Value Builder Recap

We're wrapping up our Value Builder series, where we have been talking about eight drivers of business value. This concept comes from John Warrillow the CEO of Value Builder. John discovered that when these drivers are incorporated into a business – and truly maximized – they really position a business to perform well in the marketplace.

So let’s do a recap, click on each to revisit the 8 drivers:

 

Financial Performance – what has more value… profitable top line revenue, or profitable top line revenue that quickly converts to cash? 
Growth Potential – which of the 7 growth opportunities are you implementing to drive revenue?
Valuation Teeter-Totter –  How do you improve the business’ ability to generate more cash so a buyer doesn't need a big check for working capital?
The Switzerland Structure – are you too reliant one any one client, vendor or employee?
Recurring Revenue – have you created income that will flow into the company with little to no effort on your part?
Monopoly Control – how are you differentiating your company to dominate your market?
Customer Satisfaction – are you leveraging the power of the Net Promoter Score?
Hub & Spoke – as the owner, are you still too involved in the day-to-day decisions?

Now let’s look at how these eight drivers impact how a business is valued.

It comes down to a capitalization of earnings. Or like a lot of us know, that's Multiple x EBITDA. (Earnings Before Interest, Tax, Depreciation, Amortization). As owners we understand the principles behind EBITDA, but a lot of us don't know how to drive multiple. And that's what these value drivers are all about.

Multiple is essentially a math formula. We can't influence that completely, but we can influence risk, and that's a key piece to that multiple. Implement these value drivers and you're going to reduce risk, you're going to increase your multiple and in turn you're going to increase your value in the marketplace.

If you can maximize the value in the business now, it gives you a lot of transition options when that time comes. Whether that transition is to family, a third party sale outside the business, or key employees in the business, that is exactly what the 8 Value Drivers are about. Doing things on your terms.

The game of business ownership is to create wealth.  For most owners, that is the end goal – to create wealth, exit on their terms, and to ultimately empower the next generation of ownership.  But increasing value is not only about the end game.  It starts with what you are doing right now to drive value and you have a business that really has a shot of making it to that next generation of ownership.

I hope you got value from this series (no pun intended).  Email me and let me know!