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Increase your company’s value

For many business owners, what happens when it’s time to do something else is as important an issue as keeping the business profitable and generating income to support their current lifestyle.

This article will cover some general techniques to increase your company’s value. Future articles will address buy-sell issues specific to the auto body industry.

There are really only three areas to manage in a business. There’s operations, marketing and finance. Everything else is a subset of these. You increase the value by improving the non-financial factors of the business. These include customers, employees, suppliers and your facility.

Marketing means generating customers. Operations is how you deliver the product or service. Finance is the tracking of how well finance and operations are working.

You can provide the best product and service but if you don’t have any customers you won’t be in business very long. Marketing starts with research. Who is your customer? You may work on hundreds of cars every year, but if they all come from one source you really only have one customer.

Next, define how you want to compete. Is it price, quality, service or value? It’s impossible to compete in all categories. This will tell you how you can market to get customers.  Your goal is to have a diverse base of loyal customers who are willing to pay well for your services. Get this part right and you’ll bring in more customers than you can handle, allowing you to raise rates and increase profit.

Operations include management structure, employees and your facility. Your people are your business. Your goal is to take off for a month or more and have things running better when you return than when you left. This is a key to increasing the value of your company, and more importantly, increasing what a buyer will pay.

Marketing and operations are rarely in sync for very long. A client improved production efficiency by 25%. Great news, but it required him to ramp up marketing to provide more customers. Of course, his marketing will produce more than a 25% increase in customers, requiring production to catch up again. It’s a fun and rewarding game to play.

Finance is important, but without the other components, there isn’t much to do. Finance tracks and records how you’re doing in the other areas. It gives you the tools to know where you need to improve.

When we value a company, we use a standard goodwill rating form. When rating categories on a 0-6 scale, we tell clients a 5 or 6 is rare. It puts you in the best-of-the-best category and requires a written justification on why your company is that good. Rate yourself on the topics I’ve mentioned here. Be hard on yourself. Discuss with your staff why you’re a 4 and not a 3 or a 5. For a list of 32 non-financial factors, give me a call or e-mail.

© Copyright John Martinka 2001-02. All rights reserved.