Business Strategy you need to think about
You are obviously much more concerned with the present than the far future in the heat of running your business. Like most business owners, it's undoubtedly one of the farthest items in your head as you find the quitting plan–the final stage of your business life.
However, your exit must be considered much earlier than you might expect to be a successful exit strategy. The earlier you decide to prepare, the better the outcome of your departure.
Who are the buyers?
Strategic buyers: Strategic buyers are usually other companies that
want your products, customers, locations, and footprint (probably you're current
competition). They will have their own processes, staff, and strategies in
place and will probably adapt and streamline your business to their existing values
and procedures, although they will retain some of your own processes.
Financial Buyers: Financial buyers are financial investors who would like to
save in order to make a profit. Such owners may be conservative risk investors
who wish to purchase a company that will operate with the current management or
even family members who will support their families for a long time. They will
mainly focus on your business's ability, scalability, and projections to
function without you.
When they are buying, when they
buy your business?
Depending on the type
of the buyer, their market strategy, and their goals for your business,
buyers assess three major categories within businesses:
1. Market participation— Customer lifetime costs (customer
lifetime value and acquisition costs) are considered within this category by
potential buyers. In addition, they will also analyze the demand to determine
if the market is growing or is declining.
2. Operations and Management-potential
buyers also take account of your company's strength and continuity. Management,
staff, technology, assets, products, and services are all involved.
3. Financials – Finance is the main
category, which reveals all about a company: its quality, its soundness, and
its growth potential.
How to calculate your R-value
For eg, a 15% growth and 20% EBIDA
company would have R values of 35. R Value = Revenue growth percent + EBITD A
percent Compared the R value and the two elements of R-value to those of other
firms, corporate owners can then determine the best investment position.
Top Factors that will help business
sell themselves
While R is a useful number, every business has much more than R. Potential buyers will evaluate the entire company on a granular level before they decide to bid. Focus on measuring,
monitoring and improving the following factors which increase the value of your
company to achieve market share, management, operations and financials in your
own businesses that sell themselves.
Predictability makes
it extremely attractive for potential buyers in every aspect of your business.
New owners know exactly what to expect from your business with reported
predictability. It can be very difficult to achieve predictability in service
companies, but that is not impossible.
Service companies with subscription price models have a
standard revenue flow that can be regularly anticipated. Customer relationships
and contract provisions can also increase company predictability. Organizations
with daily revenues and high costs spend wisely.
Revenue
To potential buyers,
revenue is extremely important and reflects the productivity of your business.
Potential buyers will look at your income, but will also want to divide it in
order to evaluate the various types of income and their quality. Of example, a
long-term recurring, stable income is worth more than a transient, one-time
project income.
Expenses
Naturally, potential purchasers will take into account your business cost. You
are going to consider your expenses, direct, indirect, fixed and variable. Recommends that corporate owners transfer as many fixed costs as possible
to variable costs. The outsourcing of non-core operations can do that
Business owners that, in order to
accurately represent the true business expenses, it is crucial for us to
quickly identify the personal cost incurred by the firm. Although it is often OK
for corporate owners to pay through a business for food, transport, or even
memberships in country clubs, they do not actually involve the cost of
business. If potential buyers are shown in reports, the actual value of the
company will be clouded.
Profits
Is the company
gaining money? This is question number one.
Specifically, potential buyers are looking at the company's
business unit in order to measure income at a granular level. I want earnings
and loss figures by product, service line and consumer to consider the driving
forces behind the growth of the company, which are the top earners and the
lowest earners.
Automation and operations
Your management, team
and technology are included in this category. What are your current policies
and procedures and how well do they work? Potential buyers must judge the
business and take existing staff into account as collateral. For service
companies, where people represent the company, this is in particular reality.
Potential buyers often look at digital data collection,
interpretation and monitoring in relation to business operations. Are you using
technologies that enable accurate metrics to be tracked?
Cash Collections
Potential buyers want
to know how efficiently you get paid. Automate billing and cash
collections.
Tighten up your invoicing and use electronic payment as
often as possible. Assess your days sales outstanding (DSO) and sales cycle.
Consider whether changing the payment structure would improve your cash flow.
Market share
Market share in some businesses is larger than in others, depending on the size
of the industry. It is not so big a deal and it is very difficult to measure if
you're operating in a limitless market where you will always run short of
potential customers. If you respond to a certain, restricted client type, it is
important to evaluate the value of your business by market trends and market
share.
Scalability
The potential of a business to expand and improve largely determines a future
return on investment from an investor. Your willingness to grow depends on
market size, position and demand. However, scalability could also depend on
geography, research and development or the ability to develop into additional
product lines or models of service.
Projections
The importance of outlining these
expectations to potential buyers by illustrating that estimates are based on a
number of assumptions. The outlook also adjusts when these expectations change.
It shifted the responsibility to the presumed conditions of the business
owner. Accountants in Melbourne provides all the business-related services.
