Tuesday, January 10, 2017

Summarizing the 8 Key Value Drivers

You may not be looking to sell your business any time soon.  You may not have started planning for the departure from your business despite the fact that all business owners will one day exit their business (voluntarily or involuntarily due to death, disability, disaster, divorce or dispute).

Are you, however, looking to increase the value of your business and continue to build your wealth?

Value is ultimately driven by a company's future income or cash flow expectations, and the future is inherently uncertain.  Increasing your operating cash flows and minimizing the risk associated with achieving and/or exceeding the projected operating cash flows will increase the price an acquirer is willing to pay for your business. 

I recently introduced you to the Value Builder System(TM), a statistically proven methodology for increasing the value of your business.   Business owners can complete a 13-minute questionnaire and receive their Value Builder Score out of 100. 

In order to truly understand your Value Builder Score you need to appreciate where your company stands in each of the following 8 key value drivers:

1. Financial Performance - your history of producing revenue and profits combined with the professionalism of your record keeping.  Greater revenues and profit margins lead to higher value.

2. Growth Potential - your likelihood to grow your business in the future and at what rate.  A proven track record of meeting and/or exceeding prior growth targets (revenue and profits) and a solid business plan with future growth projections will increase value.

3. Switzerland Structure - how dependent your business is on any one employee, customer or supplier.  Minimize your company's dependence on a key employee, customer or supplier to lower your risk profile and maximize value.

4. Valuation Teeter Totter - your ability to manage working capital and continue to generate positive cash flow.  A strong balance sheet with excess working capital and positive cash flow from operations on a monthly basis will increase value.

5. Recurring Revenue - the proportion and quality of automatic, annuity-based revenue you collect each month.  The more revenues you have locked up under long-term contracts or under an automatic subscription basis, the higher the value.

6. Monopoly Control - how well differentiated your business is from competitors in your industry.  A strong niche and/or competitive advantage in your marketplace will increase value.

7. Customer Satisfaction - the likelihood that your customers will re-purchase and also refer you.  Increase your number of satisfied and loyal customers that refer you to others and you will increase your company's value. 

8. Hub & Spoke - how your business would perform if you were unexpectedly unable to work for a period of three months.  Minimize or eliminate your company's dependence on you, the owner, and you lower your risk profile and increase your company's value.

Wouldn't you like to know where your company ranks in each of these key value driver areas?  Armed with this information you can zero in on the value drivers that need improvement and identify where to focus your efforts and attention to increase the value of your business.  That's where the Value Builder Score comes in. www.valuebuildersystem.com  

Empirical evidence shows that companies with a Value Builder Score of 80 or more receive offers that are 71% higher than the average business!  Simply put, improving your company's performance on these 8 key value drivers will increase the value of your business.

Join me over the coming months as I expand upon how each of these key value drivers will serve to increase the value of your business.  I will provide examples for each and discuss what you can do to improve your company's ranking in each of the 8 key value drivers.

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