How Three Moves Quadrupled the Value of this Business
Are you stumped trying to figure out how to create some recurring revenue for your business?
You know those automatic sales will make your business more valuable and predictable, but the secret to transforming your company is to think less about what’s in it for you and more about coming up with a reason for customers to agree to a monthly bill.
Take a look at the transformation of Laura Steward’s company, Guardian Angel. When the revenue of the IT consulting firm reached $400,000, a valuation was requested from an expert. Steward was disappointed to learn her company was worth less than fifty percent of one year’s sales because she had no recurring revenue and what sales she did have were dependent on her personally.
Steward set about to transform her business into a more valuable company and made three strategic moves:
- Angel Watch – The first thing Steward did was to design a monthly program called Angel Watch, which offered her business clients ongoing protection from technology problems. Steward offered her Angel Watch customers ongoing remote monitoring of their networks, preemptive virus protection and staff on call if there was ever a problem. Her clients were approached with a calculation of what they had spent with her firm over the most recent 12-month period, including the cost of her customer’s downtime. By signing up for Angel Watch, they would save money when taking in to consideration for both the hard and soft costs. 90% of her customers switched from hourly billing to the Angel Watch program.
- Doubling Rates – Next Steward doubled her personal consulting rates. When a customer not on Angel Watch called, they were quoted a technician rate and a higher rate for Steward herself. Not surprisingly, most customers opted for the cheaper option and others chose to re-consider joining Angel Watch.
- Survivor Clause – Steward also credits a small legal maneuver for further driving up the value of her business. She included a “survivor clause” in her Angel Watch contracts, which stipulated that the obligations of the agreement would “survive” a change of ownership of her company.
Steward went on to successfully sell her business at a price that was more than four times the original valuation she had received just two years after launching Angel Watch.
