Perform Differently to Maximize Business Value

Contributed by Speed2Results, LLC 

In a recent presentation on the state of the economy, noted economist, Alan Beaulieu, of ITR Economics, announced a forecast for 2013 and forward.  Beaulieu's group predicts a strong 2013, a mild recession in 2014, followed by a strong 2015-16.  Mr. Beaulieu recommends business owners who plan to sell or transfer their company in the future, should consider preparing now for a business exit or sale in the next three to five years.

Business Value Drivers - Given the current forecast, it is important to take steps now to ensure your business is attractive to potential buyers, funding sources, and to receive top dollar. Business owners can start by addressing key value drivers for growth listed below:

1.  Customer diversification
2.  Multiple streams and recurring revenue
3.  Motivated, strong management team
4.  Financial systems and controls
5.  Realistic Business Plan with strategic growth, scalability, and execution models

Attending to these value drivers reduces risk, demonstrates future growth, and increases the value of the business to buyers. How well a business intervenes to resolve value driver gaps can result in a 25% or greater increase in multiplier of EBITDA. (Earnings Before Interest, Taxes, Depreciation, and Amortization) 

Plan for Success - Business owners who are planning to grow or sell will need a business plan. Most owners believe writing a plan is an arduous and time wasting task that will not have immediate benefit and value for the business. Common excuses owner's express: "I don't have the time," "I don't know what topics or information to include," and "I don't know how to create financial models."  

Owners will consider writing a plan when operational capital is necessary for growth/expansion and to capitalize a retirement lifestyle. The problem with this approach is that an owner's personal and business life may experience unexpected change, such as a sudden illness, death, a partner exit, or a desire to take advantage of a sale or merger/acquisition opportunity. These events can initiate an unplanned exit/retirement or urgent transition of ownership to unprepared successors. Consequently, owners are pressured to sell the business at a lower value than desired.

For a business to be successful, the CEO must have a clear understanding of its purpose, goals, vision, customers, and competitive environment. A well-designed business plan is the best method for determining a viable direction, Unique Selling Proposition (USP), maximizing value drivers, and execution of performance.

A business plan is a roadmap to success for your company. It clearly states where you are, how you got there, and how you plan to proceed. The document convincingly demonstrates that your business can make a satisfactory profit now and in the future. The effort is definitely worth your time to maximize the value of your business.

Business Plan Format- A Business Plan can be complete with as few as a couple pages or as many as 100+ pages. It depends on the purpose for creating the plan, the complexity of your business, and the amount of information required to demonstrate that your plan is sound. An 8 to 20-page document, including financials, is sufficient for small to mid-market businesses preparing for growth, transition, or sale. 

Business Plan contents also vary based on the factors above; however, there are essential elements that need to be addressed:

1.  Business Profile - Description of your business, goals, operations, products, services, markets, competitive advantage, and growth history
2.  Internal/External Environments - Research on potential customers, competitors, demand for your products or services, economic conditions, industry growth, and emerging technologies. Summarize your research by:
a.  A SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats)
b.  Competitive Advantage - USP
i.   Who will buy from me?
ii.    Why should they buy from me?
iii.  How will I provide what they buy?
iv.  How are our products and services unique?
3.  Execution Plan - Include Mission/Purpose, Goals, Vision, Values, Execution Strategy, including:
a.  SMART Objectives (Specific-Measureable-Attainable-Relevant-Time-bound)
b.  Performance Measurements, and Tactical Actions
4.  Financial Analysis - Develop a 12-month cash flow forecast and a profit forecast with an estimated 2-year projection.

Consider these "Smart Tips" to improve your planning and execution:

A.  Keep it simple; include and monitor only the most critical factors, competencies, and priorities that drive your business 
B.  Include management and key employees in the analysis and decisions to get buy-in and heighten probability for success. 
C.  Continually update your employees, partners, and suppliers on your business purpose, USP, objectives, measures, and initiatives.
 

Remember, the best business plans are concise, practical and attract investors and funding sources. 

Take Action Now - Business plans are a compass and provide a map to ensure your business success and to maximize value. A plan provides a business direction, a "template for execution," and action timelines to reach desired targets. It builds commitment, credibility, and convinces others that you know what you are doing and where your business is heading.  

Plans enable an owner to perform better and research indicates that businesses that commit to regular business planning have higher profit margins and sale value. It is worth the owner's time to "wrestle" with the deep thinking, problem solving, and self-reflection that is demanded to have a clear vision, USP, strategy, tactics, and measures. This journey emboldens and strengthens an owner's persistence, stamina, and commitment to the long-term success of the business.

Whether you write your business plan from scratch, use business plan templates, or hire a seasoned professional to facilitate the process, don't miss out on maximizing your business value realized through the use of an executable Business Plan.

(originally published in February 2013 eNewsletter) 

Speed2Results® answers the question for senior leaders and business owners: how to build sustainable performance linked to bottom-line results. Their solution provides a Complete Performance Execution Platform. Their executive advisors are seasoned professionals with over 60 years combined experience in performance improvement. Contact Speed2Results at 720.209.2087 in Denver or 719-963-4690 in Colorado Springs or visit our website at www.speed2results.com. © 2013 Speed2Results LLC All Rights Reserved.