It’s the million-pound question, possibly quite literally… how can I increase the value of my business? There’s a lot of advice out there, but in these next two blogs I want to take a look specifically at how you can increase value in a post-lockdown world.
There are four things that I want to address: recurring revenue, intellectual property, securing revenue and autonomy.
1. Recurring revenue
There are some businesses for which recurring revenue is a natural thing and an expected business model. It has become commonplace these days for software to be supplied on a subscription basis for example. For these businesses, our advice would be more focused on securing that revenue, which will be covered in the next blog.
But what can you do if your business model doesn’t immediately lend itself to a recurring revenue model? It’s time to get creative! Here are some ideas:
- Spreading the cost:
The example of software has worked well because it has taken a potentially large capital cost and spread it out for the customer. You benefit by having a recurring income, but they benefit too by easing pressure on cash flow and ensuring the software is up to date.
- Added benefits:
Your main product / service may not work with a recurring model, but are there other things you can offer to loyal subscribers? For example, you may be able to offer priority support, exclusive offers, events, faster delivery, special products etc…
If your existing service or product isn’t suited, perhaps there are other related services you could offer that would give you this opportunity. For example, a high-end house builder I have worked with in the past set up a home concierge service. The idea was that for a monthly fee, they would do everything from gardening and preventative maintenance to cleaning and small repairs. This meant they got the one-off income from building the property but also a recurring income from helping their wealthy but time-poor clients maintain their homes.
Retail is probably one of the hardest industries to generate recurring income, unless your product is so niche you are the only supplier. Loyalty programmes have been successful for big chains, supermarkets in particular, but they shouldn’t be discounted for smaller companies too. Have a think about the sort of benefits you can offer loyal customers – they don’t have to be financial, or particularly onerous. Often relatively inexpensive options like extra support, priority access or exclusive content can engender a feeling of loyalty in customers.
One of the most important aspects of recurring revenue is being able to demonstrate it to a potential buyer. Even if your customer base is already very loyal, having a programme in place that allows you to show a buyer where and how that revenue is generated will have a significant impact on valuation.
2. Intellectual property
There are three steps to ensuring you are getting maximum value from your intellectual property (IP); recognise, protect, celebrate…
Recognising it is probably the most challenging of these steps as most people think of patents or global brands and trademarks. Don’t underestimate the value of your brand though, it might not be a household name but if your clients recognise it and attribute value to it so will an acquirer. But what about your procedures and methodology? What about the company’s expertise and knowledge gleaned over years as a specialist in one specific industry?
We would recommend speaking to a specialist once you have identified possible areas of IP, some have strong legal protections and others are more vague. IP insurance is also available to mitigate against the cost of any claims – anything that reduces risk in the eyes of a buyer will place an upward pressure on valuation.
The value of good advice
I have tried to give some examples above to get you thinking, but of course every business is different. There is no magic wand or one-size-fits-all approach, so one of the best things you can do to increase value is get the right advice. A company like Entrepreneurs Hub will make an honest and pragmatic assessment of your business and give you solid advice on what your business might be worth now and how you can increase that valuation. It doesn’t stop there though because Entrepreneurs Hub will work with you to implement a plan to achieve the value you want.
Entrepreneurs Hub can also introduce you to the best legal and wealth advice around, meaning every aspect of the process is covered and you are surrounded with a strong trustworthy team.
Why not give us a call if you are thinking about selling, or would like to know how you can increase the value of your business?
If you would like a free business valuation or find out how saleable your business is please do contact
Contact us in confidence anytime on:
Malcolm Murray – 07899 913220
Tim Allaston – 07785 996300