Posts tagged with: value enhancement
Traditionally viewed as three distinct practices Exit Planning, Value Creation Consulting and Investment Banking, the emerging Power Practice of tomorrow embraces the paradigm shift of a truly integrated approach to helping sellers extract maximum value from the sale of their company as well as allows Intermediaries a deeper more longitudinal relationship and greater fee participation and deal flow over time.
I was seated on the panel discussion on this topic at the AMAA conference in Chicago on July 24, 2014 addressing an audience M&A advisors.
The Moderator was Craig Dickens – CEO, Merit Harbor Group
The Panelists were:
Peter Christman – CEO, The Christman Group
KevinHanson – CEO, The Ashton Group
Kerri Salls – Managing Director, This Way Out Group LLC
Kathleen Richardson-Mauro – Co-founder, Richardson-Mauro & Johnson
- Plan – The need for a plan
Preparing the seller
Get over resistance – why entrepreneurs don’t plan –
Tangible results of a plan on deal completion
- Un-siloing silos – the need for an integrated deal team.
Where collaboration leads to better results
Setting ego aside
Who is the quarterback.
- Tools of collaboration
Data share – exit plan yield % done deals etc.
Integrated deal team = better results etc.
- The Emerging Power Practice
Identifying true targets. Create your own deal flow
Tatum Thesis example
Giving the seller a plan or empowering the seller.
Marshaling the difference between advisory and sell-side activities
The hand-off from plan to value creation to execution and seller readiness
Cash Flow implications to a Power Practice.
The consensus on the panel was that owners need a team to get to the deal and to complete the deal. And they need exit planning and value creation expert guidance much earlier than they need transaction guidance. With a power practice team on board, the client benefits from advisors being fully up to speed and engaged on their issues, their goals, their criteria long before the intense transaction cycle begins. Both the client and the advisors benefit from an integrated team collaborating for better client results. That’s the emerging power practice.
Wherever you are in your company lifecycle, start thinking now about the value of your company in the marketplace.
If you are a fast-track startup, showcasing your value and tracking your increasing value will make you a very attractive investment opportunity when you seek growth capital. If you are an established firm, clearly understanding the value you bring to the market will help position you as the most appealing acquisition/buy candidate in your space.
Value enhancement is not just a cleanup effort before the buyer’s appraiser comes in in the transaction process. Value enhancement is an overarching strategy to build a stronger, more robust company.
Here are 10 key questions to think through to maximize the value of your business.
- Who are your top 10 most profitable customers? Look at your 80/20 split.
- Who (what other customer) can move into your top 10 – if a client moves on/stops ordering?
- What new product or service could you add, break out as a paid add-on to increase revenue?
- What possibilities have you considered to accelerate your current business?
- Which (if any) of your sales are difficult to collect on? Identify those sales with high internal costs to get paid. Lower-cost orders/sales are less of a burden on the books/balance sheet.
- When do you identify customer complaints? When do you fix them?
- When was the last time you reviewed your pricing structure?
- Do you know who your top 20% of customers are? Why are they your top 20? Do you know your bottom 4%? Do you know what they cost you in time, staff, materials costs and goodwill, etc.?
- How current is your technology? Where should you update or upgrade technology to boost the bottom line?
- In your business model, what % of your sales is tied up as deferred income?
Your answers identify the numbers, activity and results that can provide value enhancement to your business now.