Let me start with a question for any business owners out there – how do you know when you’ve achieved the maximum possible valuation for your business?
On the surface, that may seem like a straightforward calculation based on your current revenue, profits, growth rates and average multiples in your industry.
But the reality is, determining your true “peak value” potential is far more nuanced. Unless you have the right drivers firmly in place, there’s a strong chance you’re missing out on a higher valuation.
Because the financials and operating metrics which potential acquirers and investors care about most, extend well beyond just top line and bottom line numbers.
They’re looking for tangible evidence that your business can maintain and accelerate its performance after you exit.
The truth is, you need to concentrate on those value drivers that matter most to your acquirer – not those which add nothing.
Let’s say your business ends up being acquired predominantly for its people and their skillsets. Yet you’ve invested heavily into your IP over the years, compared to your investment into skills training.
You might consider that the wrong focus, in hindsight. Far better that you visualise that scenario playing out, way before you actually exit. Not when you’re negotiating terms.
That’s why I always urge business owners – if an exit is even remotely on your radar in the next few years, you need to be taking action now to maximise value. Not next quarter. Or the quarter after.
There will always be a reason to kick the can down the road.
I’ve seen it many times – business owners confident from their success of delivering strong financials, believing they’ve maxed out their valuation… only to leave 2-10X of the company’s true value potential untapped.
All because they failed to appreciate the outsized impact that a particular value driver can have on what acquirers will ultimately pay.
It’s one of the most expensive blind spots I encounter on a regular basis.
Feel free to reach out if you’d like to explore what the true value of your business can be…
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