Selling a Privately Owned Business – Briefing 7 – Creating Value
most important consideration in any sale is normally to maximize the value of
creating and enhancing value in your business is a
key objective at any time, but especially where the ultimate aim is an eventual
Larger corporates are accustomed to relentlessly focusing on value
creation throughout their entire life cycle, but for many reasons, smaller
businesses have more difficulty doing so.
However, there are many ways in which SME type firms can learn
from larger corporates in creating value. Whilst by necessity a general view
has to be taken, nevertheless set out below are a few pointers on creating and
is measured both in tangible form, such as revenue and profit, but also in
intangible form, such as people, reputation and market differentiation.
key factors in creating tangible value are to ensure continued and sustainable
revenue growth, producing a return at good margins, with a well controlled cost
issues in creating intangible value include ensuring you have the right
infrastructure and people to deliver that value, and the strategic and market
position on which to continue to build a sustainable business.
Although often a less attractive subject for smaller businesses than, say,
business development, attention to costs is paramount. Value can often be
enhanced equally by attention to costs than by increased business. Attention to
costs should thus always be permanent, not temporary or fluctuating.
Clinically assess all spending and the allocation of financial resources in the
business. Check that those resources properly reflect your key business
priorities. Try to ensure that the longer term cost structure is focused and
always on margin and return, rather than volume, and avoid “buying” new
business at unsustainable margins.
and understand your strategic objectives, and develop a plan for creating value
from that strategy. Understand and focus on what really drives your business.
• Have a
clear strategy for identifying and capturing new business. Identify what the
key factors are that drive increased business, and ensure resources are
properly allocated to that key objective.
Attention to key processes is important, in two ways. Non value – producing
processes can often be simplified, such as reducing time – consuming processes
(for example payroll). Additionally, key value – adding processes such as key
account management can be optimised through efficient allocation of resources.
Finally, ultimately it is the people within the business that represent and
maintain the value, and creating and sustaining the best team you possibly can
is at least equally as important as any specific business or cost activity.
above points may seem obvious, but the reality of running a small business
often means that an owner becomes sucked into working “in” rather than “on” the
business. There is all too often insufficient time to “step back” and see the
wider picture, or to question and revisit historic and embedded processes. If
this could be done, it would almost always result in an improved business with
greater and sustainable value.
15 October 2019