Preface: Business investment value creation is a most opaque concept and process, even among experienced advisors. Yet, for the business owner with an investor business mind-set, it is of utmost importance.
Your Successor Looks at Your Business as an Investment
Credit: Donald J. Sauder CPA |CVA
Business transition advisors are necessary. Yet too often a majority of business owners omit realistic expectations on the investment feature of the transition.
If you think of your business as investment, and are interested in harvesting optimal value, beginning early with the following seven successful steps to the summit of business value creation can assist with a successful transition and an optimized fair market appraisal value to you as a business owner.
I. Adhere to a solid foundation of core values and a core focus (vision) for the business, identifying your business’s unique advantages, opportunities, and niche. Develop a one to three and ten-year plan. When your team strives every day to work purposefully per unified core values, and towards a common core focus, you can achieve great things, as the strong cultural bond of a shared purpose among your team drives the entire organization forward successfully.
II. Hire, train, and retain the best people as you build a talented team on the foundation from Step one. Without the right people, there is no success in business . Businesses thrive with expert, ambitious, talented, purpose driven teams. Your business’s ability to succeed in this area (the right people) is a key to your business’s future value. It is probable that this is where your next generation of transition ownership emerges, i.e., you develop it.
III. Continuously improve products and service solutions to meet the needs of your customers and clients both today and tomorrow, leveraging on the resources from Step two. Marketplaces shift and your business must adapt to successfully provide the best solutions for your customers and clients — they are the drivers of your business’s value from your business’s products and services delivered to them via your business team.
IV. Develop internal KPI’s and business operating systems that create and build value with performance efficiencies, and effective operations scalability. Your business needs to have processes to propel and govern operations and decision making, ranging from efficient and effective onboarding and development of employees to promptly invoicing and collecting on accounts receivable. Developed and implemented business operating systems successfully govern daily operations of the team. Again, this decreases cash flows risks and increases business appraisal value.
V. Further expand top-line sales volume, leveraging the implementation of Steps one, two and three. A great business is continually improving and growing. Successful businesses never stagnate entirely. Yet, growth can be managed with efficiencies and does not need to compound double digits’ sales volume increases. It can include new technologies for improved product quality or systems for improved sales per employee, or even improved cash flow management. Again, the true value driver of your business (cash flow consistency) is often the core values that are ingrained in your team as they deliver to the marketplace with your products or services.
VI. Optimize an incredible sales experience for your customers and clients. The experience your customers and clients have transacting with your business is your foundational business reputation. Think of the business you purchase from. The experience of the entire sales process and your trust and appreciation of that service or product delivered (the sales experience) by the team living the core values of the business, and the business’s core focus is likely the prime reason you transact there. Optimization of the sales experience will reduce business risks, and improve cash flows. This combination propels business value higher.
VII. Persistent diligence to achieve and keep your business an industry leader. You must continually strive to keep a competitive edge in your marketplace. A lethargic environment is not an option. Strive tirelessly to leverage your business’s core, values and core focus and sales experience, along with expert, ambitious and purpose driven people that keep your business at the forefront in the industry with innovation. Then you will deliver successfully, day after day the best solutions to your marketplace in the most effective way possible.
Business investment value creation is a most opaque concept and process, even among experienced advisors. Yet, for the business owner with an investor business mind-set, it is of utmost importance. Your business is an investment to your successor, if it currently is not an investment to you. They will need to invest like you, with time, effort and resources to continue its success. Applying the above “seven successful steps to the summit of business value creation” can help contribute to a successful transition to a successor from a financial perspective at an optimized fair market appraisal value for any business owner.
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