Business Value Drivers
Understanding the Value Drivers unique to your business can be an essential first step to maximizing value. Once business owners understand the Value Drivers there are steps that can be taken to enhance these factors and make a big difference in the value of the business.
Here are a few examples of Value Drivers:
- Competitive Analysis
- Online Marketing Assessment
- Personal Performance Assessment
- Acquisition Target Assessment
- Operational Review
- Customer Experience Report
- Financial Assessment
While business owners may have all the answers related to operating their business in their head and feel confident that the employees are properly trained, a new owner needs to feel a sense of assurance that they can realistically sustain the processes that have made the company successful. Documented processes and policies will increase the value of your business by ensuring the intellectual capital of your company does not leave the company when you do.
Diversified Customer Base
Business owners should be sensitive to the importance of customer diversification and its impact on the value of the business. While it is nice to have a big account and enjoy the benefits that seem to come with a well-known customer, it is important to keep the revenue stream for the business as diversified as possible. Business owners should try to ensure that one customer makes up no more than forty percent of their revenues. Having too many eggs in one basket is risky and can negatively impact the value of your business.
Some business owners prefer to run their business on a traditional hand-shake basis. Over the years there may be a number of trusting relationships built with customers, suppliers and key employees. While this is an admirable approach to business, the absence of written contracts is usually a concern for potential buyers or lenders. Taking some time to formalize the agreements through written contracts will help increase the market appeal and value of a business significantly.
We have all heard and seen how first impressions can have an impact on a decision. The appearance of a business, called packaging, is an important value driver that is often overlooked by business owners. Packaging includes things like 1) a clean, organized work area, 2) easy to understand accounting reports and 3) a clearly illustrated business model. Proper packaging will ensure your business makes a good first impression to any potential buyer and any time.