JPAbusiness

In our experience, the risks associated with business purchases fall into three categories:

1. People
2. Customers, suppliers and market dynamics
3. The value exchange.

In this blog we're examining how to manage the 'people risks' of a purchase.

People typically request a valuation of their business in reaction to an event, for example:

• they’ve decided they want to sell or exit, so they want to know how much the business is worth;
• they want to restructure the legal entities in the business and need a valuation for tax and/or statutory purposes;
• there is a relationship breakdown between joint shareholders or spouses and they need to transfer or split the business so one can sell to the other, so they need to know its value;
• they’re seeking finance and the finance company or bank has requested a valuation of the business.

Those are event-orientated valuation requirements and we certainly offer that service on a regular basis.

However, we also advocate using valuation as a proactive management and investment tool and we’ve been very excited to provide this service to more and more business owners over the past 12 months.

When people think about the term ‘brand’ they often think only of a brand’s visual manifestation, i.e. the logo and livery. But a brand is much more than that.

A brand is the sum of all you say and do in relation to your products and services, plus consumers’ personal experiences with these. It is the relationship, or connection, between an organisation and its customers.

Succession stories from the corporate world

The following business succession examples come from the international corporate world and have been well reported in business advice and human resources articles and blogs.

They provide some valuable lessons on how to – and how not to – plan for succession.

HP – The bad

Over the course of 15 years HP (Hewlett Packard) had seven different CEOs – each horridly replaced with the next.

At its core, the problem was that the incoming CEOs were not adequately educated on the innermost workings that made HP successful. They came in with sweeping changes that contradicted the soul of HP.

Many people think of succession planning as an old person’s problem – something you do once you decide to exit your business. This is far from the truth, although it's not surprising the misconception exists. 

In planning this blog I conducted a quick Google search of the question 'what is succession planning?' to test the common perceptions. The first result (from an Australian government website!) provided the following answer: "A succession, or exit plan outlines the things you will do when you sell, close or transfer ownership of your business."

I beg to differ. Succession planning should not be something you do when it's time to exit: it is a young person’s pathway to building a valuable business.

By Kevin Catlin
Insight Strategies, Inc.

Q. What is the key ingredient in a successful business culture?

KEVIN CATLIN: Some will disagree with me, but I believe culture starts at the top.

You cannot, in my opinion, create a great company culture if the owners and the senior managers are not living it themselves.

We are often asked by clients whether they need a valuation or a market appraisal.

The answer has a lot to do with the ultimate purpose of the valuation or market appraisal. For example:

• Does the valuation/appraisal need to stand up in a court of law?
• Will the valuation/appraisal form part of a transaction/settlement process?
• Is the client seeking an indicative view of a business' fair market value and the likely factors that add to and detract from that value?

Many people run successful and efficient businesses, but don’t take the time to sit back and ask: ‘What is actually driving the value in my business?’

Understanding those value drivers and focusing energy on them is the difference between having a business that runs efficiently today, and one that builds value over time.

Customers are key drivers of business value, but – as we know – not all customers are created equal. The following infographic contains 4 questions designed to assist you in assessing the make-up and value of your customer base.

Don't wait until someone offers to buy your business to seek a business valuation or market appraisal.

Valuations are extremely useful management tools for business owners looking to maximise their current business performance and long-term value.

A valuation can help you identify what you are currently doing that is adding to your business value, and what you are doing that is detracting from value.

My advice is that, if your business is greater than five years old, you should have it valued on a reasonably regular basis.

In our eBook Partners in Your Business, guest contributor Gareth Banks from Champ Ventures explained how private equity works and what sort of opportunities private equity investors look for.

In this blog Gareth answers the following questions:

• What is private equity and how does it work?
• What type of business opportunities does private equity look for?
• As a business owner, how can I benefit from private equity?
• As a private equity investor, what affects your appetite to invest?
• As a business owner, how do I become private equity ready?
• Where do I go for more information?