“ maximise the value of your business tony arena

“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