Another way to increase the value of your business is to identify ways to increase revenues from existing customers. That might include selective pricing adjustments which will not reduce the retention of existing customers. It might also involve increasing the number of services each customer receives – as long as the business remains competitive in that area. In addition, you can focus on identifying additional services which can be sold to your existing customers. This could include upsells and complimentary services or additional products. Just make sure that these revenues will make as much sense for potential buyers as they do for you. For example, adding sprinkler services to your lawncare business may make perfect sense for you, but it may or may not make sense for potential buyers.
A professional colleague of mine recently posed the question – which of the following will improve your profitability the most? Take the test for yourself!
- Reducing costs by 10%
- Improving customer retention by 10%
- Successfully increasing prices by 10%
It is amazing how many people don’t get the answer to that question right! All other things being equal, increasing prices by 10% would result in the greatest improvement in earnings. Of course, all other things are not equal, and you have to balance pricing, costs and customer service to get the optimal results.