It's not about revenue and profit, it's about building company value
Too often business executives think in terms of driving revenue and profit growth but often absent in their thinking is what does this growth mean to building company value, or company net worth?
I can present two companies, both with equal revenue and profit and yet one be worth much more at time of exit in the eyes of acquirer. The difference is the “intangibles” in the business versus the tangibles seen in the financial statements.
As you make daily, weekly and monthly decisions for your company, think about these decisions as they relate to building worth, not just revenue and profit. Think about things like:
- Are we serving high quality customers, those allowing us to generate higher gross margins
- Do we have products/services and a business model that allow us to generate more predictable revenue streams than pure transaction revenues only
- Is our product/service offering continuing to evolve in a way that we can present ourselves with unique capabilities in the market versus competition
- When we sign customer and vendor contracts, are they inclusive of business terms favorable for our business
- Are we building a management team that a future acquirer will find attractive for adding to their team
Questions like these relate to the intangibles in your company versus the tangibles seen in your financial statements. Realize the basis of the majority of the valuation a future acquirer will place on your business is heavily related to these intangibles. Certainly, great financial performance is the ante into the game of a successful exit to a third party, but to achieve a euphoric above market valuation, is going to require you to check the boxes of the intangibles. Shift your thinking to this business exit strategy today and you’ll be well on your way to creating your future euphoric exit event.
