Business owners focus on annual net income generation and revenue growth, but how often is the value of the business considered when making strategic business decisions?
For many business owners their business is their biggest asset, and when the time comes, they should be prepared to sell the business they have spent years building. An early focus on value drivers can increase annual cash flow and improve the long-term value of the business, so owners can potentially maximize the sale of their business.
What Are Value Drivers?
Value drivers are specific business characteristics that can reduce the risk of owning the business, and/or increase the likelihood of growth and return. While each business is unique, there are several areas that can greatly impact the value of a company.
- A strong, stable management team
- Documented business operating systems demonstrated to increase cash flow sustainability
- Demonstrated scalability
- Diversified customer base
- Proven growth strategy
- Recurring revenue that is sustainable and resistant to commoditization
- Good and improving cash flow
- Competitive advantage
- Financial foresight and controls
Over next several weeks we will be focusing on each of these items individually in the ARGI Business Brief. We will share stories and insights as to begin to make changes in business practices to increase business value.
January is goal setting time – this is a great opportunity for business owners to take an inventory of the value drives above and set goals for the upcoming year.
The ARGI team is equipped with a team of professionals seasoned in working with business owners to help them increase the value of their business. We would love the opportunity to help you reach your goals. Please contact our team with any business questions you may have.
Source: Brown, John. Exit Planning: The Definitive Guide. Business Enterprise Press, 2016.