Hardwood Floors August/September 2018

BUSINESS BEST PRACTICES FINANCE

HOW TO INCREASE YOUR BUSINESS’ WORTH USING VALUE DRIVERS

A fundamental aspect of a successful business owner’s exit is to assure that the business has enough value to allow for nancial security. is, coupled with wisely invested non-business assets, gives you the best chance to pursue the exit path you want on the timeline you want. Obtaining a proper, professional business valuation is the rst step in determining how much your company is worth, but what happens if the valuation shows that your business isn’t worth enough to allow you to exit your business with nancial security? How can you increase your business’ value if everything that’s made it successful thus far isn’t enough? e answer lies in installing value drivers. So, what are value drivers? Value drivers are speci c business characteristics that drive growth. While each business is unique, there are six areas of your business that, with focus and a li le time, can have the greatest impact on your company’s value. ese six value drivers represent characteristics of a business that either

6 VALUE DRIVERS

1. A stable, motivated management team. 2. Operating systems demonstrated to increase cash flow sustainability. 3. Established and diversified customer base. 4. Proven growth strategy. 5. Effective financial controls. 6. Stable and increasing cash flow.

reduce the risk associated with owning the business, or enhance the prospect that the business will grow signi cantly in the future. Let’s dive a bit deeper into each of these characteristics: Management team In all likelihood, as an owner of your business, you are absolutely critical to its success. Without you, there probably

is no business. If you are going to leave one day, this has to be xed! You must become an “inconsequential owner” surrounded by a team of motivated people with a variety of skills who are incentivized to stick around for the long haul. If a company has a solid management team, a buyer will likely assume that customer relationships can be maintained, and that the company’s reputation will remain intact. Buyers conclude that the company will

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