Increasing valuation is your number-one job as an owner. And focusing on improving that number is the most important thing you can do to scale successfully.
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Most entrepreneurs know the value of their stock portfolio, property, and jewelry. But when it comes to one of their most important assets—their business—they have no clue. It’s a back-of-napkin calculation at best, if they think about it at all.
That’s a big mistake. Increasing valuation is your number-one job as an owner. And focusing on improving that number, versus taking all of the advice thrown at you about how to 10x revenue, is the most important thing you can do to scale successfully and ultimately build your legacy in a company that lives on. A company that is 10xing revenue could still be “growing broke” because it’s running out of cash. Improving your valuation will also allow you the peace of mind that you won’t leave a mess for your family if you are forced into an accidental exit by illness or other unexpected circumstances.
Remember, revenue is vanity, profit is sanity, and valuation is legacy. There is nothing more important to your company’s future than the strategic decisions you make to improve profitability and your cash position. (You’ll definitely sleep better and age more slowly if you’ve got cash.)
How Improving Your Valuation Gives You an Edge
When I mention valuation, many founders, especially those running startups, look puzzled and tell me, “I don’t plan to exit anytime soon, if ever.” In reality, many of the strategies that will help you improve your company’s valuation will also help you build a healthy company where you can live your core values and position you to scale.
Research shows that understanding valuation can give you a competitive edge. Cornerstone Business Services found in a nationwide 2025 survey that only four in 10 business owners have conducted a market analysis. If you understand your valuation, you will be ahead of the pack, whether you need a bank loan now or are looking ahead to selling your business someday.
Five Principles To Improve Your Valuation
So how do you grow your valuation? Here are five principles you can start applying today, no matter what stage your company is at.
Know the score.
That means identifying the metrics that drive profit, cash, and valuation. If you looked at the P&L of a company that had $7 million in revenue, a gross margin of $3 million, and a net profit that was up since last year, you’d probably say they run a very successful company. But what gives you the real picture is their net cash flow—the difference between change in deposits and change in debt. Use your cash flow software to stay on top of this.
Apply the Power of One.
In my last column, “How Focusing on Cash Can Help You Scale Your Company and Valuation,” I looked at how to improve your cash conversion cycle – that is, the days it takes for a dollar you spend to make its way back to your bank account. The key is understanding which of seven critical financial levers can improve your cash flow and profitability: price, volume, cost of goods sold, operating expenses, accounts receivable, inventory/work in progress, and accounts payable. Cash Flow Story software can help you get an accurate picture.
Improving on the one or two levers that matter most by 1% or one day can have a major impact on your cash flow—just as a few small tweaks can power up your golf swing—so choose a couple to prioritize for the next quarter and mobilize your team around them. For instance, are you able to collect deposits in advance? Can you get invoices out more quickly to your customers?
One of our clients serves hospitals that pay on a 90- to 120-day cycle. He hired an accounts payable pro to build relationships with finance clerks at the hospitals – these are humans making decisions – and learn how to redesign the company’s invoices, so it was easier for hospitals to pay. Their consultant changed the invoices from white to light blue so the payable team could spot them more easily. She made sure the invoice went out today, not tomorrow, and then followed up 10 days later to make sure the invoice was received. These efforts shrank the company’s cash conversion cycle by 15 days.
Put your direct expenses and cost of goods sold under the microscope.
Revenue is made up of price and volume, two factors you control. And you also have a say over your overhead. Remember: Your operating profit is your revenue minus your overhead.
Consider an acquisition.
The most significant trend on the planet is the great wealth transfer. Visa has calculated that Baby Boomers will pass along $31 trillion of their $93 trillion in assets, including their businesses, but not all of those will find an immediate buyer. If you acquire one of the many companies that will go up for sale, you’ll be able to achieve a much higher valuation and multiple if you sell. It also increases your access to capital. Which brings us to our next point…
Invest in growth.
One benefit of improving your cash flow and valuation is that your bank will become much more supportive if you need to borrow to invest in a building, equipment, technology, or vehicles you need to grow. Banks don’t want to lend money to companies that need it. Responsible use of debt, particularly when you’ve gotten your business and your cash model right, is a powerful way for you to grow your business and increase your valuation further.
Focusing on valuation requires a shift in thinking for most entrepreneurs. But the more you do, the more everything else you need to make your business successful will fall into place.
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