue, with an eye on always trending upward.  You - and your eventual buyer of the business - will be glad you did.