Most business valuations come down to one number: the annual profit. If AI takes hours of admin off your plate and your team’s, that saving lands on the bottom line, and a bigger bottom line makes for a more valuable business when it’s time to sell.
Where the hours go
A recent guide from Flowtivity on AI for Australian small businesses makes a point plenty of owners will recognise. It quotes the Australian Small Business and Family Enterprise Ombudsman’s figure that small business owners spend 12 to 15 hours a week on admin. The guide then runs through the jobs AI can now take on: answering customer enquiries after hours, writing quotes, chasing overdue invoices, booking appointments and drafting emails. It’s routine work. It’s also work that chews through wages every week, whether it’s the owner doing it at night or a staff member doing it during the day.
Why it matters at sale time
After more than 20 years experience in business valuations, it’s clear what drives the price of a business: the size of the annual profit. Buyers pay for what the business earns. Every dollar saved on wages is a dollar added to profit, and that flows straight into the valuation. For many businesses, the saving shows up as the team spending more time on work that brings money in, or the next hire waiting another year. It helps buyers too. The more profit a business shows, the easier it is for a buyer to get bank finance, which widens the pool of people who can afford it. The key is making sure the savings show up in your accounts. A buyer will want to see the lower costs in the financials, so the sooner the changes are in place, the longer the track record you’ll have when you go to market.
Getting it right
Here’s what I’d do if I was planning to sell in the next few years:
- Start with the admin that eats the most hours, like quotes, invoice follow ups and enquiries, and bring in one AI tool at a time.
- Keep track of the hours and wages saved, so your accountant can show the improvement clearly in your financials.
- Put your team’s freed up time into work that brings in revenue, or hold off on the next hire.
- Get a valuation before you start and another once the savings are showing, so you can see what the extra profit is worth.
We’ve got more than 600 businesses for sale right now, and profit is the number every buyer looks at first. What’s eating the most hours in your business each week? And what would those hours be worth on your bottom line? #SmallBusiness #ArtificialIntelligence #BusinessValuation #BusinessOwners