Drivers of Business Value

In our last blog we described how businesses are valued. In this edition we discuss what can be done to increase what a business is worth: what are the drivers of business value.

There are many factors that can have an impact, including the examples shown in the diagram.

Some things might be outside of your control. Timing is an example – you may just hit lucky in marketing your company at the same time that a buyer is looking to acquire. But some aspects of timing are definitely within your control. For example, it isn’t usually a good idea, to market the business for sale during the summer holidays or over the Christmas period – people just aren’t there to see it, and if they are their mind may be elsewhere and so the marketing effort can be wasted.

Linked to timing is the industry that you are in. The top right box refers to operating in a ‘nice’ industry. There is not a lot you can do about the sector you are in, but if you foresee developments that you do not like, you could choose to exit in advance of those developments happening or consider how you can reposition your business to protect against them.

A buyer might have a strong strategic reason to acquire you, which might be to get into your geographical area or to steal a march on a competitor: In such case we have seen some buyers offer double what the second closest bidder offered. A lot of this is luck.

However, the other aspects are within your control, although not necessarily of short term control: it will take years to build a loyal customer base, develop a strong culture and show a period of stable growth. This is why it is so important to plan a business with the end in mind and prepare for a sale as far as possible in advance.

If you would like to discuss the value of your company, or what can be done to increase its profits and value please get in touch.

If any points in this article strike a chord with you then please contact us. CBSL Accountants' Corporate Finance team have a proven track record of helping companies to acquire and business owners to sell. We help you to identify possible buyers, to understand what those buyers are looking for, and how to present your company to them in a professional way, to maximise the chances of selling your company.

For a confidential discussion, please contact Adrian Barker: adrian.barker@cbslgroup.com