Understanding Value
Most people associate the value of a business with some obvious factors such as profit, cash flow, and a strong balance sheet.
While these factors are very important, the ability for a business to be efficiently and effectively transferred or sold is what drives the price that a buyer would be willing to pay (or a family member could afford to pay the retiring owners).
Through our Exit Planning and Value Acceleration process, we work with owners to identify and improve their most important, and sometimes not so obvious assets. We call these their 4 capitals... human capital, customer capital, social capital, and structural capital.
Understanding Value
To demonstrate a point on VALUE, take a look at the two companies below. They are similar in age, product line, revenue, earnings, and market growth.
COMPANY A
25 years
Niche Consumer Product
$20 Million
$2 Million
Nominal
None
Original & Worn
Thin & Weak
Started but Shelved
Unreliable & Inconsistent
Haphazard & Reactionary
FACTS
Company Age
Product
Sales
EBITDA
Market Growth
Product Development Program
Equipment Condition
Management Team
Customer Retention Program
Financial Reporting
Employee Training
COMPANY B
25 years
Niche Consumer Product
$20 Million
$2 Million
Nominal
Robust
New, State-of-Art
Deep & Experienced
Highly Focused
Highly Disciplined
Regular & Formal
Which company do you think a buyer would be willing to pay more for?
Which company would you rather transition to your children?