The disconcerting events of 2020 have sparked a review of business approaches along with a close examination of personal choices. When economic uncertainty lingers, you cannot let your guard down. This is a time to remain aware of threats, and more importantly, opportunities.
When your perspective on your business changes through assessment,
you gain a real time understanding of your business’ value.
The value of your business is a determination that goes beyond its assets, expected revenue, and current inventory. With the help of Eagle Corporate Advisors, you can move your business in a direction that positions you, your partners, and your family to achieve long term goals. Your business can be grown and leveraged in never imagined ways, as you gain clarity about future options.
It may at first sound a bit invasive – or even scary – but there are huge benefits to completing an objective assessment of a business’ value other than peace of mind and a gauge of where the business stands financially. A valuation allows business owners to evaluate and thereby reduce risks, align their team, enhance access to capital, achieve goals and become more effective, controllable, predictable, and sustainable.
Like a solid business plan, a complete valuation is a roadmap to success. It allows business owners to know where they are, where they can go in the future, and how they can perform higher.
Fundamentals 2.0: Sales
All sales revenue is not created equal. Customers who consistently return time and again create sales that are predictable, building the value of the company. You can increase your revenue through new sales, by building a more reliable customer base, and by reaping the benefits of a recurring revenue stream.
The following comparison illustrates what building a recurring revenue stream can do for your business.
Company A sells products or services that are not used very frequently, and effectively generates $10 million in sales annually through new customers.
Company B sells products or services that are used regularly by loyal customers that account for $7.5 million in sales annually and they effectively generate another $2.5 million in sales through new customers for a total of $10 million in sales.
Which company would you prefer to purchase or own? When Company A, with no recurring revenue, beginning each year with zero sales, all costs and expenses being equal, is compared to Company B, the valuation of the two businesses will be quite different.
Recurring Revenue Models
Consider exploring ways to create recurring sales revenue through the following methods or using a combination of methods for even more possibilities:
A written contract is great because the dollar amount of recurring short-term and long-term revenues can be reliably predicted.
The revenue stream from repeat customers is wonderful although somewhat unpredictable because businesses cannot truly predict when customers will return. Providing loyalty programs such as frequent flyer or other discount programs can build brand loyalty while tracking the frequency of purchases.
When customers are automatically billed on a credit card or account, unless they opt-out, sales revenue can be continually collected. Subscription models continue the revenue stream even when the customer is not actively using your product or services. Gym memberships, Netflix, and Dollar Shave Club are all examples of this popular approach to sales.
If you can encourage customers to consistently purchase more or to upgrade to a new level of products or services, the results usually generate more profitability. It often begins with offering a low-cost or free service as a way to attract customers who are eventually targeted for upgrades.
Another source of sales revenue comes from providing associated or necessary products or services beyond the customers’ initial purchase. This can include accessories, attachments, replacements, or refills that are necessary for the use of the initially purchased product or service.
We would enjoy discussing your current revenue model and assisting you in creating variations of the above ideas. Partnering with you to increase your sales revenue and, more importantly, the value of your business– that is how we serve. Just reach out anytime!
Find Your Why and Remember What it is that Drives You
“He who has a “why” can endure any “how.”
– Frederick Nietzsche
At every stage of your business life, knowing your “why,” and being able to clearly state the purpose that drives you will help you stay committed during tough times, and will inspire others, including your customers, to buy into your dream.
The time-honored question is: “If money were no object, what would you do?” The pursuit of money alone is not enough to see you through the extreme ups and downs of running your business. We are motivated when our work has meaning and when our passion for our “why” becomes contagious among our employees and customers. How do others relate to your cause or purpose? You are more likely to attract the right employees, customers, and vendors when the people you engage with understand why you do what you do.
If you or your employees cannot instantly state why you are in business, beyond profits, it is time to revisit and redefine your why. If you are examining your “why” for the first time, you might think you will find a large part of it in what you are creating or selling– in the products or services that you provide. This is not accurate. Why is different than what. Perhaps you went into business to meet a need, perhaps it was to satisfy a desire or perhaps to prove something? Regardless, how does that reason or purpose remain legitimate and drive you forward today?
Be sure to stay true to your “why” even as it evolves with growth over time. And make sure to actively create opportunities to share WHY your business exists.
Motivated by an innate desire to help people achieve their dreams, Chuck Mohler founded Eagle Corporate Advisors. With more than 25 years of experience in business operations, financial consulting, and real estate, he uses his vast experience to benefit business owners who realize that they do not have all the answers.
Beyond his impressive list of credentials and his understanding of business owners’ needs, Chuck is well-respected for his dedication and desire to serve his clients above and beyond their expectations.
Seek expertise. Reap long term benefits. Perform Higher.