Exit-Ready? 3 Rapid Steps to Maximize Your Business Value Now
Increasing the equity value of your business can be done in many ways. What are the fastest ways to start increasing value right now? In this article, I break down the three ways to increase your business equity value fast.
Fast doesn’t mean the most powerful tools you have available. Those are usually increasing revenue, profitability, and growth rate. However, those often take longer to create and if you want to start moving the needle right now we need to look in other areas while you continue growing the business. The three fastest ways to increase your business valuation are:
- Remove yourself from roles in the business
- Ensure your financials are clean and easy to review
- Secure your intellectual property
Remove yourself from roles in the business:
What are the key roles that you play in your business today? Can those tasks be done by anyone else on your team? Do you have clear processes in place to allow someone else to do them? When you exit your business the buyer is purchasing the future cashflows of that business along with the potential for growth. Anything that will disrupt those future cashflows decreases your equity value. Unless you want to remain with the business after you exit you need to start transitioning the work you do inside the business to other people. Make sure there are clear standards and rules for how to do what you do and work on training and supervision now. This frees you to focus on not only growing the business until you exit but also being minimally involved after the transition.
Ensure your financials are clean and easy to review:
Think of a restaurant with a messy entry area. Dirt on the floor and disorderly. What are you wondering at that moment? I would guess you are wondering what the kitchen looks like and maybe change your mind about eating there. Your business financials function the same way. If they are disordered and contain inconsistency, it drags down the value of your business, and even worse, gives potential buyers reason to doubt the value of your business. Start fixing this issue today with a bookkeeper, fractional CFO, or your CPA team. Having clear financial systems is imperative when you want to exit and makes it easier to grow your business today.
Secure your intellectual property:
Trademarks, copyrights, and patents are only part of what you need to consider when securing your IP. Think broadly about your contracts with vendors and customers. Think about your employment agreements and business operating documents. Each of these areas governs not only who owns your business practices, brand, and inventions, but also who owns client relationships and data. You can secure these things with non-compete, non-acceptance, and non-solicitation agreements. Non-disclosure and non-disparagement agreements play a role in various cases as well. Your IP attorney can help secure many of the critical pieces of your business, engage with your general business counsel, and look for risks to your business in the other areas listed here. A business that can protect its IP is more valuable and easy to transfer than one that can’t.
Growing your business and making it more profitable are the foundations of business value but the three areas listed here can either add or take away from that value significantly. Each of these areas is also totally under your control and something you can start working on today. Get going!
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DISCLOSURE: Jarrod Musick is an officer of Destiny Capital and Entrepreneur Aligned, a DBA of Destiny Capital. This article is for informational purposes only and should not be relied upon as a basis for your investment, business, or personal financial decisions. We recommend consulting with your wealth advisor, CPA/tax advisor and/or attorney, as applicable to your situation, prior to implementing any new tax, legal, or investment strategy. Advisory services provided by Destiny Capital Corporation, a Registered Investment Adviser.
ABOUT JARROD
Jarrod was born into financial planning and solving financial problems. With his financial advisor father Steve telling stories about finance around the dinner table from an early age, the idea that everyone has a different financial situation was always there. After an early professional career spent in nonprofit and government, Jarrod came back to his roots helping people plan and invest in 2011. Since then, he has worked with individual clients, led internal teams and ultimately became partner and the CEO of Destiny Capital in 2017. With a passion for helping entrepreneurs change the world, Jarrod ultimately oversaw the creation of Entrepreneur Aligned in 2020. With both Destiny Capital and Entrepreneur Aligned, Jarrod leads teams that help people live lives of abundance where money is simply a tool to let everyone be a positive force for the world around them. When he isn’t working with the talented teams for EA and DC you can find him chasing his twins, wily trout or a podium spot at an OCR race.