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1. Create a Winning Environment

Happy and loyal employees create a strong company. Top management should enter into non-competitive and/or confidentiality agreements. All employees must have robust benefit plans. The biggest asset of a company is its people and perhaps they are the biggest added value.

2. Build & Hire Strong Leaders

Build a strong management team. A company with revenues of $5 million or more needs a complete team of officers and directors. The chief executive officer, CFO, sales manager, and, depending on the type of business, CIO. It is also beneficial to create a board of directors with at least two external members. Such professionalization of management can remove the stigma of a ‘One Man Show’.

The company will not only be stronger but the business value will also increase as viewed by the potential buyer. Smaller companies should also have a strong management team and it is also a good idea to set up a group of external consultants.

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3. Constantly Look to Expand Operations and Diversify

Some of the smaller firms are kept small to maximize the owner’s benefit, these are known as Cash Cows. However, if the goal is to create value it is important to develop new products or services, increase market share, expand markets or open new ones and this usually requires financial investment, but high growth rates also create value.

The value of a company can depend on its sector, its place in it, and the direction of the sector itself. How big is the industry, is it up or down, who is the competitor and how much is the company’s market share?

Companies with sales of less than $5 million and EBITDA of less than $1 million can be considered small companies. Therefore, they may depend on continuous external funding and have no critical mass in terms of buying and selling. In terms of value, these companies may be seen as smaller or punished, however, in recent years, corporate buyers and private equity firms have seen the benefits of acquiring smaller companies.

Of course, companies with revenues of up to $10 million or more and EBITDA of at least $1 million are considered strong and self-sufficient. Small businesses can be very adept at changing course and implementing change; they must be able to change and quickly move to take advantage of new markets, fill gaps in existing markets, and even add or change products or services.

 

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4. Keep Up to Date and Accurate Records

Business, financial and personnel plans must be in writing and up to date, the terms of the employment contract must be specified in writing, business plans, business goals, etc. Should also be written periodically and reviewed, contracts should be maintained on an ongoing basis.

The big problem with many small businesses is that their business is focused on one or two large clients or clients Ideally no customer or customer should be responsible for more than 10% of sales. Expanding into new markets, introducing new products, and finding new customers should be considered without straying too far from the company’s core business.

5. Build your Brand and Digital Assets

Nothing beats Nike’s name, Xerox copies, or a soft drink called Gatorade. These are household names. Small businesses may not have the branding or recognizability of the names of these companies but can work with them. This recognition is particularly strong in the field of consumer products, but franchising has extended that awareness to many types of businesses.

Common use of the property and other assets: Patents, trademarks, copyrights, alliances, and joint ventures are examples of not only property but also valuable assets in many cases. The equipment can also be used in a variety of ways. An email list is also a very valuable asset to a company. It’s important to build a list of potential clients.

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6. Be Creative with your Assets & Outsource when Possible

Large landscape companies in cold climates install snowplows in their trucks, use the available labor force and become a snowplow company for their regular landscaping clients during the off-season. Many companies rent out their office complexes, apartments, and condominiums, other properties, outsource salaries, do their jobs offshore, or use UPS for all of their logistics tasks. Since all other requirements are answered by someone else, the company can focus on what it does best.

Owners of small businesses, even large ones have a directive: “I don’t have time today; I’ll do it tomorrow” or “Now I am too busy putting out fires”, thus the real challenges of building a business and creating value are postponed indefinitely. The creation of value is critical to a company’s long-term and short-term success.

7. Sell When your Business is Profitable

The best time to consider a sale is when the business is doing well, the business is profitable and many of the above “add-value” is already in place. By contacting us, you can find out which of the above will benefit your business the most so that it is ready for sale when you do.

Are you a business owner planning to sell your business and need help with an exit strategy and valuation? Perhaps you are considering buying a business and would like guidance with your acquisition. Either way, Murphy Business Brokers in Colorado can help you find a company that suits your needs or can transition your business to the next entrepreneur. We have more than 25 years of experience in buying and selling businesses and service all of Colorado including Fort Collins, Windsor, Timnath, Loveland, & the Greater Denver Metro Area. Contact Murphy Business Brokers now for a free consultation at (720) 292-1627.

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