CLIENT KNOWLEDGE BASE

    Part 2: Built to Sell

    Welcome to the Anomaly CPA "Built to Sell" series, a journey designed for small business owners eager to understand, grow, and potentially prepare their businesses for sale. 

    If you have not reviewed Part 1, please do that first!

    In Part 2, we are going to dive into ways that you can increase your business' valuation over time.  This is based on current market data, conversations with buyers, and our experiences helping clients sell their businesses.


    1. 1

      Increasing the Customer Lifetime Value:

      Increasing the lifetime spend of your customer or their "lifetime value" is one of the easiest ways to increase your overall enterprise value.  Here are some proven ways to increase CLV:

      • Constant Customer/Client Feedback:Implement feedback loops to continually gather and act on customer feedback, improving product or service offerings and customer service processes. 

        • A top notch customer experience can increase retention rates and therefore the CLV. 
        • You can do this though set check ins, using a simple form based survey or even specialized CRMs.

      • Increase Cross-Selling and Upselling: Develop strategies to offer additional products or services to existing customers that are directly paralell to what you are offering as your core product or service.  

        • Examples:
          • A Marketing Agency that begins selling app development services through a partner in a revenue share model.  This will create a one stop shopping atmosphere for your customer and potentially increase their revenue to you as well if you intregrate a revenue share model. 

      • Implement a Subscription Model: If applicable, transition to a subscription-based model or offer maintenance contracts to create a stable, recurring revenue stream. This approach not only ensures predictable income but also deepens customer relationships over time.  We often hear that subscriptions will not work in a given industry.  However, we have seen almost every industry touch the subscription model, including non traditional industries such as:
        • Primary Care Physicians
        • Lawyers
        • Electric

      • Loyalty Programs: Create loyalty or rewards programs that incentivize repeat business and enhance customer retention. These programs can offer discounts, exclusive access, or rewards for referrals.  For example, for each customer your current customer refers, they can receive a free unit of service or a promotional product.
    2. 2

      Reducing or Removing Owner Dependency

      From discussions with buyers, they will almost always put a higher multiple or value on businesses that have a low "key man" risk or a lack of owner/CEO dependency.  This is not an easy item to fix but with small incremental steps, you can DRASTICALLY increase your enterprise value, if that is your goal.

      • Written Succession Plan - buyers will want to see that you have formally documented a succession plan that includes how the business would run in your or the key manager's absence.  From our experience with Anomaly clients, this does NOT have to be a fancy document.  Just start getting your thoughts on paper.
      • Baseline Systems Documented - less is more here.  Consider mapping out the key functions of your business and writing very simple Standard Operating Procedures that capture the functions.  Do not worry about every fine detail when creating these.  A buyer will want to see the general guidelines for each function vs a 100 page manual for every department.  
      • Cross Skilling - this refers to the process of training employees to develop skills and knowledge outside their primary area of expertise. 
        • This approach enables individuals to perform a variety of tasks and roles within an organization, increasing their versatility and value to the company. Cross-skilling is often used as a strategic tool for workforce development, aiming to enhance operational flexibility, employee engagement, and resilience to changes in demand or staffing.
        • A buyer will be satisfied if ALL positions have at least one "backup".  For example, is the Manager the only person who can do XYZ task?  If so, the buyer will but a key man risk devaluation on this piece of the business.  
      • Consistency & Automation - automate where possible, but there is no need to go overboard.  Buyers, especially in the private equity world are looking for consistency in your staffing, relationships and vendors.  
        • As you can see, the general theme in Built to Sell Part 2 is consistency.  A buyer wants a level of assurance in the cash flow they are buying.
        • Vendors - maintain consistent relationships which leads to price assurance and service assurance
        • Staff - buyers will want a well trained, long term staff
    3. 3

      Wrapping up Part 2

      Consistency is king!  After being involved with multiple transactions (on both sides), we can say with a 100% level of assurance that buyers LOVE consistency.  Chaos, turnover, key man risk and low LTV will lead to a bad deal or even worse, no deal at all.

      Please reach out to discuss any of these improvement mechanisms more in depth.  We love positioning small businesses for sale, whether it is today or 20 years from now!
    If you still have a question, we’re here to help. Contact us