The real purpose of any organization is the creation of value. For entrepreneurs who entrust the value creation process to advisors like us, we must help them improve their strategic vision, maximize the value of mainly intangible assets, assess each of those assets, and enhance the value of the business.
By value creation, we mean creating new or innovative economic activities capable of generating future growth and earnings. As advisors with privileged access to our client’s business and financial goals, we must establish a common understanding that innovation is not only technical. In other words, the creation of new or innovative economic activities no longer passes only through technological know-how and patents.
It’s incumbent on us to use that privilege to guide the client where they want to go. To be the coach, they’re asking us to be. To lead them to a deeper understanding of the business value and guide them to the future value they require to have the post-work life they want.
Here are just a few ways you can help owners grow enterprise value:
- Reduce owner dependency. External company succession benefits the business and its employees if the owner reduces its dependence on the owner before selling. This dispels doubts that the company will falter without the owner or that a change of ownership will have negative consequences.
- Document organizational processes. Processes should be documented as accurately and thoroughly as possible so that a new hire or new manager can understand how the company works. This is extremely important, especially when selling the business because a prospective buyer wants to understand the company at its core before buying it.
- Promote employee competence and loyalty. Current employees contribute vast knowledge, experience, and competence to the company, so it’s essential to have strategies to retain loyal, skilled employees, even after a sale.
- Invest in the company. Word of a company’s impending sale often gives rise to rumors it’s no longer worthy of investment, but the opposite is true. Consider the sale of a house. Before offering your home for sale, you may clean it, paint it, stage it, and make minor repairs. Often even a few small things can help a seller realize a higher sales price. This is similar to selling a company: the company should show itself at its best during the sales process.
Realizing a higher return on the sale of a company requires you to put all your energy and strength into improving the company. Yes, traditional exit planning is failing. The pandemic proved it. Our research confirmed it. And our experience proves it every day. We, as advisors, have to step up our game. We have to think and behave differently than we have in the past.
Download the Exit Planning 2.0 Manifesto
Value Scout is built on recognizing that we, as value creation advisors and exit planners, have a unique and rare opportunity to help our clients achieve something they’ve only dreamed about – a successful transition on their terms. To accomplish that mission, we have to hold ourselves accountable to a high standard, a set of memorable beliefs that guide our work and everything we do. We call them the 8 Proclamations of the Value Advisor.