As a business coach, I often ask my business owner clients the following question:  “What’s the biggest sale you will ever make?”  After thinking about their largest unsold prospect, they eventually realize that the most important sale, with the most impact on their lives, will be when they sell their company.

The next logical question is:  “Is the company ready to be sold?”  To make sure you obtain the most money for your business, it needs to be “ready” all the time!

Every decision you make should be directed toward building value in your company, so you can obtain the most value for it when you sell, even if you don’t intend to sell for years to come.

Following are five factors that will make your company appealing to an outsider:

• a healthy income stream
• a tidy profit after all costs and overhead are paid out
• a proven plan of marketing that produces consistent sales
• a strong client/customer base
• an organized, efficient work-flow system

So, here are a few helpful tips to get you started on building value in your company.

1. To have and improve your income stream you must manage your cash flow aggressively.  There are several things you can do to reduce the cash gap between when and what you pay vendors, and when you get paid by your customers.  Here’s a short list:  

• Systematize your billing/invoicing process to speed timing 
• Give 15 day terms instead of 30 days to clients
• Give 1 to 2% discounts for early paying of invoices
• Negotiate longer terms from vendors

Implementing these measures will reduce your receivables, and improve the flow of cash through your business, making it more attractive to potential buyers.

2.  Enhancing the profitability of your business requires that you clearly and thoroughly understand the gross and net profit margins of your markets and clients.  The 80:20 rule applies: about 80% of your profits are usually generated by approximately 20% of your customers.  You need to:

• Identify your profitable segments and customers and sell more of them
• Identify your unprofitable clients and fire them by raising their pricing aggressively – give these customers to your competition
• Reduce your costs of goods and/or cost of sales
• Re-quote all your service providers – phone, internet, insurance, etc to reduce your costs

This last bullet emphasizes that you must pay extremely close attention to your fixed costs.  To evaluate your fixed costs, ask yourself if the expense is helping you generate or manage revenue.  If the answer is no, reduce or eliminate the cost!

3.   An attractive business can consistently and automatically generate leads and close these prospects into clients.  Having a robust, repeatable and predictable sales process that will convert your prospects into paying clients will make any buyer more confident about purchasing your business.  Here are a few tips:

• Make sure your marketing is targeted on profitable, ideal potential clients
• Test and measure ALL your lead generation strategies to ensure that you are getting a positive ROI on your marketing spend
• Measure your conversion rates, by marketing campaign as well as by sales person through the sales process, and implement sales training or remediation efforts to ensure you’re not wasting valuable leads 

4. The degree to which you “own” your client base will greatly impact the value of your business. Excellent customer service and retention programs will help demonstrate to potential buyers that your customers will remain with the business after the sale.  Work to:

• Ensure your product/service delivery is consistently meeting or exceeding your clients expectations – “under promise and over deliver”
• Implement systems to keep in regular contact with your clients, such as newsletters and white papers on important industry issues
• Educate your clients about the full range of products and/or services so they buy more from you vs. the competition
• Use agreements of contracts where you can to tie the client to you longer term

5.  Simply stated, the more your company relies on systems to run, the higher the value when you decide to sell.   Remember…systems run your business…people run your systems…you lead your people.  If you have yet to fully systemize your business here are the four basic steps to systemization…

• Flowchart your processes.  This will show you how it all fits together.
• Document how it gets done.  Get the team member who is currently doing the job to write down every step in performing a task.
• Measure results using key performance indicators.  Get these from the person doing the job.
• Allow the system to change/grow as your business changes and grows.

Service providers beware: The more the business relies solely on you, the less valuable it is.  Your “irreplace-ability” may do wonders for your ego but little for your pocketbook when it comes time to sell the business.

Focus on these 5 areas, and you’ll enhance the value of your business! 

It’s never too late to set your business up as if you were going to sell it…that way you’ll be ready, should the need arise, rather than regretting what you might have done.

Marc Tannenbaum is a business coach with ActionCOACH of CT.  For more information about ActionCOACH’s programs, business leadership materials and coaching career opportunities, call 203 210.7003 or visit www.ActionCOACHnow.com.