As an Owner prepares to exit his/her business, one of the biggest things that he/she may neglect to do is enhance the value of their business— losing out on selling it for what it is worth.
The value of a business can be increased in numerous ways— recurring revenue, customer satisfaction, books, and records— however, if these aspects are missing, a business owner could miss out on receiving what they truly should for their life’s work.
Transferable value is what a business is worth without its original owner. Value drivers allow business leaders to transfer power to the next owner without disrupting cash flow, ensuring that the business remains profitable and successful.
It’s critical to look at your business from a buyer’s perspective and evaluate the attributes that a buyer looks for when purchasing a business. A multi-year trend of increasing revenue and a forecast of revenue growth for the future, positive net-worth post-sale, a strong market position, experienced employees to provide business continuity post-sale, and an established customer base are all aspects a buyer will look at when determining value and ability to sell.
Next-level management is one of the most important value drivers. These are typically managers that know how to take your business to a more prestigious level by utilizing their experience and skill set. To obtain this value driver, owners must attract and retain a next-level manager, which can involve training and coaching existing management, engaging with consultants to enhance growth, and providing strong incentives to motivate leadership and top management to achieve desired goals.
The sooner business owners start to improve their company’s value drivers, the better. Waiting to build transferable value can bring monumental challenges for business owners. One of the main ones is limiting options and increasing obstacles because they don’t have time for advisors to implement alternative growth strategies.
Advisors struggle with creating successful exit plans for owners if there is little to no transferrable value, and, most importantly, it can take away from the ownership experience. Reach out to the Aberdeen team to learn how we can help create an exit plan that allows business owners to reach their selling goals.