Determining the value of your business is a central factor in assisting business owners who are growing and developing their business, leveraging finance, planning for succession or selling the business, measuring performance or tax planning. There may also be a need to determine a value when changing the business structure, for example when bringing in new partners or family members.
Valuations can be complex and subjective with various influencing factors, including financial, business strategies, staff, business processes, as well as legal and governance aspects. To improve value, the following elements should be present:
- Quality financial and management reporting with sustainable, reasonable and supportable forecasts that align with the optimal capital and corporate structures.
- Attractive growth opportunities with a strong business plan and strategy aligned to the business objectives.
- Retention, motivation and succession planning of key staff with appropriate agreements and restraints in place, including the protection of intellectual property and other assets where applicable.
- Strong customer and supplier relationships with documented internal processes and well-maintained assets and systems.
- Relevant legal agreements in place with established corporate practices and policies to manage the governance of risk.
In addition, value can be improved by making cash, customers, control, and scale operations more efficient and include:
- Making the systems work effectively to facilitate ease of collection of customer payments and ensuring an adequate level of cash reserves is in place for both risks and opportunities.
- Understanding customers and developing relationships with them to manage and maximise the return on the marketing investment.
- Having appropriate and efficient procedures in place to run and protect your business and key assets.
- Considering efficiencies of scale and scope, automation, outsourcing, and other process improvements.
Valuations offer a starting point for business owners and management and are undoubtedly key when making decisions of buying, improving, or growing your business. As a result, maximising such value would be an integral strategic goal of any such business.
HLB Mann Judd have extensive experience performing valuations in various industries. If you have any questions or would like further information, please reach out.