How can I grow and build value in my business?
Naturally, this needs to be considered in considerable detail on a case-by-case basis. The short ‘high-level’ answer is you will need to consider the further initiatives to propel near-term growth. This could include, for example, increasing the size of your sales force, broadening your product/service offering, attacking markets overseas, or maybe even making an acquisition yourself to achieve scale more quickly.
Scale impacts valuation
The scale of your business will directly affect the valuation you can achieve when you come to sell. For example, a business with EBITDA of £4m will normally attract a higher multiple of EBITDA than a business in the same sector producing £1m of EBITDA, as the former business will be considered more resilient, have greater resources, and most likely carry a broader base of customers and expertise. These factors will drive confidence in the mind of a buyer.
Putting scale aside, a business owner can build value in the business in a myriad of ways. The most important ones are as follows:
- Revenue model: having a revenue model which incorporates some element of recurring revenue, as opposed to starting each financial year from zero.
- Senior management team: assembling a high-calibre, experienced senior management team to ensure that the business is not dependent upon the shareholders.
- Growth rates: strong historic and forecast revenue growth provides acquirers with the comfort that the company’s products and/or services are in demand, making the business ideally positioned to grow well beyond its current size.
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