Monday Money Report 12.16

The S&P 500 was down slightly last week, but it’s still up over 25% for the year. This week brings the final meeting of the Federal Reserve Bank, with expectations of another quarter-percent rate cut.

I recently returned from a week of offsite strategic planning. As a business owner, it’s important to take time to work on, as opposed to in, your business. Being able to step back and systematize things increases your enterprise value.

Locally, we’ve seen several small businesses close recently, often due to the retirement of the owners. What’s lost when a business closes, as opposed to being sold, is the value of the company. You may think that there’s no value to a small business, but there is often something that can be sold. This may be a brand name, inventory, or a even customer list.

If you own a business, the question becomes how you can increase the value for an eventual sale. Having well-documented systems is the first part of that. If you as the owner can’t be replaced or step away from the business, it’s not a business. It’s a job you control. A business can run without you. Training staff to run the business allows you to step away for vacations, to scale back as you age, and eventually sell the business.

Think too, about any proprietary information you have. A customer database can be a valuable thing. It enables a new owner to continue to market to the same clientele and retain current customers. Imagine you have a small side hustle, and want to stop. Would a competitor be interested in taking over your clients? They’ll need to find someone new to replace you, and a warm turnover to a new company can benefit your clients while creating value for you.

If you have a larger business, the time to plan for a liquidity event begins five to ten years before you are ready to sell. Growing top line revenue, especially recurring revenue, is a part of that. Cleaning up your books, so that you are not running personal expenses through the business, comes next. You may want to work with someone to provide a business valuation, or even talk to a business broker early on, to identify action items to maximize the business value.

Your action item this week is to check your outside faucets. Disconnect hoses and turn off water to avoid the potential of a burst pipe. And while you’re at it, change the filters in your HVAC system.

Be sure to check out our website at covingtonalsina.com, or our Facebook page, for more information and to register for our upcoming educational events.