Download: Increasing the Value of Your Business
Chapter 5 of The Exit Strategy Handbook
Increase Company Value
It is often in the best interest of an owner of a privately held company to increase company value.
It is often in the best interest of an owner of a privately held company to increase company value. The value of a company, sometimes referred to as enterprise value, can be segregated into separate categories, such as:
- Fixed assets, such as buildings, etc.
- Marketable securities
- Intellectual property and intangible assets
- The operational value of a company
Intellectual Property and Intangible Assets
The following is from one of our proprietary books regarding intellectual property and intangible assets:
“One of the specific factors in the valuation of your business is whether you have legally protected intellectual property assets, such as patents, trademarks and copyrights.
Most business people do not know that they even have intellectual property assets to protect. For example, even if you have a nontechnology business, you may still be able to obtain a business method patent on some process or methodology that you use in conducting your business. Likewise, you may have trademarks, service marks, and trade dress that you use in your business that should be legally protected.” (The Exit Strategy Handbook, p. 117.)
There are exceptions to every rule, but generally, the operational value of a company is determined by a multiple of its EBITDA (Earnings before interest, taxes, depreciation and amortization). Increased operational value can often be increased by one or more of the following methods:
- Increased sales volume
- Improved gross profit margins on sales
- Diversification of sales with new products
- Improvements in a company’s sales force
- Improvements in costs such as selling, general and administrative expenses
Key Performance Indicators
“Key performance indicators (KPIs) refer to a set of quantifiable measurements used to gauge a company’s overall long-term performance. KPIs specifically help determine a company's strategic, financial, and operational achievements, especially compared to those of other businesses within the same sector.” (Investopedia.com.)
It is often in the best interest of company leaders to know industry KPIs and manage the variances against those KPIs.
Our firm knows how to obtain industry KPIs and help companies with the management of the variances.
Increasing the Value of Your Business
Business owners may enjoy reading a chapter from one of our award-winning proprietary books that addresses some of the ways to increase company value.