Friday, July 21, 2017
As a business owner, you may be focused on growing your business and boosting its profitability. Doing so can also drive the value of your business, increasing the net proceeds that will be available to you when you eventually exit your business. A valuation of your business in Ontario can help you identify key factors to leverage to increase the value of your business, opening the door to a favorable future.
One key factor to leverage when driving the value of your business is its financial performance. This includes your company’s history of producing revenue and profits combined with the professionalism of your record keeping.
Increasing your company’s annual profits can be achieved by increasing revenues and/or decreasing costs.
Improve Financial Performance by Increasing Revenue
There are a number of strategies you can employ to increase revenues, resulting in a favourable business valuation in Ontario’s market.
First, you can focus on selling more of your existing products to current customers. This strategy is known as market penetration.
Second, you can focus on introducing new products to your current customers. This strategy is known as product development and allows you to leverage off of an existing customer base who already knows and trusts your brand.
Third, you can sell existing products to new markets, also known as market development. By tapping into a new, or wider audience, you can reach out to new customers and benefit from the hype surrounding your products that were previously unavailable to them.
And lastly, you can opt for diversification, which means introducing new products to new markets. By launching new products and tapping into a new market at once, not only will your business gain access to new opportunities for profit, but you can also build and sustain a new customer base and market for future endeavors.
Improve Financial Performance by Decreasing Costs
Aside from increasing revenue, you can also decrease the costs at which you do business to improve your business’ financial performance, thereby increasing the value of your business in Ontario.
There are a number of ways you can decrease the operating costs of your business in Ontario. Reducing direct material and direct labor costs, where possible, will help increase your gross margins. A continued focus on reducing other operating expenses and overhead costs will also improve your net profit margins.
By identifying operating systems and processes to streamline, you can improve efficiency and reduce costs. Identifying general and administrative costs to eliminate will also improve your bottom line. If applicable, you can also consider consider filing for research and development tax credits to increase your company’s operating cash flows and overall value.
Improved Financial Reporting
Improving financial performance alone may not be enough to increase the value of your company in Ontario. Coupled with improved performance is proper tracking and reporting to ensure that you are correctly monitoring your company’s financial performance and growth.
By improving the quality and integrity of your periodic financial reporting, whether it be through monthly, quarterly, or year-end financial systems, you can further increase the value of your business. This can be done by investing in an improved accounting information system or upgrading to a review engagement or audit.
When selling your business in Toronto or across Ontario, potential purchasers will be more likely to pay top dollar for a company with a quality financial reporting system, as this is indicative of accurate and reliable financial statements and other financial reports.
Improving your company’s financial performance increases the value of your company in the marketplace in Ontario. Obtaining a professional business valuation can help identify key value drivers to focus on, including your company’s financial performance. Call us at 905-305-VSPL (8775) today.
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