What would YOU pay for your business?
There is a common theme among entrepreneurs: they all want the most for their businesses. But how much would you actually pay for your business if you had to buy it? Would you pay top-dollar? Or would you ask for a discount while holding your nose?
Every company has risks that reduce value. If you already know some of the risks within your company, you would most likely pay a lot less for your business if you had to buy it. Without knowing the risks, it is very easy to have an inflated idea of your business value.
How do you get top dollar for your company while minimizing surprises?
The key to maximizing business value is changing your lens from being the business owner to being a buyer. Now let’s investigate what a buyer looks at.
It does not matter who the buyer is, they will all boil their decisions down to two words: “Value Drivers.” That’s because value drivers are what drive your top line, bottom line, market share, and growth potential. They’re important whether you want to exit or not.
What information do you look at to run the day to day operations of your business? And does that information actually create real value, or does it simply help you keep the doors open?
The unfortunate reality is that most companies are looking at and tracking information that creates little to no value. Because they don’t have a value creation mindset, this ends up costing them a lot of money in lost profits, opportunity and exit value.
To fix this issue, we help clients identify their company’s true value drivers and then organize them into several value creation categories. These include things like revenue drivers, margin drivers, cash drivers, production drivers, momentum drivers, opportunity drivers, risk drivers and many others.
These drivers will vary based on company type but let me give you a few quick examples of these drivers in action for a manufacturer.
- Revenue Drivers may include items like company leads, active proposals, and customer contracts
- Margin drivers can encompass items like average client spend and average time or cost per job
- Production Drivers may be things like order-to-delivery cycle time, available labor, or throughput
- Momentum drivers could be the value of your sales pipeline or value of your backlog
- Opportunity drivers are most likely your market size, market share, and market trends
In working with companies, we often find that there is a big disconnect between what the business is focused on and what actually creates value for the company. Do you have such a disconnect in your company? Because if you do, it will cost you big when you are ready to sell your company, as well as plenty of money along the way.
We suggest sitting down with your team and asking: “Are we tracking the right things? And are they creating real value?”
Are you maximizing your company's growth and valuation potential?
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