How 3 Moves Helped Drive up this Company’s Value 4x.

How 3 Moves Helped Drive up this Company's Value 4x.

A simple strategy to drive up company value 4x in 2 years.

At Sophiall, when we engage with clients, we often brainstorm together and think of creative ways to add recurring revenue streams to their business, especially in industries where it is uncommon. An effective strategy is to look at successful examples from other industries and apply them.

Automatic and recurring revenue sales will make your business more valuable and predictable, but the key to successfully implementing recurring revenues is to focus on the value it provides customers instead of the undeniable benefits to yourself.

A perfect example was provided to us from our partners at Built to Sell Inc.. Laura Steward owned an IT consulting firm called Guardian Angel. When she called in a valuation consultant to help her put a price on her business, she was disappointed in the result – her company was worth less than 50% of one year’s sales. The two main reasons for the low valuation were the lack of recurring revenue and sales dependent on Laura personally.

Laura took three steps to address the low valuation and drive up the worth and independence of her company:

1. Angel Watch

First, Steward launched a monthly subscription program called Angel Watch, which provided IT maintenance and protection to her clients. Monthly subscribers received ongoing remote monitoring of their networks, pre-emptive virus protection and staff on call if there was ever a problem.  

She then approached her existing clients and showed them the value they would gain by subscribing to Angel Watch. They would save on both IT costs and the opportunity costs incurred by having downtime while IT issues were identified and resolved.

The customers saw the value and so 90% switched from hourly billing to the Angel Watch program.

2. Doubling Rates

Next, Steward extricated herself from dealing with every client by doubling her personal consulting rates. That way, when one of the customers who decided not to opt into Angel Watch called her firm, they were quoted one rate for a technician’s time or twice the price to have Steward herself. Not surprisingly, most customers opted for the cheaper option, and others chose to reconsider their decision not to sign up for Angel Watch.

3. Survivor Clause

Finally, Steward added a “survivor clause” in her Angel Watch contracts, which stipulated that the agreement’s obligations would “survive” a change of ownership of her company. This allowed her to drive up the value of her business by giving any new owner peace of mind in knowing that these recurring revenue streams would continue past a change of ownership.

After two years, Steward successfully sold her business at a price that was more than four times the original valuation.

Find out more about Recurring Revenue and what drives the value of your business.  Learn how you can transform your company from a 24/7 job into an independent asset that frees your time while growing wealth for you.

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