What are your key value drivers when selling your business?

If you want to maximise exit value (and who doesn’t?) it’s vital to remember that, just as beauty is in the eye of the beholder so value is in the eye of the acquirer!  It’s not just the monetary value that you currently have in your business that will maximise its sale value, it’s the value that will transfer to the new owners. Knowing your Key Value Drivers will ensure that you can obtain the best price for your business when you sell it.

So when you’re preparing a business for sale focus on building up its transferable value.  A great start is  by identifying the main strategic key value drivers.

These are the characteristics in your business that will either enhance future growth prospects or reduce the risk associated with owning the business.  In other words, the better the business performs in these key areas, the greater the selling price will be.

Key Value Drivers can be tangible, like physical assets, cash etc. but there are a range of intangible, “hidden” assets that have strategic value. Some, like sustainable revenues and cash flow are common to all types of business whereas others, for example Intellectual Property, licensable products etc. will be more industry specific.

Taking time to identify your company’s strategic key alue drivers will be well rewarded when the time comes to sell up.  Start by looking at your business from a buyer’s perspective.  Yes, revenue, profit and cash flow are important – after all they are usually the first thing any buyer will look at.  But what about human capital – buying skills is a powerful motivation for an acquisition.

Here are just 3 examples of key value drivers that will enhance price and saleability.

  • People – Buyers will also want key employees to stay in the business so the quality of your workforce experience, expertise and depth of knowledge has real value.  It will provide continuity during the transfer and will be essential to the growth of the business under new ownership.  If your business relies more on capable, well-trained employees – not you, the owner – it reduces the risk for a buyer and that drives up exit value.
  • Processes – Another key value driver is something that many business owners might see as just a part of business management and that is Documented Processes and Procedures.  These demonstrate that the business can be maintained profitably post-sale.  Don’t limit these to operational processes; include HR policies and processes, employee communication systems, client management systems etc.  So don’t just do these things, document them and increase the value of your business.
  • Client Base – One of the key value drivers and the more diverse it is the more value it attracts.  It is important that no one client represents more than 10% of revenue and ideally no more than 5%.   If the client base covers a range of industries even better.  Not only does this help to protect your business from the loss of any single customer and the associated risk of serious cash flow issues if one or more customers are lost, it also mitigates the risk of economic factors in certain sectors.

If  you are considering selling a business within the next 3 years it’s important to start preparing now. The most successful transactions are those where the vendor has spent time getting the business into shape and has a clear exit strategy.

Why EvolutionCBS is the first choice for business owners

  • * The Evolution team have completed over 350 successful deals, worth over £2bn in transaction value.
  • * We are proud of our industry leading 73% success rate.
  • * Our clients on average receive more than 40% above their expected sale price.

We partner with private business owners, helping them to crystallise the maximum value from the sale of their business and at the optimum time. Everything we do is built around the needs of our clients, supporting them at every stage of their journey, which for some starts many years before the sale process begins.

If you would like to discuss a potential business sale with one of our Client Directors, please either call Amanda on 0118 959 8224, email agale@evolutioncbs.co.uk or Make An Online Enquiry.

This will be completely confidential and without any obligation.

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