Most businesses are valued on a multiple of earnings, so your profits are one key factor in driving up the value of your company, but the other number in the equation is the multiple of your earnings used to arrive at a price. This multiple is based on the risk a buyer sees in your business.  The riskier it looks, the lower the multiple and the lower the value.  The more stable and predictable your business is, the higher the multiple a buyer will be willing to pay.

Below is a list of 8 things you can do to increase the value of your business in 2012:

1. Redefine Your Business so You are No. 1
Buyers like to acquire companies that are market leaders in their niche. The trick is to narrow your market focus so you can legitimately claim to be the market leader. For example, instead of defining yourself as "a tool & die manufacturer," be the "leading manufacturer of large scale compression molds for the auto and trucking industry."

2. Diversify Your Customers
Customer concentration can make your company unsaleable.  If 10% or more of your revenues come from one customer, the value of your business will go down.  If 50% or more comes from one customer, you may only get pennies on the dollar for your business.  Do whatever you can to reduce your reliance on your biggest customers.

3. Get Contracts with Assignment Clauses
Get as many of your customers to sign long-term written contracts, but be sure that each contract contains a clause that allows you to assign the agreement to a buyer in the event of a change in ownership.

4. Show a Gradually Increasing Profit-Margin
See if you can increase prices or reduce costs to improve your profit margin. Buyers like to see margins gradually improving. This is often a sign that you have a unique competitive advantage, which is valuable.

5. Develop a Recurring Revenue Stream
Buyers value predictable cash flows. Get creative, convert your business to a recurring revenue model.  My handyman took this advice.  Rather than charging me an hourly rate to open our vacation home in the spring and then winterize it in the fall, he sent me an annual contract with a monthly fee to provide the same services.  He is charging the same amount in total but his cash flow is now much more predictable and he has locked me into using him for the entire year.

6. Update Your Marketing Materials and Website
When potential acquirers develop an interest in your business, the first thing they will do is check out your website.  Website design goes through an evolution about every three years.  If your website was designed in 2001, buyers can tell and it makes your business seem out of date.  The same applies to any other marketing materials you use.  Make sure you make a good first impression.

7. Empower Your Managers
If your managers need to come to you for advice or approval, it's time to think about how you can begin to train them to handle situations by themselves.  Owner dependence, in addition to customer concentration, is one of the top reasons businesses are often undervalued.

8. Lock in Key Employees with Golden Handcuffs
Employees are often your most valuable asset.  To protect the value of your business, make sure your key employees are locked in with a long-term incentive plan that ties them to your business after the sale of your company. One example of a golden handcuff plan or long term incentive plan is to deposit their annual bonuses into a plan account.  These monies can be withdrawn three years later if the person is still employed by your business or one year after there is a change in ownership.  Before implementing any type of incentive plan, get the advice of a lawyer who knows employment law in your state.

Richard Jackim is a Managing Director with MidCap Advisors and the author of the critically acclaimed book, The $10 Trillion Opportunity: Designing Successful Exit Strategies for Middle Market Business Owners, Second Edition