KNOWING
&GROWING
The Value of Your Business
Controlling
Value Through
Risk Reduction
Strategies
THIS IS PART THREE OF A SIX-PART SERIES
ABOUT HOW YOU CAN KNOW WHAT YOUR
BUSINESS IS WORTH AND HOW YOU CAN
ULTIMATELY GROW ITS CURRENT VALUE.
READ PARTS 1 & 2 AT:
www.knowandgrow.com/Rea-Report-series
T
he old adage that “less is more” certainly applies to the amount of risk your business should
have – especially when you want to sell it. After all, the less risk your business carries, the more
attractive it is to potential buyers. By reducing your risk, you could see your company’s value
increase exponentially.
Although risk is an inevitable (and sometimes necessary) component of business, it can also hurt your
company’s overall health. Risk raises uncertainty in the hearts of buyers about your sustainability of
your company’s future cash flow – and rightfully so.
The good news is that you can take the necessary steps to reduce your risk and increase your company’s value today.
Six Common Risk Factors Affecting Business Value – And How to Fix Them
By Tim McDaniel,
CPA/ABV, ASA,
CBA, principal
and director of
business valuations
(Dublin office),
and Brad Martyn,
founder and CEO,
FocusCFO
While some risk factors may take years to modify, you can easily rectify others with simple changes.
The following six risk factors are most prevalent among businesses … and are also some of the easiest to fix.
ONE:
THE RISK: Heavily concentrated customers and suppliers
If a single client accounts for more than 20 percent of your revenue, you need to diversify. Similarly, if
you have a large supplier contract whose product is a large part of your sales, and you lose the contract
– and the product – you’ll lose sales. Customer or supplier concentration is risky for obvious reasons.
THE FIX: Diversify
Secure diverse sources of revenue to ensure your company will withstand the inevitable ebbs and
flows of customer preference and changes in the marketplace.
6