BUSINESS SENSE
BY BARBARA TAYLOR, ALLAN TAYLOR & CO.
The Case for Building Value in Your Business Today
bulb of insight flicks on. Ironically, one such moment frequently occurs at the final stage of business ownership, when you are ready to sell and exit your business. Selling a business tends to be an enlightening experience for a
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number of reasons. It may be the first time you have ever looked at your business through the eyes of a buyer, been made aware of its hidden risks and opportunities, and had someone put a price tag on all your years of hard work. Te value of a business is something that some owners track
early and oſten. But most of us see business valuation less as an operational and financial tool, and more as something to address at a later date, if it all. Te thought of business value typically doesn’t cross an owner’s mind until they’re ready to sell, and by then it may be too late to do much about it. In addition to value being an aſterthought rather than a norm,
the reality is that most owners have no idea what a buyer would pay for their business; or worse, they have a number in mind that is wrong. Tis double-whammy of not understanding the value of your business and waiting too long to find it can put a real crimp in future plans for both your life and your business. Postponing the issue of business value until you’re ready to sell oſten means it’s too late to make changes that would have increased
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f you’ve owned your business for any length of time you’ve no doubt had several “ah-ha” moments over the years; points in the operation itself or in your growth as an owner when the light
both its value and “sellability”—atributes that make it an atractive target to potential buyers. Rather than wait for hindsight to illuminate the question of
what your business is worth and what drives its value, there’s no reason to delay to geting started today. A good place to begin is to have your business valued by a qualified valuation or M&A expert. Here are four things that drive value in any business—regardless of size or industry.
Seasoned Management Team Building value isn’t solely about increasing pre-tax earnings; it’s also about the quality of those earnings. Put another way, it’s about managing risk. Companies with high-perceived risk sell for lower valuations than those seen as less risky. And where is the first place buyers tend to look for risk? Tey will look at you: the owner. In order for a business to have transferable value (i.e. value that
an outsider will write a check for) it must be able to continue to thrive without you. If your business is too dependent on you, a buyer is likely to ask you to stay on for an extended transition period aſter the sale, or even conclude that the business has litle value without you. Te primary way to address this is to build a seasoned team to
run daily operations, ideally including executive managers that can handle strategic level decisions. In the parlance of business ownership transfers, your goal as the current owner is to make yourself “operationally irrelevant.” A good (and fun) litmus test for
Fall 2015
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