When you started your business, you did so wanting to grow it and increase its value.

No contractor starts a business with the expectation of losing money so it is important you take the necessary steps to ensure your business is being valued at top dollar. A good valuation will make it easier for you to find new partners to grow, sell your business if you are looking to retire, or go a different route in your career.

As a business broker, I have worked with many contractors to increase the value of their business. Here are a few things you can do to help your company reach maximum value.

Expand your client pipeline

One of the simplest ways to increase the value of your business is to diversify your customer base. Building a healthy pipeline of new and recurring clientele will make your business worth more to any appraiser.

A diverse pool of clientele means you have a healthy number of single jobs and recurring work. It is also good to have more overall clients than less. For example, a company making $1 million with 1,000 clients will be considered less of a risk than a company making $1 million with 100 clients. The company with 1,000 clients will most likely be worth more since the diversity of business means it will remain more financially stable should some of those clients leave. A contractor with only a few high-paying clients will be in a much bigger hole if one of them decides to take their business elsewhere.

Hire an efficient team

Your ability to find the right people can make or break your company, so it makes sense that finding the right team will increase the value of your business. Make sure you hire people who allow you to complete more jobs without sacrificing quality.

And depending what licenses you maintain for the work you handle, it is also important to hire at least one person besides yourself who has those licenses. You want this in case you want to sell your business one day. A potential buyer may not have those licenses and they will be less likely to buy if the staff they inherit isn’t properly licensed.

It is also important to hire a good management team that will help you grow and will remain with the business should you ever decide to sell it. A buyer does not want to waste time trying to find good people and will value your business more if you save them that time.

Establish a strong infrastructure

If you want top value for your business, it is important that you create a strong foundation for that business. This means your company has streamlined its operations for maximum efficiency. A streamlined company will have a well-maintained fleet of vehicles, an integrated scheduling and management software, and a good customer relations team to help with client questions and concerns.

Establishing these processes shows an appraiser that your business is worth more because it runs more efficiently than businesses that don’t do the same.

Location, location, location

A great location is a huge plus for any business looking for a good valuation. A great location can give you access to more customers, potentially save you money on rent, and allow for less wear and tear on your fleet of vehicles.

A business with a good location is centrally located to your customer base and has a large enough population that your business can continually grow. If you have a plumbing retail space, then you would want to have good street exposure.

Location can add additional value to your business, as well as unfortunately potentially reduce value for those in a poor location. A poor location might be a contractor who is located in one area of the city with a majority of customers located on the other side. A bad location can be crippling to a business’s value so the best option is to move locations or try and negotiate a shorter lease.

Every contractor wants their business to be valued at top dollar and there are multiple pragmatic steps you can take to ensure that your business will be appraised at the highest value. As long as you build a healthy client pipeline, hire a competent team, build a strong business foundation, and find a great location you will realize better value on your business.

About the Author

Brian Bond is the principal of Strategic Business Brokers Group, in affiliation with American Realty Brokers, and has helped dozens of owners sell their businesses across Arizona. Bond has been named “Broker of the Year” by the Arizona Business Broker Association.