8 Ways to Increase the Value of Your Company
The presence of attributes that can make your business more valuable at the time you take it to market are the same attributes that must be present for growth. Simply put if you have taken the time and made the effort to position your company for growth you have likely increased its value even before the growth has been achieved! This can be compared to classic risk reward model. If you have eliminated some obstacles to growth your company is more valuable because there is less perceived risk to continued or improved performance. Analyze your company across the following criteria. You may realize that there are some easily achievable changes that will increase your company’s value.
Do you offer unique products or services?
Do they drive repeat visits or create regular servicing needs? Are your clients dependent on this service? Is the product or service unique from the competition? Is it consumable? Does it require periodic maintenance? Is it non-discretionary or have a non-discretionary component?
Is the goodwill related to you or your company?
This is the question of defining whether you have “personal goodwill” or “entity goodwill”. Does the goodwill reside with only you making it more difficult or risky to transfer to a buyer? Does the goodwill also reside with key employees and or management?
Are there growth opportunities?
What are they and what are the deployment costs in terms of people, technology and money. What is the geography constraints of the opportunities? Are they in your existing markets or are they in new markets that require deeper deployment costs? What will the working capital requirement be to take advantage of the growth? What are the CapEx costs required for this growth and where will you find it and how much will it cost?
What are the weaknesses and risks?
In the current business model what are the points of risk and weaknesses in terms of people, technology and money? Is the team performing? Does the team have excess capacity? Are the right performing people in the right positions? Is the current technology required easily scalable? Does the business have sufficient working capital or is it deficient working capital?
Are there concentration issues?
Does the company revenue concentration issues? In real terms do any of your customers account for more than 10-15% of your top line revenues? If you combine the top five customers do they collectively account for more than 50% of top line revenues? Are there supplier concentration issues? Are any suppliers sole source? Can you execute contracts with suppliers that provide you with exclusivity?
Are your customers committed?
How many of your customers are under contract? Are they renewable? What is the average term? Is there a dedicated sales force servicing them? How many customers are repeat or recurring? How many are one time users?
What is the quality of Books and Records?
Do you have accounting software and a viable data entry system? Does your accountant (on staff or outside) finalize or close out your monthly books? Does management review results routinely to leverage performance and so inaccuracies are fixed and reporting improvements are implemented?
How will the sale be financed?
Is it your goal to cash out? Have you discussed with your advisors any limitations this might create? Have you discussed the advantages of carrying a portion of the purchase price? Have you considered selling the business to the employees through the use of an ESOP?