Maximise Your Business Value: The Key Drivers You Need to Know

Written by Elements Advisory Group
February 9, 2023
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business, Business Analyst, business finance, business management, Business Value, Valuations, value

Whether you’re looking to attract potential buyers and investors, expand your business, or eventually sell it, understanding the factors that increase your business’s value is essential. 

From strong financial performance and repeatable, scalable business models to a skilled workforce and substantial brand equity, there are many factors to consider when you’re looking to build a sellable asset. By prioritising these key factors, SMEs can increase their market value, reduce risk, and maximise their potential for future growth and profitability.

Factors That Increase Business Market Value

Strong financial performance

When it comes to financial performance, SMEs should aim for stability and growth. Consistent revenue growth over time shows that the business can sustain itself and generate a steady stream of income, which is attractive to potential investors. On the other hand, high profit margins demonstrate the business’s ability to generate a significant return on investment, which is an important indicator of its potential for future growth.

To maintain a healthy balance sheet, SMEs must efficiently manage their costs and price their products and services. This involves monitoring expenses, cutting unnecessary costs, and ensuring that prices accurately reflect the value being delivered to customers. By doing this, the business can maintain its ability to pay debts and meet customer expectations, which is essential for building trust and securing future business opportunities.

Repeatable and scalable business model

Buyers are more likely to invest in a business that has a proven and scalable model. It reduces the risk associated with expanding the business and introducing it to new markets and customer segments. 

A repeatable and scalable model includes the most effective business structure and supporting role composition for the most efficient workflow. Processes and procedures should be clearly outlined for easy replication. 

Intellectual property

A business with a solid intellectual property portfolio can command a higher value. This can include trademarks, patents, copyrights, trade secrets, and proprietary technology. 

Intellectual property provides a barrier to entry for competitors, which can help to secure the business’s future growth and profitability through exclusivity.

A strong customer base

A large, loyal customer base with a high percentage of repeat business and strong customer relationships is a good value driver. It provides a reliable source of revenue and is an indicator of the business’s long-term stability and growth potential.

Having a strong customer base is a value factor that most SMEs can cultivate due to the direct and personal contact with customers a smaller structure allows.

Diversified revenue streams

A business with diversified revenue streams is less vulnerable to market fluctuations and economic downturns, making it more valuable. This can include multiple product lines, customer segments, and geographic markets. 

Diversification can also increase the potential for future growth. Businesses with diversified revenue streams are more likely to take advantage of new opportunities.

Strong brand equity 

Strong brand equity can increase the value of any business. This includes brand recognition, a positive reputation, and a strong customer following. A strong brand provides a competitive advantage and can help to attract new customers and retain existing ones.

Skilled and dedicated workforce 

A business’s workforce is its greatest asset. A low employee turnover, a team with a mix of skills, and positive company culture are golden in the under-resourced market. 

A skilled and dedicated workforce is essential for business growth, and buyers are more likely to invest in a business with a reliable and capable team.

Focus on the drivers that count

When it comes to increasing the value of a small to medium business, there are many factors to consider. By prioritising these key value drivers, SMEs can reduce risk and build a sellable asset that will be very attractive to potential buyers and support future growth. 

Whether you’re looking to expand your business, attract investment, or eventually sell it, focusing on these key value drivers will help you build a strong and valuable business capable of sustained growth and success.

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