Are you building value while working your values?

Too many business owners are broadsided by the fact that the company they have put their blood, sweat and tears into is not worth what they emotionally believe it should be worth when considering selling or being bought out. When the company was built on solid principles and values, and has realized good profits and steady growth, it begins to make the owner wonder why they put so much of themselves into building the company for such little return when ready to cash out. However, that may be part of the problem.

1. Tangible Assets: Whether it is equipment, cash in the bank, inventory or your business facility, your tangible assets are the first place that is reviewed to determine business value. This is why service-oriented or consulting businesses compared to a products or manufacturing business are more difficult to appraise in value.   

2. A Customer Base: The next place that is reviewed is the customer base and its stability to continue to maintain and grow sales without you in the picture. Are you the sole provider of service to customers or do you have a qualified team? What about contracts? The more contracts, specifically long-term contracts, you have with customers, the better. If your business is not structured for contracts, consider ways you can package or price-model for retainer or contractual income flow. 

3. Systems and Processes: How is the company going to run when you are no longer in the picture? Have you put solid processes, systems and procedures into place so that it can run seamlessly without you? Do you have training and reference manuals? If everyone has to go to you or through you to get anything done, it is time to get what is in your head documented and used as a valuable guide to running and operating the business.  

4. Intellectual Property: Do you have proprietary protocols for anything that your company does that is unique and differentiating in how you work with or service your clientele? Too many business owners miss the mark by not taking advantage of the value-building power behind having intellectual property. Copyrights, trademarks, service marks and patents all add value and distinction to your company. Look at any public stock report and you will see a line value of “intangible assets.” Intellectual property falls into this category and can add substantial value to your enterprise if your proprietary offerings or image is in demand.

5. Image and Reputation: It is rare in this day for a company named after its founder to be purchased with the name being a part of the reason the company has value. A client of mine realized this unique value-added aspect when she sold her company a year ago. A consulting and IT staffing business, her company did not have the tangible assets, but it did have an impressive contractual client base, excellent systems and processes effectively running the business without her, intellectual property in approaches and branding, and then her company’s reputation which was of the greatest value of all to the buyer.

The bottom line for you is to take a step back and begin to look at your business, not as an owner, but as a shareholder. Should your long-term plan be to ultimately sell the business, take a look at what you need to do to make it a business of value as well as a business operating with strong core values.