Add Value To Your Business
If you’re like most small business owners, you started a business because you have knowledge and skill in a particular industry, and wanted more personal freedom. Its also likely that you started without a clear vision of the business you were going to build, and continued to practice your profession with the trappings of your business assembled around you. As your business grew, your responsibilities grew in parallel so that now, in addition to your original trade, you are also responsible for human resources, sales and financial management.
E-Myth advocates off-loading these responsibilities to well-documented systems, and recommends setting the strategic goal of adding value to your business. Your business’ value is dependent on long-term profitability, and you need thoughtful strategies to be successful.
The Owner’s Two Roles
A small business owner is an investor and also the CEO. From a financial perspective, the owner is an investor who wants a positive return on invested money, time and work effort applied to the business. The CEO has a professional and fiduciary responsibility to shareholders to profitably grow the business.
While both roles want overall success, conflicting short-term interests may certainly occur. An investor may become impatient, and want more money from the business as a return on investment. This reduces the amount of capital which would be available to the CEO to build additional business infrastructure.
Its useful to recognize the two roles, to be aware that long-term objectives are the same, and to make decisions that take both perspectives into account.
Maximize Value
Maximizing the company’s value should be a central goal as it serves the needs of all involved parties, including investors, managers, employees and customers. To obtain maximal business value, an owner should objectively answer the following questions when implementing business strategies;
Optimize The Owner’s Investments
Ask yourself ‘How can I achieve the greatest return on my money, time and efforts? ‘ Answer as if you had no personal connection to the business
Optimize Revenues
Ask yourself ‘How can I create new revenue opportunities and improve profitability of current revenue streams?’ Answering ‘more sales’ is obvious, but factor in an optimal balance of total revenue and profit so that each revenue dollar generates maximum profit.
Acquire Appropriate Debt
Borrowing money can provide you with needed capital and doesn’t dilute your ownership percentage. If you are considering raising capital by bringing in other investors, be sure to evaluate low-rate loan instruments as well.
Systemize Your Operations
Creating systems to manage your business has value beyond operational efficiency. Documented systems support a consistent customer experience, facilitate employee training, define standard operating procedures, and add inherent value to the bottom line.
Minimize Expenses
Money not spent goes directly to your cash reserves. Look for ways to save on production, distribution, advertising and customer service
Minimize Taxes
A good accountant will do more than prepare your tax returns; she will explain the tax implications of your business strategies and decisions, reduce your tax exposure, and become an invaluable asset to your business.
Expect The Unexpected
Have necessary insurance coverage in place and set aside an emergency cash reserve so that unforeseen events don’t take the company down.
Focus on fundamentals that add real value to keep your business resilient in the face of changing economic conditions.
