One of the most frequently asked questions we receive from business owners is "how do I enhance the value of my business?"
Value enhancement strategies can range from competitor and client analysis through to marketing strategies and industry comparison, and when performed together can make a significant difference to a company’s value and ultimately its sales price. At Generational Capital Markets, we offer a range of Business Improvement services to help prepare companies for a successful sale or exit.
Taking our ratio analysis, and using the experience our evaluation team members (many of whom are members of the American Society of Appraisers as well as Chartered Financial Analysts), we often make recommendations to clients on specific programs to implement to grow sales, improve margins, improve inventory turns, clean up payables, and enhance ongoing operations. Again, all with the goal of ultimately not just improving operations, but enhancing the company’s value.
Determining where a company stands in relation to other industry players is also a key service that is part of our process improvement program. Industry research from several sources can be used to compare growth rate, margins, competitive strengths, and intangible assets, all with the goal of deciding what areas of the business need the most improvement.
Who are your key clients and why are they important to your business? If you lost one (or more) what would that do to your company’s earnings? Our team will walk you through this analysis and ensure that your key clients are ‘key’ to you for the right reasons.
Too often we encounter clients who generate a significant amount of revenue from a few key clients. Usually this is due to incentive programs that encourage sales teams to spend more time servicing accounts than working to find new ones. In addition, marketing budgets often are too low by industry norms or lacking altogether. Our teams provide key ideas on how to improve sales and by doing so, throw more money to the bottom line.
How is your company performing in relation to industry norms? How are your profit margins, operating margins, and other key metrics in comparison to standards? This analysis is key because it often shines the light on areas of your operations that have not been examined in years. How often have you reviewed your purchasing department’s policies and procedures regarding RFQs? When was the last time you reviewed and updated your operational manuals? All of these are key to improving your company’s valuation.
Frequently our clients lock their key customers into long term contracts that simply renew year after year without any analysis. It is vital to make sure that as your costs go up, so too are long term pricing relationships, even with key accounts. Doing so allows us to again, improve the value of our clients’ businesses because even a few percentage point increases in margins can make a big difference in valuation.
Most business owners rarely (if ever) do a comprehensive profit margin analysis by client, market, and product line. This is vital for business operational improvement because even slight improvement in your pricing structure in critical areas can generate significant future earnings that could be attractive to buyers.
In order to determine how a company compares to other industry players, it is vital to do a comprehensive ratio analysis on the business. This enables our Financial Analysts and Evaluation Managers to determine how healthy a business’s income statement and balance sheet are when compared to industry standards. Depending on the industry, we usually examine 10-12 ratios that are standard to determine financial health.
Our Roadmap for Enhancing Value (REV) is designed to give business owners specific strategies to pursue, to enhance and improve the valuation of the company over time with the goal of going to market at some point in the future. We evaluate 12-18 metrics that are benchmarked to our valuation improvement targets. Clients are given two updates at no additional charge over a five-year window to see how their efforts are enhancing the value of the company.
Are there new markets for your existing product line(s)? Have you ever asked your clients what else you could provide them that they need? These are important areas to review because they often reveal new areas of business that you have not considered before. Our teams will get you thinking about them as we ask questions relating to new markets and products.