With all the people and organizations who want time and money from us, how can we decide which people and organizations to spend our time and money with? And, let’s face it, we are constantly inundated with those wanting our time and money. Be it a course, an event, a book to read, a seminar, etc.
I read a lot of books, attend a few seminars and classes, and show up at a few events. I even sponsor one event, the annual Impact event for CEOs. But how to decide which places to spend your time and money?
I’ve got a method. It may not work for you, but it is what I like to do. I spend my time and money where there may be a million-dollar idea for one or more of my clients. If I can find value for my clients, my practice will thrive. So, I’m always looking for ways to add value for my clients.
How would I find a million-dollar idea? Let’s start simple. If I can add $1 of net income per month, through increased revenue or lowering expenses, that’s $12 per year to the bottom line. In this particular example, let’s assume the company’s enterprise value is derived from EBITDA (net income is a close proxy) times a multiple of 5. That $1 increase to net income each month times 12 months times a 5 multiple raises enterprise value by $60. Simple enough, right?
So, a million-dollar idea means increasing monthly net income by $16,667. That’s a lot, but nobody said we need to do that in one month. That might take a few years. But $1 million is still real money to me, so worth working towards.
Does that seem like an unrealistic example? We’ll try something more modest. Let’s look at a $100,000 increase in enterprise value. That only requires finding $1,667 in increases to net income each month. That seems doable, doesn’t it?
Where might one find such an idea? How about reading a good business book? How about attending a great seminar? How about networking with your peers and finding something that has worked for them? How about hearing a terrific keynote speaker? That’s why I’m constantly learning. Well, it’s one reason anyway. There are ideas out there that can be worth a lot of money to your business.
Let’s Make More Money
Okay, enough conceptual stuff. Let’s talk about something that can make a big difference to your business quickly: Raise your prices. My experience is that your customers are not as price sensitive as you think they are. When I see a business raise their prices, I’d venture to say that less than five percent of the customers/clients object or even notice.
Right now, everyone is hearing about inflation in the news daily. Yes, the price of everything seems to be more than just a short time ago. In other words, it is the best time ever to raise your prices, because you don’t have to explain why. Everybody knows why!
If you raise your revenue because you’re doing more business, you need to subtract the cost of goods/services sold to arrive at the increase in gross and net margins. But what we’re talking about here is raising your prices with no change in costs. The Revenue increase drops straight to the bottom line.
Take your existing Revenue, increase your pricing by ten percent, and how much does that add to the bottom line? Calculate the annual increase and then multiply by the multiple appropriate for valuing your business. For many readers, the enterprise value of their business just went up by a bunch. You’re welcome.
Now, I know not everyone can just raise their prices ten percent. If you’re in competitive bid situations, you probably can’t. But a lot of business owners can raise their prices ten percent, but they don’t because they think their customers will push back. Generally, they won’t. Do it.
Then let’s think about another idea that will raise your enterprise value even more.
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