Top 3 Sales Reports that Increase the Value of Your Business
With so much doom and gloom about the global economy, many people feel that now is not the best time to try to sell their business. This will depend on many factors, but if you are going to sell your business, one of the key factors in getting a good price will be to demonstrate your ongoing sales potential.
The best way to do this is with established sales reports that highlight your growth potential. An increasing trend in sales will help justify a higher premium for the business.
However in a recent survey on small business issues, prepared by CPA Australia, only 20% of businesses reported using financial statements on a regular basis to support their ongoing management decision making.
Maxell Consulting has found a similar result. Only a small fraction of business owners look at their sales performance on a regular basis, and typically use the financial statements from their accounting software as sales reports. In most cases these reports do not have the level of information to demonstrate the real value in the business.
The top three reports that demonstrate the future sales potential for the business are:
1. Total sales by market segment.
2. Number of new customers and average new customer purchase levels.
3. Number of repeat customers and average repeat customer purchase levels.
Ideally these reports should be available for both monthly periods and also as yearly totals over several years.
Why are these reports necessary? These reports show the buyer the key trends that will support ongoing cash flow. Any uncertainty about the future cash flow of the business will make the business less attractive and reduce its value. These reports provide the buyer with confidence of ongoing sales and will show the relative importance of new and repeat customers.
Why is this information important? Sales by market segment show the key growth areas of the business. Most businesses have product or service areas that do not show as much growth as others, so it is important to highlight to a buyer the segments that are growing and how much they have grown recently.
Every business needs either a growing number of customers, or a strong level of repeat business. Reports that highlight what the customer base is doing will show the buyer what type of strategy they need to implement to maintain or improve the sales growth.
When should these reports be produced? They should not be “one-off’s” that you have produced just for the sale of the business. Ideally you should be able to show a system where management produces and reviews these reports regularly. That demonstrates that to the buyer that other people in the business know what’s going on and that the business is proactively managed.
One of the key factors in getting the best price for your business is to make the buyer feel comfortable that the future cash flow is not at risk. Sales reports should not be meaningless stacks of paper – they should highlight the real value in your business.
How detailed are your sales reports and sales systems? Will they stand up to the scrutiny of an outsider wanting to give you a pile of cash? Do you use them to proactively manage your sales performance?
Maxell Consulting can provide a free assessment of the information your business needs to provide to demonstrate its real value to a potential buyer.
Maxell Consulting has helped many businesses identify the value in their business and empower the owners to develop plans to crystallise that value.
We offer a free assessment of your situation and review what potential value exists within your business.