8 Key Drivers Of Company Value (Series) — 1. Financial Performance
The history of a business producing revenue and profit, combined with the professionalism of the financial record keeping
This series of articles follows on from an article I published recently, titled “8 Key Drivers Of Company Value That Every Business Owner Should Know”, where I mentioned that I use the Value Builder System™️ to help small business owners grow the overall value of their companies, by focusing on 8 Key Drivers that impact company value.
At the heart of this system is the Value Builder Score, which determines how well a business is performing in each of those 8 key areas. This series of articles provides some deeper insight into each driver with tips on how to improve in those areas.
But ultimately, what makes this important? It’s every business owners dream to be rewarded for all the hard work they put in over the years when they finally decide to exit, so they get to enjoy a long and happy retirement without financial worries.
So, knowing about these drivers and how to improve them, puts business owners on a path to maximizing the value of their companies while giving them the peace of mind to know that they are growing an asset of value before they exit.
Today we’ll look at Financial Performance, which looks at the history of the business producing revenue and profit, combined with the professionalism of the financial record keeping.
This is how John Warrillow, the founder of the Value Builder System, explains it:
“We discovered that there are these eight key drivers that drive the sellability of the company. The first one’s an easy one. It’s easy to understand, it’s actually very difficult to deliver. It’s your financial performance, right?
So it’s made up of what’s your top line revenue, what’s your bottom line profit. And the interesting thing about financial performance is there’s a second kind of hidden element to it. It’s not only what those numbers are, but the quality of the reporting of those numbers.
So to drive up your score, not only focus on your top line, your bottom line, but also consider investing in an audit or some way to make sure that those numbers are as defendable as you can, because a buyer’s going to come in and say, great, you’ve got these numbers, but how defendable are they? And what third party has come in to really scrutinize these?
So investing in an audit is one simple way to improve your score and financial performance.”
John also delves a little deeper into this topic on his “Built to Sell Radio” podcast:
“In this episode, Sunny Vanderbeck’s company Data Return was growing 40% every quarter. He had a great problem to have… until his deal to sell to Compaq fell apart. Sunny knew his company’s growth rate would burn through his cashflow in six months if he didn’t find a buyer.”
Listen in as he discusses how he went from a billion dollars to bankruptcy and back again.
So if you’re a business owner who’s planning ahead and considering ways to exit your business on your terms, I hope the information I provide in these articles will help you reach those goals.
If you would like to chat to me about this in person, feel free to book a slot in my calendar and we can discuss it further.
If you want to see how you score in each of the “8 Key Drivers” right now, take 15-minutes to complete this survey and you’ll get a comprehensive 25+ page report benchmarking your business against its peers, plus 49 tips on how to improve those 8 key areas.