In this article we continue our discussion on ways to increase your company’s value. Unlike our earlier piece on Curb Appeal projects where we listed 22 quick ways to polish the company’s appearance, here we tackle 17 “Renovation” projects. They take longer but deliver big-time. They do so by modernizing and streamlining your business’ underlying infrastructure. Some Renovation projects are so important that if they’re ignored you may find it difficult to sell the business at a fair price or even at all.
Forbes and Class VI Partners generally describe Renovation projects from the perspective of why you should do them. While that’s valuable as an incentive to take them on, we take a more granular approach. We itemize what specific steps you need to take in order to complete them.
Now… the Renovation Checklist
- Upgrade IT/control systems. Can you slice and dice your client data to show their retention, margin, revenue size, growth over time, location, industry, etc.? And then apply that data to guide the growth of your business?
- In a related point, do you have a management dashboard you can use to monitor key metrics (KPIs) in near real-time? Metrics like sales volume, margin, progress toward strategic objectives (e.g.,
increase the sales of a new product, reduce the number of marginally profitable and unprofitable clients, etc.)? - Maximize cash flow by streamlining and automating accounts receivable and accounts payable processes. Reduce days outstanding for both A/R and A/P in order to “right-size” net working capital (NWC). (To the degree that your NWC is insufficient, it will ding the value of your business dollar-for-dollar.)
- Reconfigure production processes to enhance efficiency and economy.
- Look for better automated solutions and new suppliers to improve the cost and speed of service and product delivery.
- Launch a new marketing/sales campaign.
- Launch one or more products or services to prove that they represent new paths to growth.
- Ease out less productive and/or overpaid managers.
- Identify and groom a potential successor.
- Exit from slow-growing or unprofitable products/markets.
- Divest unrelated businesses.
- Reduce the number of shareholders and board members for quicker, more unified decision-making. They can become cumbersome, even obstacles, when negotiating terms with acquirers.
- Salt employees as officers throughout leading trade groups.
- Whenever possible, replace non-assignable or conditionally assignable client and supplier contacts with freely assignable contracts. Doing this in advance of selling a business can enhance its value substantially.
- Revisit and negotiate more advantageous supplier contracts.
- If office/factory space is tight, get options on larger facilities and/or negotiate shorter-term leases with the option to renew.
- Reduce client concentration: keep single clients below about 20% of sales. You don’t want four clients together to account for more than about 30% of sales.
increase the sales of a new product, reduce the number of marginally profitable and unprofitable clients, etc.)?Wrapping It Up
While the number of Renovations projects we list to increase your company’s value may appear daunting, each one is discrete. You may also find that some of them are irrelevant to your business. If you’d like
to chat about some Renovation project ideas customized to the unique needs of your business, get in touch through the contact form at the bottom of our website.
In our next article we discuss ways by which you can determine whether the time is right to explore the value of your business in the market. Check out When is the Right Time to Sell?
