The critical role your people play in determining your business valuation

In our recent series of articles, taken from our Uncommon Guide: How to Seriously Increase the Value of Your Business, we’ve identified the core business elements that will contribute to your business’s valuation when the time comes to sell your business.

In this article we look at two key elements that will be at the front of mind for any potential buyer of your business, each based around your people: building a strong leadership and management team, and developing a committed and loyal workforce.

If you can get these two elements right, you willseriously increase the value of your business.

Build a strong leadership and management team

To seriously increase the value of your business, you must build an experienced leadership team, with a strong track record of achieving targets and delivering results, and with the authority to make key day to day and long-term strategic decisions.

A strong and experienced management team will increase the value of your business by reducing risk, reducing the integration phase, and increasing the likelihood of sustained revenues into the future.

You need to show a good governance structure that mitigates against any risk and demonstrate a history of focusing on and achieving relevant KPIs.

You will need to show that your management team follow efficient and effective processes and provide evidence that your management team are willing to embrace innovation.

Once again, demonstrating that you don’t have single points of failure is critical. You need to show that your business is not simply dependent on a handful of core management individuals, because this can increase the risk to future profits should a key individual choose to walk away.

There are things you can do to mitigate this risk in the mind of a buyer.

For example, you can make sure you have a good management training programme and that you have a process for identifying talent in the business.

You can also make sure that your core processes and procedures are clearly documented.

And you can ensure that your management team are able to delegate effectively to others to remove your dependence on a few key people.

If you’d like to find out how we help our clients to build a strong leadership and management team that can ‘take the wheel’ from the Company Director, then we’d be happy to talk to you about our service: “Cruise Control“.

Develop a committed and loyal workforce

You also need to demonstrate that you have assembled a team of employees with the skills, expertise, and drive to continue improving and delivering profits into the future.

And you need to demonstrate that your people are loyal to the business. This is particularly important if your people are a key function of the business’s perceived value.

You need to show that you have low staff turnover, and that you are well-known as the place that the best people in your industry want to work.

A buyer will also want to see that your people want to work for you and that there is a high level of employee satisfaction. You need to clearly show that you value your employees, and that they value you.

A well-defined corporate culture is essential to achieving these objectives. You need to have a clear set of values with well-defined behaviours and be able to prove that your people live by these values.

You also need to demonstrate that you have developed a culture that recognises and rewards performance and that doesn’t tolerate undesirable behaviours or toxic people.

Your business value will be significantly increased if you can demonstrate a well-crafted training/professional development programme for your employees.

A well-defined and embedded corporate culture is attractive to many buyers because they know that it creates a loyal workforce and will make it much easier for the business to continue hiring the best people in the industry long after the sale.

You may also want to consider giving your employees some ‘skin in the game’ by offering them share options or some profit share. By giving your employees equity, you ensure that everyone in the company is motivated to grow the business, and you also create a more loyal set of employees.

Download our Free 54-Page Guide: “How to Seriously Increase the Value of Your Business”

This article is taken from our free 54-Page Guide for Business Owners and Directors: How to Seriously Increase the Value of Your Business.

The guide will help you to get the sale value you want and deserve, and ensure that when the time comes to sell your business, your guts, drive, commitment and sacrifice will be worth it – literally.

You will also get a Valuation Scorecard to use in your own business to start increasing your business’s value today.

Find out more about the guide and download it here.

Alternatively, contact us today and speak to our advisors to tell us about your exit plans (in confidence) and to find out how we can help you to grow the value of your business from day 1 and maximise your business valuation when the time comes to sell.