If you really want to know what something is worth, ask someone to buy it from you in the open market. I believe it’s safe to say that companies are no different.
Regardless of whether you are actually planning to sell your company or not, considering how a potential acquirer of your business might evaluate its worth and potential can open your eyes to new areas of improvement. This, in turn, allows you to maximize the value of your business. (If you actually are looking to exit your business, learn more in our podcast episode: I Put a Sell on You.)
That’s why I’ve compiled recommendations and considerations for how you can add value for your company, make improvements and drive success. These recommendations are based on our combined experiences in transaction advisory services and the things that we have seen actually benefit—and hinder—the values of businesses. These proven ways to increase the value of your business are grounded in four key areas: strategy, operations, legal issues and finances.
The following three actions are the top value-drivers for increasing your business’s value through strategy.
1. Develop a strategic plan, and ensure the entire organization is aligned with it.
It sounds simple, but don’t be fooled! Doing this the right way is an extremely exhaustive process. Our team typically spends at least six months working with our clients to develop a strategic plan, which should always begin with creating impactful and powerful vision and mission statements. Careful thought should be given to the company’s true culture and values and how you want your stakeholders (employees, customers, vendors, etc.) to perceive your business. Do you want to be known as the industry leader in a particular niche or service? Do you want to be the company that has a human aspect at its core? A business with an environmental mission it ultimately serves? Whatever you believe is the underlying reason for the existence of your business, make sure that your vision, mission, culture, values and every aspect of what you do is true to that.
From there, you must spend time developing your long-term and short-term goals and the many activities, tasks and actions required to meet those goals. Be SMART (Specific, Measurable, Attainable, Relevant and Time Bound) when defining the goals, activities, tasks and actions.
Also, consider that a 50 or 100-page plan isn’t always the right answer either. In most cases, a one-page strategic plan is more than enough for your organization. There is no shortage of free strategic planning tools out there. Just Google “one-page strategic plan,” and you will be overwhelmed with the results!
2. Establish a strategic advisory board, and make sure the right people get a seat.
Finding trusted advisors who can offer solid and objective advice for your business is a must. I absolutely believe that having good advisors to help you make crucial decisions is important to a company’s value and success, but I also believe that you don’t need to take out a second mortgage to implement this function. In most cases, people in your industry and region will gladly play a role. If not those from your industry, then people with strong business acumen, such as CPAs, bankers and attorneys, surely can. They can be mentors and will serve on an informal board that you create. The board does not have to have decision-making power, can meet as often as you like and can have as many members as you desire. When advising clients, our team typically recommends that they identify at least three members who meet quarterly with the company’s management team. Establishing an advisory board—whatever that may look like in formality for your business—can strategically cultivate true value for a business.
3. Create a great place to work. Remember that human capital may be your most valuable and most strategic asset.
It goes without saying that you wouldn’t have a business without your employees, even if you’re a two-man (or woman) operation. You hear, time and time again, Fortune 500 CEOs give all of the credit to their people. The number-one piece of leadership advice I can give is to surround yourself with people who are better or smarter than you. I can confirm from experience that having the best people in your organization makes all the difference in the world between being a mediocre company and being a great organization.
Make sure your workplace is somewhere your employees want to come. This doesn’t mean you completely ignore your profit margins or “give away the farm,” but it absolutely means that you should make decisions that will truly make a difference in the lives of your employees. Examples such as flexible work arrangements, casual dress policies, meals or snacks provided at certain times and sabbatical programs are all ways to improve employee morale without costing a great deal to execute. Giving your employees the peace of mind to know that their efforts are appreciated and rewarded is just as valuable to a company as the product or service you are delivering to customers.
Formulating your business’s strategy can be a long, intensive and even grueling process, but the benefit of establishing strong infrastructure and practices in this area can lead to great strides if your company’s strategy is planned and executed correctly.
Of course, creating a strategy is important, but it certainly isn’t the only way you should be considering adding value to your business. Read on to part two of this series, Maximizing Value through Operations, to learn more.
Access the other pieces in this series:
Hanny Akl is a Member of Warren Averett and leads the Firm’s Transaction Advisory Services practice, which focuses both on buy-side and sell-side transactions along with advising owners on creating value within their businesses. Click here to contact him directly.