14 Ways to Increase the Value of Your Business: The Ultimate Guide [2023]

Is there anything more important than increasing the value of your business?

Well, yes – family, friends, and finding joy in lifelong passions are just a few examples. But if you’re trying to raise capital or sell your company, increasing its valuation will be top of mind. 

You might have invested years of time in building your business, sacrificing things that people with “normal” jobs take for granted. Maybe you’re ready to exit or raising funds for the next phase of your startup. Either way, you want to see a return for your hard work, and that usually rests in how much your business is worth to an investor or acquirer. 

But how do you increase your company valuation? How long does it take? How do you measure progress? Who can help you increase the value of your business?

Answer these questions and more as we explore 14 ways to increase your company valuation to get acquired for the highest price or raise capital at the best valuation. 

How to Calculate Your Valuation

First, learn how to calculate your valuation so you know where you stand today and how far adrift you are from your valuation goals. 

Most buyers on Acquire.com use the multiple valuation method. Here, financial buyers, those buying or investing in a business for a financial return, determine a multiple based on past M&A data, industry averages, and the specifics of your business and apply it to your revenue or profit. 

Strategic buyers are those for whom an acquisition or investment in your business would result in a strategic advantage. Maybe your software would shorten their time to market, your customers open up a new geographic region, or your staff accelerates their roadmap. 

While strategic buyers care less about your financials and more about what your business can help them do, they’re not as common as financial buyers and it can take years of preparation to attract them. 

Learn the different valuation methods buyers and investors might use in our blog and then continue below for advice on increasing your company valuation.

1. Increase Revenue

One of the simplest ways to increase your valuation is to increase revenue. It sounds obvious, but so many founders prematurely believe they’re ready for acquisition when they’d enjoy a higher valuation if they scaled their business a little longer. 

Most investors and buyers will use a multiple of your revenue or profit when determining your valuation, so if your company is already growing, you’d be surprised by the difference a year – or even six months – makes. Just how practical it is to increase revenue enough to meet your target valuation will depend on the phase of your business or its life cycle.  

For example, have you been running a business for years or just started climbing that growth mountain? Increasing revenue gets harder the longer you’ve been in business due to market saturation. It’s the law of diminishing returns: Once you’ve exploited one market, it usually becomes harder and more expensive to exploit others.

You might need to rethink your customer acquisition strategy, for example, or increase your marketing budget and wait for growth – both of which are okay so long as you haven’t settled on selling or raising capital now. 

If the gap between your current and target valuation is substantial, we recommend postponing a sale or funding round until you’ve increased revenue. The other action items on this list are effective, but if the gap is big, you’ll need another year or two of scaling to close it.

Pros

• Simple. You’re already growing your business (or should be), so you could increase revenue and your valuation with little other than time.

• Easy to plan. The internet is packed with advice on increasing revenue or sales, making it easy to assemble an effective growth plan.

Cons

• Less useful for companies that have already scaled. If your business is years old and already serves multiple markets, revenue growth might be challenging.

• Can take time to hit valuation goals. The longer you try to increase revenue, the more exposed your business is to outside influences (such as legal changes, competition, and so on) that can jeopardize your valuation.

What You Need to Improve

• Increase gross revenue.
• Increase growth rate.
• Increase annual recurring revenue (ARR).
• Increase monthly recurring revenue (MRR).
• Boost customer retention.
• Reduce or eliminate customer churn.

2. Increase Profits

You’re best boosting profits to increase your valuation after you’ve scaled. Revenue drives profits, and it’s pretty common for early-stage startups to sacrifice profits for revenue in pursuit of growth. But after scaling, focusing on profits can help increase the value of your business.

Why? Profits sustain businesses, their founders, and stakeholders. A business’s sole aim is to generate profit – anything less and it won’t survive. Revenue without profit suggests expenses are too high and that you might need to review your business model or operational efficiency.  

Cutting expenses is one way to generate profits that increase your valuation, dealt with in the next section. But it’s also about investing your time, effort, and resources into activities that deliver the best return on investment. 

For example, marketing is often one of the biggest expenses for companies (after salaries, perhaps). Paid ads can get expensive as you exhaust your available markets. A better strategy might be to focus on SEO where the benefits take longer to materialize but cost a lot less. 

Similarly, your business model might also be at fault. If you can increase profits with recurring revenue over one-off purchases, that might be a pricing strategy that ultimately helps increase the value of your business. The key here is to experiment and find the model that works.

In SaaS, your churn rate is another area where issues can arise. Is it higher than the industry average? You pay more to acquire new customers than retain old ones, so your churn rate should be as close to zero as possible to reduce costs, boost profits, and increase your valuation. Find out how to reduce churn in our recent blog.

Pros

• Attractive to investors and buyers. High margins suggest you’ve got the fundamentals right and that all that remains is to grow the business to achieve returns on investment.

• Ideal for companies that have scaled. Once you’ve sacrificed profits to achieve scale, switch focus to profitability as a later-stage company and increase your valuation.

Cons

• Growth may slow. It’s usually impractical to focus on maximum growth and maximum profits simultaneously, so you might find growth slows as you pull back on expenses. 

What You Need to Improve

• Reduce your operational efficiency rate.
• Reduce customer acquisition cost (CAC).
• Increase lifetime value of customer (LTV).
• Reduce churn to as low as possible (preferably zero!).

3. Cut Expenses

Cutting expenses is one way to increase your valuation as it increases cash flow. It’s not about eliminating all overheads, but ensuring your business operates efficiently. Bloat will repel buyers and investors as it forces them to make the difficult decisions that you should’ve done. 

You might not realize it, but your business probably spends more than it should. A simple test is to ask what the return on your expenses is. Some will be easier to track than others. How much you spend on ads is quantifiable but an employee’s contributions may be less so. Key questions to ask: Are your returns outweighing expenses? Can you track ROI?

Swanky offices, flights, and days out might cheer your employees but also drain your coffers. So might maintaining a product or service that few people use. Hunt for bloat in your startup and then pop any swelling expenses. Renegotiate with vendors and suppliers. Review your social media campaigns. Consider relocating to a cheaper city where salaries and rents are lower.

Pros

• Lean, efficient startups are in high demand. As a result, you might attract more offers that will drive your valuation higher in the market. 

• Cutting expenses equals more profit. When you cut unnecessary expenses, your profits should increase proportionately to the savings you make.

Cons

• Efficiency can cost you. You might pay more in the short term as you evaluate your expenses and replace operations with more efficient processes and systems.

• It could involve layoffs. You might have to let underperforming team members go rather than pay salaries that don’t contribute to your business goals. 

What You Need to Improve

• Increase cash flow.
• Reduce expenses. 
• Increase ROI on expenditure.
• Increase lifetime value of customer (LTV).
• Reduce customer acquisition cost (CAC).

4. Acquire VIPs & Partnerships

The right customer contract or partnership can increase your valuation (almost) overnight. For example, an enterprise contract that multiplies demand tenfold or a relationship with a well-known brand or influencer with millions of followers. Both increase revenue and profits and could introduce you to new markets you struggled to penetrate before. 

The same applies to new distribution partnerships. If you white-label your product or service, for example, or another company offers it through its network, you can expect revenue to grow and your valuation to increase. While it might take a few months to see traction, a signed contract, purchase order, or agreement could be enough to justify a higher valuation. 

Pros

• May cost you nothing. Acquiring a VIP customer can be as simple as an email outreach campaign while collaborating with an influencer might cost you nothing more than a free product or subscription.  

• Fast. With a contract signed, you unlock the value of future revenues. Likewise, a single ad campaign with an influencer could result in a massive uptick in sales or subscriptions. 

Cons

• Labor-intensive. Learning sales takes time and campaigns require careful planning and consistent execution. VIPs and influencers get hundreds of enquiries a week, so it’s unlikely your first campaign will deliver results instantly.

What You Need to Improve

• Brand equity – calculate the value of your brand based on how much it would cost to recreate, its market or acquisition value, and how much value it delivers the company.
• Distribution – have you been locked out of other distribution channels due to the high cost of entry? Could a partner or VIP give you access?
• Key opinion leaders (KOLs) – add more to your roster to boost the value of your business.

5. Develop Your IP

If you sell something proprietary, such as a product you designed or invented, you can boost the value of your business by securing and refining your intellectual property (IP). For example, nail down ownership with patents, trademarks, and copyrights to avoid copycats stealing marketshare. Futureproof your business by making your products challenging to copy.

Likewise, listen to customer feedback and develop your product to be the best it can be. Make it faster, easier, or cheaper. Add in-demand features and never stop iterating. The more advanced your product roadmap, the more your competitors have to do to beat you. 

Pros

• Minimizes competitor risk. Watertight ownership of your IP prevents people copying it and stealing your market share, minimizing risk to potential acquirers or investors.

• Makes customers happy. Developing features that your best customers want ensures they return again and again to buy from you, helping protect future revenue.

Cons

• Not all IP is easily protected. Patents might be difficult to obtain and patent lawyer fees can get expensive. Keen copycats can tweak the little details to evade laws. 

What You Need to Improve

• Obtain patents and copyright on all intellectual property.
• Refine and secure your codebase or product.
• Ensure you own code developers write for you.
• Minimize bugs and support tickets.
• Develop a customer-driven roadmap.

6. Delight Your Customers

Your valuation will increase if you can prove to buyers and investors you spend the bulk of your time, energy, and resources on delighting your best customers. In other words, you know who delivers the most value to your business and have deployed systems that prioritize them.

What does that mean?

In SaaS for example, long-term freemium subscribers won’t boost your valuation (low LTV). Nor do customers who take advantage of your special offer and never return (high churn). Loyal and engaged customers who pay for every upgrade and add-on, however, can increase your valuation considerably (high LTV and low churn). 

Evaluate who your “power” customers are (those that offer the most value to your business), and then plan how to acquire, delight, and retain them. Are your customers ambassadors or consumers? You want customers to love you so much they nag their friends, family, and professional networks to sign up and buy from you. 

Keep a close eye on your net promoter score (NPS), which measure how readily your customers would recommend you. Ask customers for reviews, testimonials, and case studies. Listen to and then act on their feedback. Customer loyalty or perception of your business is referred to as an intangible asset and is harder to quantify, but in certain industries, such as newsletters, these intangible assets can push your valuation higher for a strategic buyer. 

Pros

• Increases profits. By focusing only on those customers that provide the most value to your business, you avoid wasting money on others who don’t intend on buying from you. 

• Increases revenue. Your ideal customers are also those most likely to buy add-ons or uggrades and refer you to others, increasing sales and reducing the cost to acquire new customers.

Cons

• May upset freeloaders. If you decide to remove or downgrade a product or service your formerly gave away for free, it might impact your reputation in the short term as they air their grievances on social media and review sites. 

What You Need to Improve

• Increase net promoter score (NPS).
• Increase lifetime value of customer (LTV).
• Reduce or eliminate churn.
• Exploit social proof by gathering more reviews, testimonials, case studies, and positive press coverage.
• Identify your ideal customer persona and market to them.

7. Define Your Vision

Buyers and investors want you to reassure them your business will deliver a return on their investments. To increase your company valuation, define a long-term vision and roadmap that convincingly explains how they’ll achieve that return. For example, you might devise a growth plan that leverages a buyer’s or investor’s expertise, something you’d lacked until now. 

If you don’t understand how your business serves its market, how it impacts the wider world, the problem it solves, and so on, don’t expect a buyer to fill in the gaps for you. They expect you to elucidate the opportunity while backing up your claims with data, trends, and projections.  

Visualize where your business will be in three, five, and ten years. Create a roadmap that achieves those goals. While far from final, a thoroughly researched plan can give buyers and investors the confidence to take over or invest in your business. They might also feel more comfortable paying a higher valuation knowing there’s a plan in place to justify it. 

Pros

• Reassures buyers and investors. You’re the expert on your business and market. Your insight can reduce investment risk and save buyers and investors from devising growth plans alone. It proves you believe in the future of your business. 

• Tells your story. The why of your business can resonate with buyer emotions, something that data alone can’t always capture.

Cons

• Intangible. While a persuasive vision for the future helps buyers understand how they’ll achieve a return, it’s still just a vision and might not be enough to boost your valuation.

What You Need to Improve

• Write a compelling vision, mission, and roadmap.
• Draft pitch decks that capture the business opportunity.
• Use company data (financial and operational) to substantiate your claims.
• Tell an engaging and motivating brand story.

8. Hire a Valuation Expert

A valuation expert or M&A advisor can work with you years before you decide to sell or raise capital, helping you deploy changes that result in a higher company valuation. Someone who values businesses for a living probably knows which valuation methods are appropriate for your company and which factors are most likely to increase its value over time. 

You can hire a valuations expert through Acquire.com when you sign up and list your business for sale. Our in-house counsel, James Graves, will then match you with someone from our M&A Advisor Directory, ensuring they have the skills and expertise to achieve your goals. 

Pros

• Accurate. An accredited valuation expert possesses the skills and experience to value your business more accurately than any calculation you might attempt alone. Not only are they proficient financial modellers but also market professionals privy to past transactions. They know where your business sits in the market.

• Effective. With years of acquisition experience, a valuation expert knows what you must do to increase the value of your business and can help you make those changes.

• Respected. A buyer or investor is likely to trust a professional valuation more than one you determined yourself, simply because the professional is more objective. 

Cons

• Cost. A professional valuation will cost you some money, but what you lose in the short term may pay for itself with a more accurate and defensible valuation calculation.

• Expert opinion differs. Since there are so many ways to value a business, you might find a buyer or investor’s expert argues for a different valuation method than yours.

What You Need to Improve

• Prepare for your valuation. Give the valuation expert a head start by ensuring your financials are clean and tidy otherwise they may refer you to an accountant first.

9. Create Recurring Cash Flow

It’s no secret that recurring revenue is every buyer’s dream and that it alone can help increase the value of your business. Why do buyers pay more for predictable cash flow?

1. Forecasting revenue is simpler and less risky (because it’s repeat business).
2. It’s easier and up to five times cheaper to retain customers than acquire them. 
3. Buyers can compare your company with others.

Think about what your business offers customers. How might you productize and serialize your product or service? Could you offer a monthly or yearly subscription? 

When software moved to the cloud, SaaS companies began charging for access instead of licenses. You no longer bought an application on CD from Best Buy, but paid a monthly or annual fee to run always-up-to-day software from anywhere in the world.

SaaS isn’t the only industry to apply the recurring revenue model. Ecommerce and other industries can do the same. You might offer a subscription box like HelloFresh, for example, or package consultancy services into a monthly contract.

Once you’ve created recurring, predictable cash flow, any buyer or investor will pay a premium on your valuation over companies whose revenues are harder to predict. You also make it easier for them to measure your performance against companies with similar business models, which again reduces their risk (assuming you perform at or above average, of course). 

Pros

• Easy to implement. So long as customers need to use your product or service regularly, packaging it up into a regular subscription could save them time and money – and provide a nice boost to your company valuation. 

Cons

• Doesn’t work for all products. You might need to buy toothpaste or access a digital notetaking app regularly, but few if anyone will buy an electric toothbrush every month or pay to use a recruitment app when they’ve already found a job.

What You Need to Improve

• Increase monthly recurring revenue (MRR).
• Increase annual recurring revenue (MRR).
• Increase lifetime value of customer (LTV).

10. Automate Everything

Automating boring, repetitive tasks frees your time for hitting revenue and profit goals, which in turn, increases the value of your business. 

Many buyers and investors don’t have the time or inclination to operate your business. Those who do want to spend it on meaningful activities such as growing revenue and profits, delighting customers, and developing your product or service. 

If your business can (almost) run by itself, you offer a growth opportunity, not a full-time job, which those running busy portfolios might pay a premium for.

How much time do you spend on admin now? I bet it’s more than you think. According to one report, small businesses can spend up to 120 hours per year on admin. That might not sound like much, but think of it as time lost to increasing profits, revenue, and your valuation.

What can you automate? Almost anything – calendars, emails, contract renewals, payment reminders, customer management (chatbots, for example), order fulfilment, and lots more. How can you automate? Either buy software that automates the busywork or build it yourself. 

Just remember Bill Gates’s advice: “Automation applied to an inefficient operation will magnify the inefficiency.” For example, if you collect product feedback with a chatbot but lack the staff or means to deploy improvements, you’ll simply accumuluate a mountain of tickets, adding to your stress levels.

If it helps, compile a list of tasks you do each day and then pick those that an algorithm or machine would do better. The more you automate simple, repetitive tasks, the more time you’ll have for growing your business and boosting its valuation.

Pros

• Fast. If you buy software that automates admin, you could begin freeing your time as quickly as it takes to install the software.

• Frees your teams too. Automation helps your teams focus on the core skills your hired them for, whether that’s sales, marketing, finance, and so on. All skills that lead to a better valuation in the long term.

Cons

• Automation can cost time and money. It might take a while to automate a complex order fulfilment process, for example, and automation software might not come cheap. 

What You Need to Improve

• Free time spent on administrative tasks for activity that results in a return for your business.

11. Prepare Early for Acquisition (Or Investment)

Your valuation today might not be the one you want when raising capital or selling your business. You need time to hit that valuation goal – so ensure your prepare for acquisition or investment early to avoid disappointment and stress later.

Your valuation matters most when raising money or selling your business. In either case, you’ll have to justify how much your business is worth to people outside of your company. Expect them to be skeptical since they want to maximize their returns and minimize their risk of losses. 

No one can argue with cold, hard facts. Your valuation rests on the work you put into growing a profitable and efficient business. The longer you spend on preparation, therefore, the easier it will be to justify a higher valuation to buyers and investors. 

Financial buyers want a return on investment. Strategic buyers want to understand how your business complements theirs. Positioning your business for either may require years of preparation, so don’t leave everything to chance. Prepare early, well, and with a valuation goal.

Pros

• Easier to hit your valuation goal. There are many ways to increase your valuation, and most involve time. The sooner you start, therefore, the better your valuation will be by the time you want to raise capital or sell your business. 

• Takes the stress out of valuations. Knowing you’ve time to increase your valuation can take the stress and anxiety out of pushing for a higher number when you know, deep down, that your business can’t justify it right now.

Cons

• Valuation goals can change. You might want to rethink your strategy for achieving your valuation goal if for whatever reason the goalposts change, such as needing to sell or raise capital faster than expected.

What You Need to Improve

• Identify your valuation goal.
• Identify your ideal buyer or investor (financial or strategic).
• Invest time and resources into achieving your valuation goal.

12. Test Different Valuation Models

You might be able to increase the value of your business using different valuation methods. Now, I don’t mean cheat your way to a better valuation, but choose the most appropriate method of calculating it. You might not have got that right first time – especially if you’ve never valued your business before. 

For example, a financial model valuation might not be appropriate if you’ve yet to make any serious revenue. Perhaps your business is young, but has great potential, and in which case, you might adopt a different valuation method such as Berkus or Risk Summation. 

Equally, you might lack customers but excel in technology. If you’ve built a sophisticated product that’s yet to scale, a cost-to-duplicate valuation method might be more appropriate and result in a higher valuation than a multiple method. 

Run an ecommerce business? Perhaps discounted cash flows (DCF) analysis would work better or applying a multiple to seller discretionary earnings (SDE). 

Calculate your valuation using the most appropriate valuation methods and then take an average of the results. It’s not about choosing the highest valuation, but find the method that results in the most accurate valuation – or more precisely, a valuation you can justify to investors and buyers.  

Pros

• Could instantly increase your valuation. If you’re new to company valuations, you might not have chosen the most appropriate valuation method for your business, and the correct one might instantly boost your valuation.

• Levels the playing field. A knowledge of different valuation methods and their pros and cons can help when negotiating with similarly knowledgeable buyers or investors.

Cons

• Justification still key. Using a valuation method simply because it results in a bigger number won’t convince buyers or investors it’s accurate. You still need to justify it.

What Do You Need to Improve?

• Learn common valuation methods and how and when to apply them.

13. Keep Clean and Organized Financials

If your financials are clean, tidy, and verifiable, others are more likely to put their faith in their accuracy, which helps justify a higher valuation. Questionable records will drive your valuation down and might put raising capital or an acquisition at risk if you can’t explain irregularities. 

While you might think this common sense, you’d be surprised how many founders enter acquisition talks with disorganized financial records. How can you calculate an accurate valuation if you don’t have a clear accounting of your income and expenditure? How can you expect to justify that dream valuation if you can’t provide convincing evidence for it?

Do yourself a favor and hire an accountant to thoroughly appraise and audit your books. Follow their advice to the letter before you even think about valuations. That way, when it comes down to crunching the numbers, you’ll know where you stand and how much work’s ahead of you to achieve your valuation goals. Stick your head in the sand, however, and can say goodbye to raising capital or selling your business at the valuation you want. 

Pros

• A quick and easy fix. Getting your financials in order can be a relatively simple fix if you hire an accountant to help you. 

• Helps spot errors early. The earlier you spot an inconsistency or error, the easier it is to solve or explain when it comes time to raise capital or sell your business.

Cons

• Might be too little, too late. Trying to justify your valuation while also explaining away inconsistencies can feel embarrassing and might put you on the back foot when negotiating or justifying your valuation to buyers and investors.

What You Need to Improve

• Record every dollar earned and spent.
• Keep financial records for at least seven years.
• Hire an accountant to audit your books every six months or year.
• Use software such as Quickbooks to automate bookkeeping.

14. Diversify Your Revenue

If you want to increase your valuation, prove your business doesn’t rely on any one customer type, geography, or product. Diversified revenue is stable, secure, and infinitely more attractive to buyers and investors than if you earn all your money from one source. Why?

Let’s say you’ve built a Slack app that automates responses. If Slack were to cease trading – unlikely, but bear with me – your app would be obsolete. Even a Slack service outage could impact your revenue. As a result, your business is riskier to an investor or buyer. 

But what if that Slack app was just one of many apps your business sells? Maybe you run a dev company that builds apps for lots of different ecosystems like Monday.com, Shopify, and more. Your revenue is no longer dependent on the one ecosystem – you’ve spread the risk.  

As a result, buyers and investors will look upon your business more favorably – even if your revenue is the same in both examples. They may increase their valuation of your business because they’re comfortable that revenue is safe in the long-term and their goals are achievable.

Pros

• Sound business advice. Diversification ensures your business’s survival, not just when you’re trying to increase your valuation. It’s a sensible strategy for all businesses.

• Reduces stress. Just knowing your business isn’t vulnerable to any one customer, business, or location can relieve some of the anxiety of building a business.

Cons

• Can backfire. Trying to be everything to everyone can dilute your messaging and long-term strategy. Ensure you’re still targeting your ideal customers. 

What You Need to Improve

• Increase your product offerings for different customer needs.
• Expand into new markets and territories.
• Diversify your client and customer profiles.

A Checklist to Increase the Value of Your Business

As you can see, there are countless ways to increase the value of your business – most of which require time and preparation to maximize the result. Here’s a checklist to get you on track to achieving your valuation goals. Good luck!

1. Calculate your company valuation today.
2. Set a target valuation for a point in the future – when you might need to raise capital or want to sell your business.
3. Ask an M&A advisor or valuation expert for guidance (optional).
4. Set short, medium, and long-term goals to close the gap between your current and target valuation using the methods above.
5. Break your goals into practical, step-by-step actions.
6. Calculate your valuation periodically, perhaps every six or twelve months, to track progress towards your target.
7. Monitor market activity such as fundraising and acquisitions and note the factors that made those companies special to investors or buyers.
8. Stay abreast of current events that could impede or accelerate progress towards your valuation target.

---

The content on this site is not intended to provide legal, financial or M&A advice. It is for information purposes only, and any links provided are for your convenience. Please seek the services of an M&A professional before any M&A transaction. It is not Acquire’s intention to solicit or interfere with any established relationship you may have with any M&A professional.