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Maximize Business Value Upon Exit

by | Oct 21, 2011 | PKF Texas - The Entrepreneur's Playbook®

Note: Running Fridays in FromGregsHead.comis a continuing series of tips brought to you by Greg Price. These run Sunday evenings during the BusinessMaker’s Radio Show on KPRC 950AM. Audio files can be found on the PKF Texas – Entrepreneur’s Playbook® page of the PKF Texas website.

The Global Financial Crisis has delayed the exit plans of a few of our clients; still, their need to exit at some point in the future has not gone away. Thankfully, most of our clients are delaying their sales decision for the right reason. Their business is beginning to improve, but the value is not where it was just a few years ago when looking at the last three years trailing earnings.

We have outlined 10 steps, grouped into three distinct phases, which are designed to help maximize a company’s value upon exit.

Phase 1 – Optimum Performance

Step 1: Improve the profitability of your business by removing waste. There is no point to putting more business through an incapable process. One of the key performance measurements of a company is how efficiently sales are converted into profits for the business. The way that the automotive component manufacturing companies effectively removed waste from their processes can be applied to any industry.

Step 2: Grow the business on a positive trend line. Sales growth can provide confidence that the sales process is working well. Accordingly, to grow sales, the business must have a sales process that works. A plan to improve the sales process involves:

  • reviewing the product and market segments
  • reviewing the price points
  • training the sales force
  • developing a contact program
  • creating a detailed competitor analysis

At the end of phase one, the business performance is optimized; cash is created to fund phase two of the process; and the sales and profit trend lines show a continuous and predictable improvement.

Next week we’ll talk about phase two, which is polishing the business and phase three, creation of the sale.

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