by Kelly Deis of SoundPoint Consulting
- a Fortune 500 company in business for 35 years with revenues locked in for the next 5 years
- a start-up with an untested management team, dubious business plan and volatile revenue stream
- Sales: Increase price and/or volume
- Costs: Improve margins, and/or decrease overhead and other variable costs
- Efficiency: Increase throughput with the same level of effort and/or improve performance.
- Revenue Quality: Strive for strong customer loyalty and/or significant recurring revenue. Subscription-based revenue is even better. Multiple revenue streams (or product lines) also decrease risk.
- Diversification: Endeavor for zero reliance on any one customer or supplier. The top ten customers should not account for more than 20% of revenue. Same is true for suppliers.
- Litigation: Any litigation – no matter what the circumstances, appears risky to an outsider. Get any open or pending litigation behind you as quickly as possible.
- Management depth and strength: Your business should not be overly reliant on any one person – including you. Like any good team, strong bench strength is critical in case the star player can’t play.
- Financial records: Messy financial records project an appearance of poor management (and therefore risk). Ideally, an outsider should be able to accurately assess your financial situation without any additional commentary.
Kelly Deis is president of Soundpoint Consulting, based right here in Kitsap County. She earned an MBA at the Wharton School, and offers services as a Certified Valuation Analyst and Certified Exit Planning Analyst. She also helps clients develop a differentiating strategy.