Be the Driver of Value
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
250-929-2929
