Unlocking the value in your business
By Parik Bhandiwad
A key question for many business owners is how to maximise the value of their business. Whilst there is no secret formula for driving up business valuation, there are a few common themes that differentiate highly valued businesses from the rest of the herd.
Some of these are:
The importance of the management team cannot be overemphasised. The success or failure of any business relies on the people who run it and many business owners don’t invest enough time and resource into developing a strong management team. This often creates succession problems, which limits growth. A highly driven management team, on the other hand, is like a well oiled engine propelling the business forward in the high speed growth lane.
Nothing comes free of cost – owners have to invest today to maximise value tomorrow. Whilst aggressive overinvestment can be very risky for the survival of the business, extreme prudence and cash hoarding may be equally detrimental. The key to maximising value is making informed, commercially astute, timely, risk neutral investments that are critical for the growth of the business.
The old adage of ‘never put all your eggs in one basket’ rings true even in business. Diversification could be in the form of expanding the supplier/customer base, creating new product lines or
diversifying into new geographies or sectors. The rationale behind diversification is to create additional income streams and weather adverse economic shocks. Diversification need not require enormous investment either – as long as it creates new markets/strategic opportunities for the business, then diversification has achieved its objective.
A combination of these three elements along with a bit of time, can unleash the latent potential in a business and maximise value for the owners.
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