People buying a business look at many factors when deciding what to pay for it and the way your income is spread out over your customers is a major factor in determining how much it’s worth, today we talk about why.
Why the type of customers you have affects the value of your business
People don’t want to pay you money to buy a business, which just has one really big customer. Because if you think about it, if you just have one really, really big customer and someone buys your business off of you and that customer then leaves, then they’ve just paid for something which doesn’t make any revenue.
So it’s a massive risk for them. So they’re not going to pay you a lot of money for a business that just has one big customer. And ultimately, the value of your business is likely to also decrease if you’ve got lots of tiny little ones, because the admin involved in dealing with that is often not as profitable, as well. So ultimately, what we’re looking for is a balance. So a lot of the time, I come across businesses where they’ve got lots of little customers, and then they might have one or two really big ones. And what you need to start think about if you really want to start focusing on the resale value of your business and increasing that resale value is trying to work with customers of a similar size.
So one of the key things is if you’ve got a teachable system and you’ve got a signature solution, which you can give to your customers, and you’ve got that customer avatar, naturally, your customers are going to end up with having a lot of stuff in common. And one of the things they’ll have in common is the size of their business and also how much they pay you for what you deliver to them. So that’s the point I wanted to make today. Ultimately, you know what? If you’ve got a business that’s turning over about a million pounds and you’re doing it over maybe 20 customers, some people might consider that to be a bit of a sweet spot. So it’s worth thinking about it, but ultimately to get the value of your business up, you need to start thinking about how your income, the money coming into your business, is spread out over your multiple customers.
And what that could mean is just focusing on customers that don’t buy as much from you and trying to upsell to them rather than trying to sell more to your largest ones. So if you want to talk about this and talk about how it can be applied to your own business and get in touch, we’re the sale and scale specialists. So we help people structure their business so they can actually scale it, as in grow without having to do loads and loads more work. And then, when the time is right and they want to actually exit that business, then at least they’ve got a business that’s worth something and they can sell on, and then they can start the next chapter in their life. So get in touch, go to our website, book yourself in for a discovery call and we’ll take it from there.