A successful business is built on solid systems and positive cashflow. What steps do you need to start taking today?
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How valuable is your business? Does it depend on your social media following? Does it depend on your sales? Does it depend on the leadership?
Have you ever attended an auction? What is so intriguing are the various prices being bid on the same item, depending on the value that the bidder places on it. The bidder usually knows the value of the item or even the origin of that item and the potential value for resale.
Different values are placed on the same item dependent on the value that is perceived.
An unknown quote highlights that a ball in a famous person’s hand will be worth millions more than a ball in a non-famous person’s hand.
So what is used to determine how valuable your business is? What is key when it comes to creating a business of value as well as one that is recession proof?
Related: 9 Smart Ways to Recession-Proof Your Business (Fast)
Your business value is dependent on key foundation criteria and it is critical that as the business owner you are constantly ensuring that the value of your business in increasing.
Creating value in your business is very key to longevity and survival. Having a valuable business does allow you to be more competitive, readily be sought after and seen as the icon for setting standards in the industry. Creating that business of wealth should be a goal as a business owner/CEO and it will help you shape strategy and goals for your business.
Related: Why Valuing Your Business Can Enhance Its Value
5 key steps to build your business value
1) Manage your cash flow to ensure your business is cash positive
Cash flow is the lifeblood of your business. Richard Branson says, “Never take your eyes off the cashflow.” There are several strategies to manage cash flow and of course it will depend on the stage and state of your business–a key strategy is to ensure that your cash balance in terms of day’s sales is at a very healthy ratio!
2) Ensure you are creating standard systems and operating procedures for your business
Do not make the mistake of operating your business in your head. How long could your business survive without you? Do you have effective systems that are constantly improving the operations of your business? If not, it is time to start setting them up, then automate and incorporate software as needed.
3) Decide from day one what is your plan of exit or succession plan
At any time your business may be approached by a buyer or investor and it is best to be ready. Also, it helps to get things into perspective for your family or estate. How is your business set up? What are the tax implications for your estate? Do you have a flow through to separate personal from business assets? These are some key questions to start and to assess where you are as a business and your direction in the future.
4) Reduce the riskiness of how your business operates
This is not about your business venture or offerings only. This relates to how is your business operating. For example, do you have a gorilla account–most of your sales from one main client or customer? If so, that is a red flag to be addressed. How secure is your data and information? How strong is the vulnerability of your business to fraud.? These are some areas that impact how high your business risk is.
5) Review your business numbers and reports
To do this you first need to have business reports and numbers to review in your business. Investors and financial institutions will ask for your financial reports to access the strength and estimated longevity of your business. Reviewing your business reports is very important and will ensure you are prepared for growth, and of course equips you with key information. Understanding key reports and statements in your business will help you as a business owner. Regular review of the numbers will help with reshaping strategy as needed and being proactive with certain decisions.
Ensure there is also a tax plan in your business. This is not just having your taxes prepared but having a tax plan that allows you to save taxes from various means. A tax plan should be an integral part of your business plan and strategy as soon as possible. Tax plans also change as tax laws change, and as the business grows and experiences change.
A successful business is built on solid systems and positive cashflow. What steps do you need to start taking today to start building your business of value plus being recession proof?
Related: Business Valuation Is Not Just A Number, It’s A Story