Business Value Building

Are you satisfied with the current performance and value of your Business?

If not, Value Building may be the most important Business initiative you will ever take.

Value building is the process of increasing the value of your business in order to maximize its potential sale price or attract potential investors.

By focusing on value building, a business owner can ensure that their company is in the best position possible to attract buyers, investors or partners. It involves identifying and implementing strategies to improve the company’s performance, financials, and growth prospects. It can be done by implementing operational efficiencies, increasing revenue streams, creating a strong brand and reputation, and building a solid management team.

Investing in value building now will pay off in the long run, by positioning your business for a successful exit strategy and securing your financial future.

At Bolton Advisory Group, we seek to educate Business Owners on what value is.

Then We Look at Your Gaps

Business value refers to the value that a business or its assets provide to its stakeholders. This can include financial value, such as revenue and profits, as well as non-financial value, such as customer satisfaction and employee engagement.

For a business, the value it creates can manifest in different ways, for example, for shareholders, it can be the return on investment; for customers, it can be in the form of goods and services provided; for employees, it could be the working environment and opportunities for growth and development.

At Bolton Advisory Group, we view value as long term profits and growth that is sustainable, recurring, scalable and produces ever increasing cash flow.

What is Transferable Value?

Transferable value is the value of a company or asset that can be transferred to a new owner. This value is often referred to as “saleable value” or “market value,” as it represents the price that a company or asset could reasonably be expected to fetch in the open market.

Transferable value is an important concept in business, as it is often used to determine the value of a company for purposes of sale, merger, or acquisition. It is also used to determine the value of assets such as real estate or intellectual property.

To determine the transferable value of a company or asset, analysts may consider a range of factors, including the company’s financial performance, brand value, customer base, and market trends. The transferable value of a company or asset may be different from its intrinsic value, which reflects the value of the company or asset to its current owner or to the market as a whole.

Sources of Value

Some companies are built around tangible assets such as Physical plants and others are built around intangible assets. Intangible assets are non-physical assets that have value, but do not have a physical form. These assets can include things like patents, trademarks, copyrights, brand reputation, customer relationships, and company culture. Intangible assets can also include things like intellectual property, such as software, research and development, and proprietary processes and methods.

Intangible assets are important to companies because they can provide a competitive advantage and can be a source of differentiation and revenue. For example, a company that owns a patented technology can license or sell the technology to other companies, generating revenue. Similarly, a company with a strong brand reputation may be able to charge higher prices for its products or services.

In the new modern economy, intangible assets are usually the greatest source of value for most companies. At a high level, you can categorize the intangible assets of a company under the following categories:

Human Capital

Customer Capital

Social Capital

Structural Capital

Value Drivers

Value drivers are different for every business and industry and should be evaluated based on their specific context, it’s also important to note that some of these drivers may not be relevant to every business or may not have the same weight for every business. Identifying and understanding the value drivers for a business can help management to identify areas for improvement and to make strategic decisions that can increase the value of the business over time.

Business Attractiveness refers to the overall desirability or appeal of a particular business or industry to potential investors, partners, or acquirers. Factors that contribute to a business’s attractiveness can vary depending on the context and the perspective of the observer. Some of the common factors that are considered when evaluating a business’s attractiveness include:

Market size and growth: The size and growth potential of the market in which the business operates can have a significant impact on its attractiveness. A large and growing market provides more opportunities for revenue growth and can help to mitigate risk.
Competitive environment: The degree of competition in an industry can also affect a business’s attractiveness. A market with few or weak competitors can provide more opportunities for growth, while a highly competitive market can make it more difficult for a business to succeed.
Barriers to entry: High barriers to entry can protect a business from new competition and can increase its attractiveness.
Innovation and Intellectual Property: A business that has a strong intellectual property portfolio or is a leader in innovation can be considered more attractive.
Financial performance: The financial performance of a business, such as revenue, profits, and cash flow, can provide an indication of its current and future attractiveness.

It’s also important to remember that businesses that appear to be attractive from a financial perspective may not always be so from other perspectives, such as social or environmental impact, or even regulatory compliance. Therefore, it’s important to consider the big picture.

Business Readiness refers to the degree to which a business is prepared to operate and perform effectively in the marketplace. It is an indicator of the ability of a business to meet the challenges and take advantage of the opportunities that it may encounter. Factors that contribute to a business’s readiness include:

Market knowledge: A business that has a deep understanding of its target market, including customer needs, purchasing patterns, and industry trends, is better prepared to succeed.
Operational excellence: A business that has well-designed and efficient processes and systems in place is more likely to be able to execute its strategy effectively.
Financial resources: A business that has sufficient financial resources to support its operations and growth is better prepared to withstand unexpected challenges.
Talent and leadership: A business that has a team of talented, motivated and experienced individuals, especially in leadership roles, is more likely to perform well.
Innovation and adaptability: A business that is able to continuously innovate and adapt to change is more likely to be able to succeed in a rapidly changing market.
Compliance: A business that is compliant with all relevant regulations, laws, and standards is more likely to be able to operate without interruption and avoid any legal issues.

Business readiness is important for both new and established businesses. New businesses need to be ready to launch and establish themselves in the market, while established businesses need to be ready to adapt to changes and stay competitive.

As with Business Attractiveness, Business Readiness is also multi-dimensional and will depend on the context and the purpose of the evaluation, in addition it will be evaluated differently by different stakeholders.

Owner dependency refers to the degree to which a business relies on the owner or a small group of individuals for its day-to-day operations and decision-making. A business that is heavily dependent on its owner or a small group of key individuals is considered to have a high level of owner dependency.

A business with high owner dependency can be challenging to manage and may not be sustainable in the long-term, as the departure of the owner or key individuals can have a significant impact on the business. For example, if an owner is heavily involved in the day-to-day operations and decision-making, the business may struggle without them.

Some of the key indicators of owner dependency include:

Lack of standard operating procedures: The owner is likely to be involved in the decision making, but they may not have established standard operating procedures to ensure that the business runs smoothly in their absence.
Limited management depth: A business that has a high level of owner dependency may have limited management depth, meaning that there are not many people who can step in to take on the responsibilities of the owner if they are not available.
No clear succession plan: A business with high owner dependency may not have a clear plan for what will happen to the business if the owner leaves or retires.
Limited revenue diversification: A business that has a high level of owner dependency may have limited revenue diversification, meaning that a large portion of the revenue may come from a small number of customers or contracts.

Overcoming owner dependency requires a focus on developing and implementing robust systems, processes, and structures that can support the business without relying on the owner or a small group of key individuals. This includes building a strong management team, developing standard operating procedures, and creating a clear succession plan.

How Bolton Advisory Group Helps Build Business Value

After reading this list, are you thinking, “There is no way one firm can help with all of this”. You’re absolutely right. No single advisor can tackle this entire list. But a team of advisors coordinated by an Advisory Firm like Bolton Advisory Group can.