Increasing the value of your business

A great deal of my consultancy work these days involves helping business owners to increase the value of their businesses prior to a sale in a few years’ time. Letting businesses used to be valued on a multiple of turnover so my job was to identify various ways to do this. More recently however, the profitability of the letting business has become a much more important factor in determining its value. As a consequence, I now have to consider cost control and efficiency improvements as part of my brief. Salaries should not be more than 40% of turnover but many businesses are spending 50 or even 60% on staff. Cost control is a subject that is often misunderstood. It is not about saving a few pounds by buying cheaper stationery, nor is it about making swingeing cuts to the staff or advertising budgets which can reduce the turnover of a business by an amount that exceeds the saving. Most costs, such as rent, rates and utilities are fixed and most variable costs only make up a small percentage of the expenditure, so the only area in which significant savings can be made is staffing. Salaries should not be more than…

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