We are progressive, proactive and professional in providing our clients with a different approach to business advice and accountancy.

Increase your business value without you!

As business owners we often want to feel essential to the success of our business.  Some common quotes from business owners are:

“My Customers are totally loyal to me”

“I am the face of my business”

“My clients will only deal with me personally”

Whilst in part these statements may be true, they may not in fact be a good thing for your business.

A business that relies heavily on its owner is not as valuable as a business that in not reliant on its owner. Many business owners don’t understand how minimising the risks of key person reliance can significantly improve the value of their business.

Compare the following business valuation on the same business when key person reliance is reduced or minimised.

 

Business Key Person Reliant

Same Business Not Key Person Reliant

Business Profit

$200,000

$200,000

Business Cap Rate

3.05

3.5

Business Value

$610,000

$700,000

Value Improvement

 

$90,000

Improvement %

 

14.75%

 

 

  

 

 

  

As you can see if you can reduce key person reliance and change nothing else within your business, you can improve your business value and therefore sale price by nearly 15% or in the example above $90,000.

So How can you reduce key person reliance in your business?

  • Business Systems: Introduce systems into your business that anyone can follow
  • Client relationship Management: Establish customer relationship management protocols so your staff can manage key customer relationships
  • Staff training: Invest in the development of your staff
  • Let go: As business owner you need to relinquish control to reduce reliance upon yourself.

If you would like to know the impact of key person reliance on your business Clifton Accountants can complete a business valuation for you.  This will also give you strategies to significantly increase your business value

Rate this blog entry:
Warning Signs
Is Your Business at the Top of the Game?

icon blogs

factsheets

videos