If you own a business and want to sell it, you're in for a great time. Why? The economy has never been better. Investors are coming out of the woodwork to snap up companies. This is especially true in the home service industry where Google, Amazon and other big players are jumping in.
Don't want to sell your business yet? Well, here's why this is still important for you. Building a business that lasts is actually not that different from building a business to sell. Both share the same principles of building a profitable, sustainable business. Both require you the business owner to build the right foundation from day one.
To make sure your business is truly sellable, here's a few things you should consider:
1. Understand your actual profit.
To investors, you will want to say that you're worth about three to five times your actual profit, which means that you have tremendous business growth. If you do over a certain revenue, and everything was perfect, you can even get a 10-12 times multiplier in your business. The easiest way to start figuring out your actual profit is to work with your accountant, who would also know how to optimize this important figure.
2. Have a large enough customer base.
Having huge clients and contracts might be great on paper, but it could be really bad for a business when selling to investors. Why? Think about it: if you ever lose one of these big accounts, your business will start to look shaky. I get that some business models do rely on a small pool of premium customers, but it's almost better to have a much larger base of customers who won't impact your bottom line as much individually.
3. Increase the customer lifetime value.
A great 80/20 to grow your business is simply making your customers come back again and again. Now, I'm not saying you should squeeze your customers --- that's not what an ethical business would do. Instead, you should find ways to continuously add value to your customers while also making it profitable for you as well. One great example to do it in the home service industry is service plans: these agreements get you out to your customers' home more often, and also make your revenue projections more predictable.
4. Create an amazing brand.
Beyond than just making tons of money and showing the ability to do so, your business needs to have a great brand. That's something your competitors can never match once you achieve a certain reputation in your field. I know how some entrepreneurs think branding is all warm and fuzzy, but a great brand does a few things well: outstanding customer service, consistent values and principles, an exciting vision. Start by delivering quality work and service, and then get referrals from your customers. That's how you will be able to leverage on word-of-mouth marketing and start dominating your market.