When a business owner understands the genuine value of their company and builds upon it, they can achieve a higher sale price for their company. Consequently, increasing the value of the business can maximize transfer of wealth to the owner.
A number of the factors that drive business value are named below. These value drivers differentiate a company from its competitors and make a company more appealing to potential customers. They give the company competitive advantage in the marketplace which make it extremely appealing to a potential buyer.
Buyers consider these same value drivers when assessing a potential acquisition.
Key business value drivers may include:
- Continuous growth in revenue
- Barriers to entry into the industry
- Strong market niche
- Product and service differentiation
- Diverse, loyal and growing customer population
- Strong corporate identity and branding
- Strong product and service offerings
- A company culture that encourages innovation
- Highly skilled and loyal employees
- Experienced, capable management team able to transition to a new owner
- Up to date technology and operating infrastructure
- Efficient work-flow systems and processes
- Solid vendor relationships
Of these value drivers, company culture and existing customer relationships are two critical areas that concern most buyers. Both of these concerns can be mitigated if the seller stays on as an employee or consultant for a reasonable period of time.