9 Ways to Increase and Protect Your Business Value

9 Ways to Increase and Protect Your Business Value

Mary Guldan-Lindstrom Focus CPA 0 Comments

9 Ways to Increase and Protect Your Business Value - Focus CPA IncAn entrepreneur can spend years starting and building a business.  For many, we live and breathe our passion, put in long hours, and give up being with family and friends. You can invest your blood, sweat and tears trying to increase and protect your business value.

Consider these odds: one out of two businesses never returns to the marketplace following a major disaster. Of those that do, half go bankrupt within three years. The ones that survive plan their response to a disaster before it strikes.

We may be hoping to be the next Mark Zuckerberg or just find that pot of gold at the end of the rainbow. Are you prepared?  What does that pot of gold look like?  When is the right time to start watching for it?

Here are 9 ways to increase and protect your business:

  1. Plan your exit now!  It doesn’t matter whether you plan on selling the business to outsiders, passing it on to a family member, setting up an employee buyout, or just generating cash.  Determine your desired outcome.  Your business may be a great option for someone or be a great add-on for an existing company.  Knowing the desired end result makes it easier to determine your daily decisions.  It removes the wasted time of indecision.
  2. Be prepared.   If you’re not available, who will make decisions on the company’s future? Who will implement them?  The value of the business will drop quickly.
  3. Have good financial records.  The financial records tell a story; have them tell a story with a reliable, consistent and positive financial ending.  Know who your customers are, clearly identify revenue streams and costs.  The financial records can tell you when something is going astray.
  4. Keep the accounting records clean.  Keep your personal financial activity out of the business.  Report all income.  Make sure the business is in compliance. A tax audit can wipe out the financial reserves.  Pay yourself at least a fair wage.
  5. Diversify your investments.  Create an alternative income source outside of the business.  Fund a retirement account, own commercial real estate, create passive income stream, etc. It will take the pressure off one source. Diversification provides choices, choices to recover from a recession, key management changes, security breach, etc.
  6. Have the business work without you.  Can you take off on a one week, two week or a month long vacation? If not then you have a job, not a business. If you are indispensable, how is someone else going to get value out of it?
  7. Ownership agreement. If you have other owners, it is critical to have an ownership agreement in writing and a way to fund it. If you don’t have other owners, have an emergency business succession plan. The value of the business can decrease quickly if leadership falters.
  8. Have written policies and procedures. Strong consistent financial results increase the value of the business. Consistent application of policies and procedures provide consistent results. Writing them down assists in maintaining the income it generates. Long term customer contracts, alone, can increase the value of the business.
  9. Plan as early as possible.  Once your plan is in writing, update it annually.  Evaluate the likelihood and consider other possibilities.

It takes just a little time to protect your business verses the years that are spent building it.  Take the initiative to maximize and leverage your time, energy, blood, sweat and tears.   Instead of hoping for the pot of gold at the end of the rainbow – visualize it, prepare for it and expect it.

At FOCUS CPA Inc. we are here to help – whether it be brainstorming, documenting, cleaning up the financial records or providing focus to get it done. Contact Mary today [email protected] to put your plan in place.

By Mary Guldan Lindstrom, CPA

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