“ maximise the value of your business tony arena
TRANSCRIPT
“Maximise the Value of
Your Business
Tony Arena
Every business is Every business is currently perfectly currently perfectly designed to achieve designed to achieve
the results it is the results it is currently achievingcurrently achieving
Every business is Every business is currently perfectly currently perfectly designed to achieve designed to achieve
the results it is the results it is currently achievingcurrently achieving
Business BuyersBusiness Buyers
Business SellersBusiness Sellers
?QuestionsQuestionsHow Much
How
Who
WhatthenWhen
Why
?QuestionsQuestionsHow Much
How
Who
WhatthenWhen
Why
?QuestionQuestion
Why
Are
You
In
Business
?QuestionQuestion
If someone tapped you on the shoulder tomorrow to buy your business, and a
transaction took place, who would get the most value?
• The money you put into it
• The money you need to pay your debts
• The money you need to retire
• The years you have put into the business
• A multiple of your profits
• A multiple of your gross revenue
What is Value...it is not... ?What is Value...it is not... ?
• It’s worth only what a buyer will pay for it.
What is it worth?What is it worth?
…and a buyer will pay today’s price for what next
year’s profit should be.
The TruthsThe Truths
Two ways to Build ValueTwo ways to Build Value
Build Build ProfitProfit
Reduce Reduce RiskRisk
Only Five Ways OutOnly Five Ways Out
• Sale of whole or part to individual or company
• Transfer to family members
• Merger
• Public Float
• Slow death
Characteristics of High Value VendorsCharacteristics of
High Value Vendors
• Have a two to five year plan
• Don’t have to sell
• Know the “target price”
• Know their “target buyers”
• Are well prepared for sale
Who Will Buy?Who Will Buy?
• Individual (private) buyer– Mum and Dad– Buying a job– Based purely on profit– Risk assessment will pull down price– Preparation is the Key
Who Will Buy?Who Will Buy?
• Corporate Buyer– Economies of scale can count in your favour– Special value can play a part– Risk in the marketing process– Risk in due diligence process– Preparation for sale different
Valuation by Rule of Thumb
• Only based on Gross Revenue or other
• Inflexible
• Quick and easy
• Industry acceptance
• No reference to profit
Valuation by Return on InvestmentValuation by Return on Investment
• Determine Profit
• Internal and External Analysis
• Assess Risk
• Choose a multiplier of profit
• Compare recent sales
• Arrive at a valuation figure
Valuation by Asset MethodValuation by Asset Method
• No Profit
• Assets valued at realisable value in marketplace
• Stock marked down heavily
• Last resort
• Negative Goodwill
Business Buyers Point of ViewBusiness Buyers Point of View
• Do I like the business?
• Can I replace the owner
• Could I run the business?
• Will it fulfil my goals?
• Will it grow?
• Will I maintain the earnings?
Value Post 2000Value Post 2000
• Industrial Age - Assets
• Post Industrial Age - Profit
• Information/Services Age - ?????
Value Post 2000Value Post 2000
• Industrial Age - Assets
• Post Industrial Age - Profit
• Information/Services Age - Profit and...– Clients– Intellectual Property– Systems & Infrastructure– Brand and Goodwill
The Hot KeysThe Hot Keys
• Financial
• Administration
• Systems
• Infrastructure
• Brand
• Growth Prospects
The Hot KeysThe Hot Keys
• Financial– Provable on the documents– Reasonable (with add backs)– Maintainable
1
The Hot KeysThe Hot Keys
• Administration– Company, Business and Domain Names– Insurances– Contracts with suppliers/clients/staff– Policies and Procedures– Data and other Security
2
The Hot KeysThe Hot Keys
• Systems– Operations Manual– Marketing Processes– Systems Maintenance– Control– Flexibility
3
The Hot KeysThe Hot Keys
• Infrastructure– Owner’s role in the business– Departmental delegation– Experts and outsourcing– Strategy related
4
Building InfrastructureBuilding Infrastructure
• Outsource, employ or partner
• Plug the weaknesses
• Affordable growth
• Certainty
• Profit and value a must
• Long range thinking
The Hot KeysThe Hot Keys
• Strong Brand– Integrity and Values– Track Record– Public Relations– Consistency of Message– Emotion and Trust
5
The Hot KeysThe Hot Keys
• Growth Prospects– Demographics– Socio-economics– Industry Strength– Stage of Development
6
The Hot KeysThe Hot Keys
• Financial
• Administration
• Systems
• Infrastructure
• Brand
• Growth Prospects
Keys for SuccessKeys for Success
• Preparation for Sale
• Transferability
• Systems
• Timing
• Brand Trust
What do you need ?What do you need ?
• Marketing
• Sales
• People Skills
• Clients
• New Business
• Profit / Numbers
• Recruiting
• Documentation
• Business Planning
• Consolidation
Out BackUp Front
The Way AheadThe Way Ahead
• Plan– When to Sell and for How Much
– Personal SWOT Analysis
• Do the Paperwork• Establish Financial Reporting Framework• Plan Infrastructure and Systems• Brand and Emotion will follow
Business Maximiser
Business Maximiser
“Start Planning your Exit Strategy Now”
Successful Business SellerSuccessful Business Seller