How to grow a high profit, high value business by Harvest Business Advisors, Business Brokers, Investment Bankers, and Business Valuation Experts
I am often asked “What is a good business to buy now?”
I’m not sure I know what a good business to buy at any given time is. I do have some ideas on what it takes to grow a highly profitable and therefore highly valuable business quickly. Five tips for growing a high value high profit business quickly are:
1. Be highly profitable. Cut expenses. Keep things tight. Some business owners are magicians at this. Learn to do more spending less.
2. Find a niche where your customer base repeatedly needs the service and tends to come back to you. Tax preparers, software as a service, and commercial insurance brokerage companies have this one figured out. Having a book of business where 80% or more of your customers are coming back increases value and peace of mind. The ability to maintain customer, revenue, and profit continuity or growth is what drives business value.
3. Find a niche where the cost of the initial sale is low compared to the capital investment and profitability of the work. Usually this involves providing a service as services can be provided with small capital investment outlays and cash on cash profitability can begin quickly.
4. Create systems that meet the standard, “Average people can get extraordinary results every time”. Then train, train, train. For many businesses, particularly businesses with repeat customers quality service is the best marketing.
5. Lock in your key people with stay agreements or other forms of golden handcuffs. This works both for current value and if you have planned or unplanned succession issues.
Many business models and industries will not allow you to meet these five steps. That does not mean it may not be a good business choice for you. It just means the business will not grow in value as rapidly as other businesses might. Find a business that meets the criteria and then follow these five steps to build the business with a firm foundation. That is the way to rapidly creates and maintains high business value.