As 2019 closes and we ready ourselves to embark on a new year we thought this would be an opportune time to ask a simple question…”do you intend to GROW or ADD VALUE to your business?” Although one should never “assume”, we will assume that your answer is “yes”. Great, we have the first basic question out of the way. Now, a more difficult question…”do you have a PLAN to grow or add value to your business?”
No assumptions made for that question. My conclusion, is that if you are an entrepreneurial, single owner business or partnership generating $1m-$15m in revenues annually the honest answer is “no” or more respectfully probably not”.
If you can honestly answer “YES” then stop reading and go execute the plan.
If you answered “NO”, then read on.
Since this is the season of “giving” (or in some cases “taking”), we would like to give you with 3 simple strategies to grow or add value to your business.
1) Create a Pricing Strategy for 2020 - Like most small business you have not increased customer pricing in years for products or services beyond those you may have passed on to cover basic increases in raw costs. You are a “profit” organization so get profitable.
Start by creating a list of your top 25 customers or top 5 product/service offerings and look to increase pricing by 5%-7%. Don’t just do it, have a communication plan to justify the increase such as to maintain quality of products or services, operating expense increases, adding people resources to the customer relationship. The one caveat to this is that you must be delivering high quality to your customers, if not then fix that first.
Do the math, if you have a $1m business and the above grouping represents 70% of your revenue ($700,000) and you increase by 5% ($35,000), each year for three years then you have created a potential value increase of $267,750 to your business (assuming a 3x multiple minus a portion for actual expanse contribution). You still have the responsibility of managing costs to realize the full value of the increase.
2) Get Contracts – the days of handshakes and purchase orders are over. Get your clients under contract. Don’t buy into the fear that they will not sing one. Sell it and protect your business and insulate it from competitive pressure. It’s an agreement when you are presenting, it’s a contract when you need to enforce it. A one (1) year contract with a thirty (30) day termination clause without cause is NOT A CONTRACT, it has no value to your business. Create a solid three (3) to five (5) year agreements with a termination clause with cause and be sure to include a cure provision that resets and cures the potential default. Now that adds value to your business and protect your client relationship from competitors. The difference in value will be significant with these contracts.
3) Be a Brand – Spend a little money to create and promote a client facing brand. Be bold, be colorful and even create a jingle. We live in a visual world. Your messaging must be memorable and immediate. Start by adding a logo to your email signatures, a quarterly email messaging campaign, and if you are a service company please brand your trucks and my gosh have your staff wear professional looking uniforms with name badges. At least make that happen. You need to take your image seriously if you expect your employees and most importantly your customers to do so.
If you want to grow and add value to your business then do challenge yourself and your organization to get increased pricing, get contracts and establish a brand. It is work and requires confidence, planning and even some risk. A successful roll out of these three actions can result in a 71% increase in business value or more.