It is a well established principle that as your company increases in value, it opens up more opportunities and more favorable exit paths for you. Increasing the value of your business is within your control and unlocking that potential can dramatically improve your post-business future.
The most valuable businesses are those that demonstrate stability, sustainability of value-creation, and scalability. One of the best strategies a business owner can employ is to take a step back and look at his/her business objectively through the eyes of a buyer. When a business is sold to a third-party, at minimum, the buyer wants to know the following:
- that the leadership team can manage a much larger company;
- that the employees are interested and motivated to come to work and enjoy creating value for customers;
- which employees are major contributors and what motivates them;
- how and with whom the business makes money, at what margins, and by customer;
- the revenue potential for existing products and services with existing customers and with new customers;
- the revenue potential for new products and services with existing customers and with new customers;
- how fast the business can grow without losing margins or quality;
- the key operating metrics of the business;
- how the business addresses efficiency and effectiveness;
A business owner can improve the value of the business by thinking about the following questions and taking measures to address and strengthen areas of the business where there are identifiable weaknesses.
- Does the company have a purpose, vision, values and culture consistent with its strategic intent?
- Does the company have a sufficient and scalable leadership team?
- Does the company continually engage in recruiting to maintain a pipeline of talent?
- Does the company provide employee training programs to enhance employee value-creation skill-sets?
- Does the company have any rainmakers that may be a flight risk?
- Does the company have an over-reliance on the owner or on any single employee?
- If the company was three times as big tomorrow as it is today, does the leadership team have the skills to manage the larger organization?
- Does the company have customer-focused metrics?
- Does the company effectively manage its product life-cycles?
- Does the company have a customer feedback mechanism?
- Does the company have procedures for continuous process improvement?
- Does the company have information systems that empower operations management to effectively act to improve operational processes?
Making improvements to the business in the areas above will strengthen the business and increase its value regardless of whether you intend to keep the business for another 10 or 20 years, transfer or sell it to an insider, or ultimately sell the business to an outside third-party. As the business owner, increasing the business value will create more opportunities and more favorable exit paths for you and can dramatically improve your post-business future.