© 2019 by Malahat Valuation Group Inc.

Be the Driver of Value

December 5, 2019

 

 

One best practice is to conduct regular (annual or bi-annual) internal due diligence vents on your own business. Those who drive value realize much higher ROI (returns on investment) than those that just passively take the value given to them. 

 

Go through some of the basic items on the list below and see how your company compares to other companies in your industry.

 

PRIMARY Drivers of value:

  • Revenue

    • Size

    • Growth

    • Stability

    • Re-occurrence

  • Cash Flow

    • Historical

    • Future/projected

  • Margin Percentages

    • Gross margin

    • Operating margin

    • Profit margin

  • Customer Concentrations

  • Management & employee team

 

SECONDARY Drivers of value:

  • Financial controls

  • Quality control

  • Competitive landscape

  • Target markets

  • Codified business processes

    • Operating manuals

    • Key job descriptions

    • Secret sauce

  • Asset quality

    • Inventory

    • Equipment

    • Facilities/location

    • Sustaining capital expenditure

  • Asset turns

  • Non-reliance on ownership for management

 

Other Drivers of value:

  • People

    • Recruiting

    • Training

    • Retention strategies

    • Incentives

  • Legal protections

    • Intellectual property

    • Trademarks

    • Patents

For those looking to sell a business in the shorter term, emphasis should be placed on the primary value drivers (financial metric) improvement, as those are the most important and take time to translate onto the financial statements.

 

The key take away from the valuation list is that increasing business value is a continual process not a single task, owners need to work every day to build a strong case for revenue/cash flow surety. This can only be done with discipline and focus on measuring and improving key drivers of the business over time. (typically 3-5 years).

 

The stronger the business can defend future earnings potential, the stronger the case for a high valuation.

 

Business valuations are extremely complex and time-consuming, with many possible outcomes influenced by owner bias tendencies. For the best results, contract a CBV (Chartered Business Valuator) who is certified to provide an expert opinion of value for your business.

 

 

At Malahat Valuation Group, we pride ourselves on providing business valuations prepared by Chartered Business Valuators that have been prepared through a in-depth analysis, research and stand up to scrutiny that  help our clients and professional partners meet their client's needs.  We specialize in business valuations, commercial real estate appraisals and equipment appraisals under one roof, ensuring assignments are completed faster while being very competitive.  Call us today to book your 30-minuted free consultation.

 

 

Malahat Valuation Group

www.MalahatValuationGroup.com

info@malahatvaluationgroup.com

250-929-2929

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