When considering the ultimate sale of a business the actual value that an owner will achieve is dependent upon many factors. I like to describe this value matrix in the context of risk. The lower the risk perceived by a buyer, the higher the value of the business. So knowing what these risk areas are and how they be minimized is critical to any transition strategy.
The overall concept here is that if the business drivers are strong, then a buyer can more readily predict consistent future revenue and profits. Thus developing a plan to improve each of your business’s drivers should be at the top of every business owner’s agenda. Even if you are not in the market to transition your business, strong business drivers will lead to greater profitability, for your own benefit. What I have often seen with clients in my Chicago market, is that while running their business they become comfortable with the risk inherent in the business and thus unaware of the potential danger awaiting them. Undertaking a risk analysis of their business will be an eye opening experience for any owner.
The business drivers that I will be exploring in future articles included:
- Leadership/ management and the overall health of the organization
- HR and staffing, including the management team
- Sales and Marketing
- Customers, strength and diversity
- The Marketplace
- Core Competencies
- Business Life Cycle
You will find a series of articles on these and other topics in my blog http://www.philipelworthcfo.com.