Five Ways Sales Affects The Value of Your Business

Selling your business without first addressing critical challenges is like waiting to renovate your home until it’s time to list it. Just like potential homebuyers notice outdated kitchens and cracked foundations, potential buyers or investors will quickly spot the cracks in your business.

Let’s fast-forward to the point where you’re ready to sell all or some of your business and look at that process from the lens of a potential suitor, investor, or partner. In this blog post, you’ll learn about five different things that will detract from the value of your business:

• • • Inconsistent Revenue Performance
    • Profitability
    • Scalability
    • Brand Perception
    • Customer Concentration

First, we’ll look at what the investor sees. Then we’ll examine potential root causes and solutions from a sales perspective. Hint: Fix your house up so you can enjoy it before you need to sell it!

Revenue Detractors

1. Inconsistent Revenue Performance: Your business’s revenue tells a story. If revenue fluctuates unpredictably, buyers and investors will see risk instead of reliability.

What the investor sees to lower the value of your business:

Risk instead of predictability: Unsteady revenue streams make it difficult to forecast future cash flows, which can send red flags to anyone evaluating the potential of your business.

Lower valuation: Volatile revenue often results in reduced offers.

Potential Sales Root Cause:

• • • The sales process is not documented, optimized in a CRM, and followed by all.

2. Profitability: Profitability doesn’t just depend on how much you sell—it’s also about how efficiently you sell.

What the investor sees to lower the value of your business:

• • • High CAC: Indicates you’re spending too much to win each customer. Simply stated, an inefficient sales process leads to hiring more reps to achieve inferior results.
    • Client Churn: A leaky bucket erodes long-term profitability.

Potential Sales Root Cause:

• • • Your sales process is not aligned with operations/delivery of products and services, causing churn.
    • Your sales team is not executing a sales process that enables them to connect with the client’s business and communicate true value. As a result, your sales team wins a lower percentage of deals with more discounting, leading to deteriorating profit margins.
    • The sales process is not properly optimized in a CRM to leverage efficiency. The CRM must be customized to enable sales efficiencies for that specific business.

3. Scalability: A scalable sales process is key to sustainable growth.

The Impact:

• • • Dependency on individuals: Makes your business seem fragile.
    • Limits to growth: Without a repeatable, documented process, scaling becomes impossible.

What the investor sees to lower the value of your business:

• • • A ceiling on growth because your business is dependent on an owner or superstar sales reps to succeed.

Potential Sales Root Cause:

• • • Sales reps may be good at selling and making a lot of money. They do it “their way,” which works for them but negatively impacts the sellable value of the business.

4. Brand Perception: Your sales team plays a significant role in how your brand is perceived.

What the investor sees to lower the value of your business:

• • • Early in the process, they see poor online reviews and reputation in Google, Yelp, Glassdoor, etc., depending on the product or service.
    • Unhappy clients AND employees. This may not be evident until the due diligence process, which doesn’t happen until you, potential investors, and their expensive teams have a lot of time invested in a potential deal.

Potential Sales Root Cause:

• • • A poor sales approach—overly aggressive or disorganized—can damage your brand’s reputation.
    • Misalignment between sales and delivery/operations. Sales teams not properly qualifying out bad prospects or over-promising

5. Customer Concentration: If a small number of customers account for a large portion of your revenue, your business is at risk.

What the investor sees to lower the value of your business:

• • • Risk! If 60% of the value of your business comes from a few clients, then losing just one client could cripple your revenue.

Potential Sales Root Cause:

• • • No sales strategy. The business started with a client or two and has grown to where it is based on providing great value, but there has never been a proactive approach to sales.
    • Whale hunting! Prioritizing huge deals (whales) instead of bread-and-butter clients that sustain the business in between whale hunts.

The Solution: Address Sales Challenges Before It’s Too Late

Addressing your sales challenges now will not only increase the value of your business before you sell, but it will also allow you to realize more revenue and profit in the meantime. By improving your sales process, reducing CAC, stabilizing your revenue streams, and diversifying your client base, you position your business as a well-oiled machine that investors can trust.

Just like fixing up your home before listing it can result in a higher sale price, improving your sales operations ensures that your business commands the best possible valuation. So don’t wait to “fix your house.” The time to optimize your sales is now!