What are the things that drive the value of your business, and how can you make a positive impact on the worth of your business? Today we’re continuing our series on business valuation, and focusing on the main drivers so you know the right action steps to take to reduce the risk rate inside your business.
How many customers, vendors, or employees your business is dependent on is going to greatly impact the valuation of your business. This dependency can become problematic and increases the risk rate of your business. You may have a star employee, but having one person generate most of your sales is not great for your business.
The same idea stands for any business that is heavily reliant on one vendor. Vendor concentration is more important now than it used to be in previous years. In our post-covid world, vendor diversification is crucial to getting what you need to continue working effectively as a business.
The other important aspect to understand is how much the business depends on you as the business owner. Being involved in the day-to-day tasks of your business is not good for your business valuation. You want to be working on your business, not in your business. If you can’t go on vacation and turn off your phone without worrying about your business, you have a hub-and-spoke problem.
A great place to start improving the valuation of your business is to build a system and process that allows all employees to be great at what they do. If you see an employee exceeding above and beyond their peers, figure out a way to capture this in your training to bring the whole team up to the same level.
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