How To Increase The Value of Your Coaching Business

Elena Volkova, Esq. on June 2, 2016

What does “owning a business” really mean?

Do you have to incorporate?

What if you want to sell your business someday? How do you know what it’s worth?

How do you protect (and grow) your most valuable assets?

These are the types of questions that often hang out in the back of a small business owner’s mind – but it can be hard to find the time to figure out the answers.

That’s why I recently sat down to speak with my colleague, Barbara Vrancik, a financial consultant and angel investor.

Barbara is an expert in showing small business owners how to accelerate growth, and helping them to determine the value of their business.

And she broke down these topics in an easy-to-understand way.

Owning Your Business – What It Really Means

The surprising thing is – you may own a business, even if you don’t know it.

Whether you’ve incorporated or not, you own your business the moment you stop being an employee. That is, the moment somebody stops giving you a salary and a W-2.

It’s your business when you start generating revenue by selling your services and products.

Incorporating is not necessary, but does have benefits, such as…

  • it protects you against personal liability
  • it provides a clean record of ownership, which is important in creating value and in transferring ownership
  • it allows you to sell the business as a whole (tangible and intangible assets)

How to Create A Business You Could Sell

1. Separate Your Business Expenses & Personal Expenses

I know what you’re thinking – “I already keep everything separate. I mark up my receipts and everything!”

Well, according to Barbara, the problem is that potential buyers might not be able to differentiate between personal expenses and business expenses.

Co-mingling expenses is a red flag to potential buyers – and it can expose you to potential personal liability.

2. Recognize Your Most Valuable Assets & Improve Them

For business coaches in particular, some of the most valuable assets are your contact list and the name of your business.

Other questions to ask yourself are – do you have anything in writing like books? Do you have recorded media materials and modules that could be utilized by another businessperson? Do you have marketing platforms like webinars and other things that you use to market your business?

In the coaching world, these types of assets are very valuable. You can also consider using a strong, trademark-able name because, as your business grows, that can become a strong asset, too.

One frequently overlooked asset is key life insurance. It covers both disability in case you’re unable to work, and death. At a relatively inexpensive cost, this type of insurance creates a wonderful cushion for both your family and for any potential acquirers of your business in the event something happens to you.

3. Make a blueprint for your business.

Finally, make sure you are documenting your procedures because the blueprint you create for running your business adds a significant amount of value to the company.

It’s important to have procedures in place that will allow someone else to step in seamlessly and efficiently. It will be very attractive to buyers.

4. Strategically manage your liabilities.

Liabilities detract, decrease, or diminish the value of your business.

But not all debt is bad. Some loans are justified in order to finance the growth of the business, as long as there is a very clear-eyed approach to using the investment effectively.

Make sure you’re getting your money’s worth from your investments.

A common money pit in this field is investing in expensive training programs. Often, the lessons learned don’t become part of the work process. Without implementation, purchasing training or materials is not worth it.

Read your credit and loan agreements.

If you have a line of credit or any formal financial obligations, it’s imperative to know what constitutes a default.

One frequent provision in credit agreements with small businesses is the promise not to take out additional loans. Doing so breaches the agreement and results in what is called a cross-default. It allows the bank to accelerate or force you to pay them back the entire amount outstanding.

It’s a very unpleasant outcome and one that could be easily avoided or negotiated around by speaking to your banker.

Also, get a line of credit.

You don’t necessarily have to use it, but if you choose to, it’s much cheaper than having a high-interest credit card in place.

How to Increase the Value of Your Coaching Business

In most coaching businesses, the assets are the coaches themselves.

1. Consider developing products or implementing unique methods to turn your business into a service/product type of business that others can continue to operate.

2. Make sure you have strong client/service agreements in place, AKA agreements that have tight termination clauses that protect you in case of cancellations and ensure you’re not on the hook for large refunds.

3. Build value even if you’re not planning on selling.

Ultimately, the value of a business is the amount somebody’s willing to pay for it.

But even if you aren’t thinking about selling your business, there are other times building value in your business is important….

  • If you want financing, you need to show value in your business.
  • If you’re doing an acquisition or a joint venture, value in your business is going to be important.
  • If someone is thinking of investing in your business, s/he’s going to want to see its value.

So start taking the steps now to create a business with value that will open up doors for you in the future.

This material may be viewed as attorney advertising and does not constitute legal advice. This information does not create an attorney-client relationship between you and the author. This article strictly represents the personal views of the author on the date it was written and such views are subject to change without notice.

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