The One Number Owners Need to Stop Focusing On

The value of your business comes down to a single equation: what multiple of your profit is an acquirer willing to pay for your company?

profit × multiple = value

Most owners believe the best way to improve the value of their company is to make more profit – so, they find ways to sell more and more. As experts in their industry, it’s natural that customers want to personally engage with them, which means spending more time on the phones, on the road and face-to-face to increase sales.

With this model, a company can slightly grow, but the owner’s life becomes much more difficult: customers demand more time and service, employees begin to burn out, and soon it feels like there are not enough hours in the day. Revenue flat lines, health can suffer and relationships get strained – all from working too much. Does this feel familiar?

If you’re spending too much time and effort on increasing your profit, you could find yourself diminishing the overall value of your business. The solution? Focus on driving your multiple (the other number in the equation above). Driving your multiple will ultimately help you grow your company value, improve your profit and redeem your freedom.

What Drives Your Multiple

Differentiated Market Position

Acquirers only buy what they could not easily create, so expect to be paid more if you have close to a monopoly on what you sell and/or are one of the few companies who have been licensed to provide the specific product or service in your market.

Lots of Runway

Most founders think market share is something to strive for, but in the eyes of an acquirer, it can decrease the value of your business because you’ve already sopped up most of the opportunity.

Recurring Revenue

An acquirer is going to want to know how your business will do once you leave – recurring revenue assures them that there will still be a business once the founder hits eject.


The size and profitability of your company will matter to investors. So will the quality of your bookkeeping.

The You Factor

The most valuable businesses can thrive without their owners. The inverse is also true because the most valuable businesses are masters of independence.

Built to Sell: introducing the Value Builder System

VB gas gauge.png

I’ve been a huge fan of John Warrilow’s since I read Built to Sell a couple of years ago – a book that shows you how to create “a business that can thrive without you”. I’ve been applying the principles of Built to Sell at SME Financial and in my client’s businesses, with great success. Personally, I’ve been gradually stepping back from working in my business, spending more time working on my business and more time with my family – but the business has a higher value than ever before. I believe that’s something every ambitious business owner should be striving for; it grows wealth, creates jobs and secures your financial future.

 Now, I’ve become a Certified Value Builder, so I can use John Warrilow’s Value Builder System to help my clients grow their wealth and build their businesses. SME Financial is one of only two Kiwi organisations offering this service and I’m the only Certified Value Builder in New Zealand who is also a Chartered Accountant.

VB certified logo.png

The Value Builder System is a proven methodology for increasing the value of any company, and it includes simple ideas and techniques that grow your business’s profitability and make it more saleable. Business with a Value Builder Score of over 80 get 71% higher sales prices than the average business in their industry (find out your Value Builder Score here). By meeting with business owners once a month, the Value Builder System works step-by-step on the eight drivers of company value:

  1. Financial performance

  2. Growth potential

  3. The Switzerland Structure: make your business independent

  4. The valuation teeter-totter: building stronger cashflow

  5. Recurring revenue

  6. Monopoly of control: marketing so you can control your pricing

  7. Customer satisfaction

  8. Hub and spoke: reducing your company’s dependence on you

The beauty of using this system is that it not only grows the value of your company, it releases you from “the owner’s trap”, where you do the selling and deal with the customers and the business starts to fall apart without you. If business always slows down when you’re away and customers always come to you with a problem, you’re stuck in the owner’s trap. The Value Builder System can help you escape from the trap, giving you more free time and reducing your stress.

Want to know more? Give me a call, text me or email me for a free consultation.

A banner year

This has been a fantastic year for SME – we’re all about to go on our summer break and we’ve definitely earned it during 2018. The year started with a complete refit of our Mt Eden office, which really lifted the environment. The upstairs space has also had some attention, with our new tenants, the team from Cuisine magazine, moving in just before Christmas.

One of the biggest business changes has been launching SME Assurance Services. Shelley’s worked hard to build momentum with this side of the business and it’s beginning to pay off. We’ve got some excellent new clients who are going to help drive this side of the business in 2019.

 We’ve also expanded our client base, growing new customers entirely through word of mouth promotion. It’s a great way to get new clients because we know that our existing clients are happy enough to recommend us, which is a great feeling.

With almost all our clients now using Xero, it was exciting to be a finalist in the Xero awards for New Zealand Accounting Partner of the Year. Kunal went to the awards ceremony in Brisbane and it was a lot of fun, even though we didn’t take out the prize.

Toward the end of 2018, I became a Certified Value Builder, which means I now have access to a whole range of resources to help grow the value of your business and make it more saleable. I’m expecting to grow this side of the business more in the year ahead.

SME had a record month in November 2018, beating the previous record-setting months earlier in the year. This has been our best year ever – and that’s saying something since I’ve been running this company for over 30 years. So a huge thanks to the whole team at SME and all our fabulous clients.

Hopefully you’ve also had an excellent year in 2018 and together we can work toward an even better year in 2019.

How much should you spend on Christmas gifts for your clients?


Here at SME we don’t buy client gifts. Instead, we make a donation to a local charity. This year it’s Eat My Lunch, which feeds Kiwi kids in need. We let our clients know that we’ve donated rather than sending them a hamper or a bottle of wine – so far, no complaints. However, individual gifts are important for lots of industries and they can foster good relations for the year ahead and remind your clients how much you value them.

So how do you know how much to spend on each client? Ask yourself:

  • How much profit are you making off this client each year? Valuable clients get gifts, one-off or low-value clients haven’t earned one.

  • How easy is the client to deal with? Spend more on the easy ones, because they’re worth more to you.

  • How long have you had the client? So few businesses reward loyalty, but you should. Loyal customers have massive value to your business.

  • What are you giving your clients? Food and drink are 50% tax deductible while other items are 100% deductible (ask us if you’re not sure). That means you can spend more on non-food-and-drink items. Also think about whether your client would appreciate something tangible or if they’d prefer a donation to a charity or similar – don’t be scared to ask them, lots of people really appreciate being given the opportunity to choose a gift.

To work out what to spend on each client, first calculate a total gift-giving budget. The maximum should be something like 1.5% of your profit. Say your profit is $100,000 a year, you might spend $1,500 on gifts.

Obviously, though, you don’t want to divide it equally among your clients. Your best client might get a $250 gift, while your smaller clients might get a $25 bottle of wine. And don’t forget to write a nice note on the gift so your client knows you’ve been thinking about them. With any luck your gesture will be appreciated and help to support a strong relationship with your valuable customers.



Do yourself a favour and outsource some chores


I’ve recently been working with a small business owner who’s doing extremely well, making great money and expanding rapidly. Part of that is down to his hard work, of course, but my worry is that this success is coming at a price to his family life. He spends a lot of time in the business, plus he and his partner (who’s also working full time) deal with all the cooking and cleaning, mowing the lawns and all the day-to-day household admin. It’s bloody hard work. I know they’re making money, but it’s tough to get quality family time to spend with their two-year-old twins.

My advice to him was this: “Get a cleaner. Get someone to mow the lawns. Get My Food Bag. You can afford it.” Sometimes New Zealanders are stubbornly wedded to the DIY mentality. We’ve all seen the Mitre 10 ads on TV that insinuate we’re all weak-chinned losers if we don’t do our own renovations. Honestly, though, if you’re running a successful business, why would you spend your weekend installing shelving? Or mowing lawns, or cleaning your bathroom? There’s no pleasure to be had in doing everything yourself while missing out on quality time with your family and friends.

Kiwis are often sheepish about admitting to outsourcing jobs like cleaning or mowing, especially if it’s never been done in your family before. (We even do this when it costs us money – like the way lots of Kiwis won’t pay for good financial advice or use a mortgage broker, even when it makes perfect financial sense.) Paying someone else to help you spend more time with your family is a great use of your money. There’s no point building a brilliant business that’s worth a fortune while your personal life flounders along miserably.

Household chores are a massive source of annoying arguments and resentment, so get them taken care of and you can enjoy more peaceful family time, too. And a bonus benefit: you’re supporting other local entrepreneurs to help build up their businesses. This is a win-win situation, where you build your business and they build theirs. All the while you spend more time with your family and reduce your stress.