Tuesday, August 4, 2020
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Exit Planning  >  Maximizing Value

Maximizing and Protecting Business Value

The elements that build the value of a business or preserve the value that you have worked so hard to create and that buyers will pay for are called Value Drivers.

Value Drivers

  • A stable and motivated management team;
  • A realistic growth strategy;
  • Operating systems that improve cash flow sustainability. 

It is essential to identify which Value Drivers in your business are important to meeting your objectives and design strategies to protect the tangible and intangible value of your business.

Creating Value in Your Business to Get Top Dollar When You Leave It

Using a case study, we ask readers to consider why a buyer would likely treat two similar companies very differently: buying one and not even considering the other. The difference is in the strength of the Value Drivers one owner has made the effort to install. This issue describes the most common Value Drivers and recommends that readers contact the newsletter sender for more information.

Value Driver One: Putting Business Fundamentals In Order

The first order of business when creating a Value Building Plan is to put one’s Business Fundamentals in order. These are the housekeeping activities that reduce exposure to risk of loss so that as owners work to increase value, mechanisms are in place to protect existing and future business value. Business fundamentals include: 1) Ownership rights and responsibilities; 2) Facilities management; 3) Competitors; and 4) Employee errors.

Value Driver Two: Tactical Planning

With your help, owners not only identify the areas of their businesses that need attention, but also choose strategies to address these shortcomings. In this case-study-based issue, we illustrate how asking owners a few questions can prompt them to start the job of picking tactics. This issue covers several common tactics including: 1) Diversifying the customer base; 2) Expanding sales to current customers; 3) Setting goals and holding people accountable; 4) Creating a consistent sales and marketing message; and 5) Tax planning.

Value Driver Three: Systemize Internal Operations

Best of the Best companies systemize every internal operation so that they perform tasks in the same way—every time. Because owners can be so overwhelmed by the number of operations needing attention that they fail to address any, we limit our discussion to just two: creating a system to collect and use customer feedback and diversifying vendor and supplier relationships. Our goal is to motivate owners to create internal operations that: 1) Are written and communicated clearly; 2) Are adhered to by all employees; 3) Produce consistent results; and 4) Will remain in place after the owner leaves.

Value Driver Four: Leveraging Human Resources

In this issue we look at how owners can build business value by improving the productivity, efficiency and quality of their employees. Suggestions include: 1) Connecting reporting responsibilities/duties and revenue generation; 2) Creating employee scripts; 3) Implementing new employee training systems; 4) Connecting employee activity and company success; and 5) Transferring responsibility to employees. Due to space limitations, only items 1, 4 and 5 are discussed in detail.

Value Driver Five: Financial Measurement and Management

In this issue we concentrate on Value Drivers related to financial measurement and management. These include: 1) Understanding and using existing financial information; 2) Managing and reducing company debt; 3) Implementing financial controls; and 4) Increasing employee productivity.

Value Driver Six: Benchmarking and Measuring Success

This article completes a six-issue series on Value Drivers. Benchmarking and Measuring Success refers to: 1) Tracking revenue to new or returning customers or markets; 2) Measuring and evaluating customer retention; 3) Measuring sales activity and effectiveness; 4) Identifying critical industry metrics; and 5) Defining and measuring success.


What Does Your Business Value Tell You?

Most owners look to the value of their businesses as the chief source of liquidity for their post-exit lives. Therefore, most owners need to know the value of their companies now so they can be smart about creating greater business value in as short a time as possible. Knowing the value of your business today is critical whether you plan to leave your business tomorrow, or in five years.

Building Business Value In The Exit Planning Context

Building value is a great use of an owner’s time, but it isn’t Exit Planning. Value building as part of Exit Planning covers four important issues: current value, value needed at owner’s exit, developing tactics to close the gap between current and desired value, and creating a strategy to transfer value in the most tax-efficient way possible.

Knowing Business Value is a Very Good Place to Start

Most owners look to the value of their businesses as the chief source of liquidity for their post-exit lives. Therefore, most owners need to know the value of their companies now so they can be smart about creating greater business value in as short a time as possible. Knowing the value of your business today is critical whether you plan to leave your business tomorrow, or in five years.

Building Value is the Win-Win-Win of Exit Planning

This provocative article reminds owners that buyers pay for business value—not for the selling owner’s expertise—and that Exit Planning is the process owners use to make themselves “inconsequential.” In addition to building value, Step Three involves protecting value and minimizing taxes.

What Is Your Business Really Worth?

Knowing the value of your company is a fundamental, indispensable element of sound decision making because it provides you: 1) an objective indicator of how much value needs to grow before exit and how long you must work before exiting; 2) the ability to monitor progress toward your exit; and 3) a basis for estimating (and minimizing) tax consequences of exit path alternatives. This article includes a case study and information about various types of valuations.

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