Transition Planning 2nd Edition

VALUE DRIVERS
When taking your business to market, it is important to consider
the internal and external value drivers. Each of these factors can
substantially increase the final selling price for the benefit of the seller.
Each value driver is a characteristic of a business that either reduces the
risk associated with owning the business or enhances the prospect that
the business will grow signifcantly in the future.
“
We are in danger of valuing most
highly those things we can measure
most accurately, which means that we
are often precisely wrong rather than
approximately right.
- Sir John Banham
“
EXTERNAL VALUE DRIVERS
4 Economic factors
4 Strategic buyers synergies
4 Reccurring revenue
4 Competition from buyer groups
4 Innovation & IP (Intellectual Property): proprietary technology,
trademarks, patents, etc.
4 Transition timeline for existing management
INTERNAL VALUE DRIVERS
4 Stable and predictable cash flow
4 Reliable financial information
4 Customer diversity
4 Human capital / quality of workforce
4 Growth potential
4 Facility and equipment condition
4 Product / service diversity
4 Goodwill
4 Barriers to competitive entry
4 Operating systems and procedures
Simply put, the better your performance in these areas, the greater the
selling price of your business. The likely result is that you will sell at the
higher range normally associated with our industry.
Note: Accountant valuations are useful for applying to divorces,
partnerships, breakup, etc. However, the fact remains they do not
actually represent “fair market“ enterprise value.
“
Money speaks sense in a language all
nations understand.
- Aphra Behn
“
“She knows the value of everything she makes.”
- Proverbs 31:18
INTEGRITY • AGILITY •RESULTS 17