It is an eventuality that your agency will perpetuate at some point. Because of this, it is important to treat your business like a business so to speak. This is the only way to maximize the value of your agency. You need to acknowledge that your agency will one day perpetuate, and you must act like your company is for sale all of the time. However, there are a lot of owners that do not do this, and instead they simply treat their agency like it is their personal bank account.
With that in mind, here are some tips for treating your agency like a business in order to maximize value:
- Re-invest – Watching business expenses is important, but you should not cut to the bone. Instead, to drive growth, you must continue to invest in your business. A health balance between profitability and growth will lead to a better valuation.
- Buy your assets – It is wise to think about purchasing your assets, such as copiers, phones and computers, instead of leasing them. Majority of buyers will not want to take over your long-term lease commitments.
- Maintain operating expenses at a healthy level – It is important to assess your operating costs at present, and ensure you maintain them at a level that is healthy for your agency. A good example of this is your office space. Make sure you do not have too much space per person.
- Get your finances in order – Now would be a good time to get your finances in order. To do this, you will need to make sure that your customers pay you on time. Be clear about your payment terms. Make sure they are fair; yet don’t be lenient when it comes to enforcing them. Your customers need to know that the payment terms are set in stone. Try not to allow clients to go beyond 60 days past their due date. This will save you a lot of hassle and a lot of money too.
- Don’t mix personal and business finances – Resist the temptation to treat your business bank account like it is your own. Instead, you will improve profitability and retention by treating your business like a business. Potential buyers will also see that you are financially responsible. You can also protect yourself from tax penalties by ensuring there are no grey areas.
- Review financial statements – Last but not least, make sure you review your financial statements and other key metrics every month. A lot of business owners see their annual tax return preparation as an opportunity to do this, however, you won’t be able to set high standards and stick to them if you only assess your standing once per annum.
There you have it, if you take all the points mentioned above into consideration, you will be able to grow your agency and maximise value by actually treating it like a business.