Accounting can be a bit dry at times, but if you are in business there are things you can do to make more money without working harder. Preparing your business for sale is one of them and here’s why. The number of times I have read or heard the phrase ‘Start with the end in mind’ without breaking it down into simple steps. I’m going to try to tell you in a short article a practical and easy to implement change in attitude that can double the value of every client you bring in.
That being said, for some business this works better and for some hardly at all. For some its easy and for others you really have to put your thinking cap on to figure out how this works for you. It is the single biggest thing you can do to make more money from the work you put in and if you get it right, this is magic.
Most businesses can be sold in some way or another. Take a window cleaning round, they sell for between 2 and 10 times their monthly turnover. That is about as simple a business as I could think of.
With that in mind if I do the things that turn my window cleaning round from a 2x multiple to a 10x multiple, every new client is worth not just how much they pay me every month. You also get to add on 10x that amount as a one off when you sell the business.
This multiple changes in every business, in mine it is around 1 x annual income. So, for every client I bring in I earn let’s say £1,500 and eventually I can sell their business for £1,500. Easy.
The trick is to make the business sellable and stretch the 1 x multiple to 1.5 x or beyond.
There’s another trick as well called ‘The Lifetime Value of a Client’ which is too big for this week, so I’ll write about that next time.
So, I promised you five easy steps to do this so here goes:
- Find out and write down your multiple (when I have looked around this looks like 1 x turnover on average)
- Every time you win a job try hard to figure out a way to sell ongoing services to the client
- Whatever you sell them add that to your turnover
- Multiply the increase to turnover by your sector’s average
- That’s the number you have added to your value
When you sell your business chances are you will only pay 10% tax on your take. If you pay, say 40% tax normally this makes the sale a lot more valuable pound for pound than the income. So, build your business with this in mind and you will potentially double your money (especially if it is a recurring sale like the other stuff you sell them in point 2.)!
Today I am helping a manufacturing consultant to make his business more sellable and double what he will sell it for. We are also working with a property developer on some pretty exciting tech for that sector.
I don’t know about you, but in my experience getting paid twice for the same amount of work is about as sweet as it gets. There’s a lot more you can do and this is part of our consultancy services if you want to know more get in touch now.
