It is important for business owners to realize the decisions made today will gravely impact the value of a business down the line. It may surprise you to know the decisions with big long-term value are actually pretty simple, and if handled strategically can significantly boost the net worth of your business—and your personal balance sheet, too.
Here are five actions every business owner needs to take to reap their long-term benefits.
1. Hire people who are smarter than you.Invest the necessary time and money to find and properly train the individuals who will become top managers in your company. The people on your staff are just as important—if not more so than the product or service you are bringing to market. Your leadership team will make a big difference in the total valuation of your company, particularly in the eyes of a buyer. Be sure to have a solid team in place and do what it takes to keep them there.
2. Iron out all of the business details. Your company's operation and processes must be streamlined and appropriately documented. Additionally, establishing an efficient reporting system early on allows you to monitor progress and ensure you meet benchmarks. Getting organized and systematic from the outset eliminates a big headache when you need to share this information and performance with stakeholders and buyers.
3. Expand your reach. As your company expands, so too should your client base. In other words, the majority of your revenue should not be coming from a single customer or account. When your business is being courted by acquirers, they want to see a diverse client base, each of whom account for no more than a small percentage of your revenue.
4. Play defense with your ideas. Having created the business from scratch, your intellectual property is woven throughout the firm's processes and output, and experts agree that it is something worth insuring and protecting. You can limit access to particular information or enforce non-disclosure agreements with employees.
5. Tap third - party experts. If your business comprises most of your net worth, you are not alone and in fact, this is the case for most entrepreneurs. Though it may seem out of reach, planning your exit as early as possible is a smart business move. The right experts—including CPAs, attorneys, financial planners—can set your business on the right path to reach profitability and steadily increase value for the most lucrative sale prospects.
Building a successful business requires a balance between achieving short- and long-term goals. As you set and quickly meet immediate objectives, maintain a longer time horizon on the goals that need time to develop. While it may be easy to put these decisions off, taking a step back to consider how decisions you make today can impact your company's distant future is the smartest business move any entrepreneur can make. Your business won't be built overnight and likewise, your net worth needs time to grow.