This is the first in a series of short articles on business risks for entrepreneurs and business leaders. If you would like to discuss this article or understand more about the factors that make up value in a business, please contact Ken Graham at Pace Equity.
As owners or Board members of growing businesses, how often do we stop and consider – “If we were made an offer to sell the business now – what would it really be worth?” In private companies, the thought of selling a business is often well down the priority list. It is only when faced with unexpected offers, the need to raise cash or a business crisis that most management teams typically give serious consideration to business value. But this is a high risk strategy and one that can cost shareholders dear.
A good management team should always have one eye on the value of the business as well as the key factors that make up that value! So why do so many companies allow shoddy financial reporting systems, or poor succession plans, or Directors that are no longer pulling their weight, or mediocre training programmes or inadequate quality control? A particular problem in a percentage of British companies is a wholly inadequate attention to marketing! Far too often when selling otherwise sound companies, Pace Equity has to point out that proper attention to marketing offers a significant opportunity to buyers! Of even greater concern is that due diligence processes, so often identify risks that impact value and lead to an erosion of price in company sales. Why don’t directors and shareholders recognise that even marginal amounts spent to address these areas over time can reduce risk and enhance value?
By law we take our cars for regular MOT’s, so why not have a regular review of your business risks to make sure that you are wholly on top of all those aspects of the business that create value – then, if an unexpected offer does appear, you can be confident that you’re well placed to achieve good value!