KEY POINTS:
Are you or any of your colleagues a lifestyle entrepreneur? Those about whom so many hand-wringing articles have been written? Business owners who only grow their business to a level they are comfortable with so life can be a mixture of work, recreation and family?
It's not great
for the economy but on a personal level it doesn't sound so bad. However, every business owner in this category has a huge question mark hanging over their head. That is: "When I go to sell the business, what will it be worth? How can I pump up the value to create a more valuable going concern?"
An accountant would explain that the value of one's business is based on three things: fixed assets, inventory and goodwill.
Fixed assets include land, buildings, vehicles and office equipment. They represent a cost of doing business.
Inventory includes purchased supplies and goods for sale. These are a drain on income as it is money spent and in limbo.
Fixed assets and inventory are easily sighted and felt. Along with future commission revenue streams, they are relatively easy to value.
On the other hand, goodwill is more intangible. This includes things such as a strong commercial reputation, established brand names, trademarks or copyright. Another component of goodwill is the ability for someone else to step into the business and be able to create income from your customers. If you work on developing this, you can personally profit from it now as well as in the future when you sell your business.
If you were in negotiations to sell your business, what answers would you have to these questions?
* Have you transferred your company and customer knowledge into the computer or are you going to walk away with it in your head and just leave names, addresses and account numbers?
* Can a buyer easily and instantly get to all your customer information? Can they target the right product to the right client with a click of the keyboard?
* Do you have a system set up where a buyer can do a quote on new business easily? Is it organised so practically anyone can do it?
* Do you have any marketing or business development processes set up? Is there a newsletter - print or online?
* Do you have a good transactional website?
The bottom line is, a good workable database can enhance goodwill valuations significantly. Therefore, why not view your customer and prospect database information as a potential goldmine? It is an asset equal in value or potentially greater than your other assets.
Here is a simple recipe you can employ to grow goodwill and profit from it now and later:
Profit = database information + communication + software/internet.
Database information
Never let a viable prospect, referrer or customer go. You have spent time (networking, good customer service) and/or money (advertising, website development) to get them. Don't waste it. Keep a marketing database containing information relevant to you and them. Don't forget your business referrers. They are equally important to keep note of.
Communication
Activity brings income. Communicate with those on your database, offering pertinent, valuable (to them), value-added targeted information. These communications bring in more business and more referrals than you can imagine. That is if it's not too much of a gorilla-chest-thumping "me, me, me" exercise. Put on their shoes when communicating. If not, you'll lose permission to communicate with them permanently.
Everyday software and the internet
Automation is the name of the game. Move as much database collection as possible to your website to eliminate manual work. Have staff learn and use software to make manipulating and managing the data quick and easy. Email and text messaging allows you to communicate with many, inexpensively, at the push of a button. Temper this with telephoning, visiting and writing.
An insurance broker told me a story about these principles. "When you spoke to us six months ago about communicating more regularly with clients, I thought it made sense. I asked my PA to call some clients to fill in the holes we had in our database. Not only did everyone give her the information cheerfully, so many of my clients wanted to speak with me personally. The funny thing is I have done hundreds of thousands of dollars in new business with them and I still haven't sent out one email!"
There's more business out there waiting for you. Go and get it.
Debbie Mayo-Smith is a best-selling author and international speaker.
www.debbiespeaks.co.nz
