Matthew Atkin delves into the essential strategies for creating and realising value in your business. While some may think the sale value is irrelevant if they don’t plan on selling, it’s crucial to understand that a high business value opens doors to growth, investment opportunities, and more.
Matthew discusses three of the eight key drivers of business value in this video, focusing on growth potential, financial performance, and independence from the owner(s). Learn how these factors can significantly impact your business’s attractiveness to potential buyers or investors.
Video Transcript: Maximising Business Value
Hello everybody, my name is Matthew Atkin and today I want to talk about how to create and realise real value in your business. And what I mean by that is pounds, shillings and pence, the sale value of the business.
Now, for many people the sale value is irrelevant because they’re not planning on selling. But the value of the business is important in the sense that it enables you to do other things, for example, to be able to borrow money, to grow and develop and invest in the business.
So, there are broadly eight key drivers of business value. I’m just going to mention three of them today because I don’t want to spend too long on this. We can explain it much more detail where we to meet. But in principle, one of the key drivers is growth potential, the potential for the scale of your business. If you had a single village store that had a limited hint of land and relatively few people, the growth potential of that store is negligible. But on the other hand, if you had a product which could be sold nationally and indeed internationally, then clearly that’s of far more value to a potential buyer. So, the potential for growth is very significant in terms of the potential marriage value with another buyer.
Secondly, financial performance. If you’re already performing well in terms of return on investment, return on capital, and you’re generating a good cash flow, clearly, you’re much more likely to be a target for a purchase, for a takeover. But also, you’ve got to have good clear records so that the buyer can understand exactly how the business works and know what the numbers are.
Thirdly, I’ll just mention that it needs to be independent from you, the owners, or the shareholders more generally if there’s more than just you. And the reason for that is that the buyer doesn’t want to buy you, they want to buy a profit stream. So, the further you can develop the business to be independent of you, the better in terms of value. And what that means is that you’ve got people to do every task within the business that you are merely directing, which means that when a buyer comes along, they can easily replace you with a manager, a general manager, and they’ve got a business that functions and contributes and returns on their investment.
So, if you want to know about more about how to create value and ultimately to realise that value such that your business is a genuine asset, send me a message.
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