6 different approaches to maximize the value of your business
The valuation of a company is a complex exercise: it results from the intersection of a certain number of methods based on various approaches. Therefore, the entrepreneur who wishes to act on the value of his company will have to use different levers. We list below 6 possible strategies to maximize its value:
Maximize the value of your business:
- Anticipate and prepare the future transfer of the company by foreseeing a necessary period during which the seller and the buyer will have to work together in order to allow the buyer to appropriate the strengths and weaknesses of the company and to imagine new ideas, with the accompaniment of the former manager who will see to their coherence with the DNA of the company; plan an organization that will facilitate the transfer of skills (sales manager, technical manager, etc.); begin to disengage the seller as much as possible from all operational tasks.
- Act on the profitability of the company: the main method of evaluation of a company is based on the profits it makes. From then on, it will be necessary to implement actions to increase these profits: development of the turnover, creation of new products, improvement of the gross margin (selling price of the product - the purchase price of the materials), search for a reduction of the expenses, in particular the fixed expenses. From the generated result, the company is valued by applying to its profits or EBITDA, a multiple which is variable according to the professions, the sectors of activity.
- Â Increase the productivity of the company: it will be a question of seeking all the solutions to lower the production costs and to increase the volumes produced while preserving a constant structure: improvement of the processes, automation in the chains of production, suppression of fixed loads (of administrative personnel in particular), synergies between the activities of the company which takes over and the company which repurchases;
- Seek to optimize the existing: analyze the processes in place for all existing productions and the profitability of all products in the portfolio, eliminating all those that have reached the end of their life cycle and no longer allow for sufficient profitability, with competition putting too much pressure on prices and margins;
- Â Seek to increase the technological positioning of its products/services to bring them into the high-end segments, which will allow it to differentiate itself from competitors and to charge more advantageous prices;
- Â Structure and organize a plan to increase the value of its products through a detailed analysis of the existing situation (product positioning, market maturity, state of the competition, investments required to obtain the desired results). It will be necessary to analyze the impact of the planned measures on the company's financial structure, its working capital and its current cash flow in order to provide sufficient financial resources: new equity, new loans. We can then determine a set of measures to be implemented.
As this analysis is complex and requires knowledge in many fields (technical, financial, marketing) that the entrepreneur can hardly combine, it is advisable to be accompanied by experts in the construction of this plan.
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