Services provided by JPAbusiness:
Business valuation
Business advice
Business background
This business is a national manufacturing and contracting firm servicing mining, industrial and construction sectors. Approximate turnover is $40 million.
I’ve been involved with this business for about 10 years, initially via my role providing CFO consulting services to another mining services company.
Part of my role at that time was helping my client purchase a 50% share in this business. At that time this business was only operating in its home state; the purchase allowed my client to expand their product and service offering and to gain a geographic presence in a desirable new market.
Since then, this business has grown significantly and now operates throughout Australia and overseas.
Today the business is owned by my original client, the managing director and key employees of the firm.
The issue
Just over a year ago the business targeted additional key employees with a view to doubling the size of the business in the next three to five years.
Part of the growth plans involved providing additional incentives for these key employees to achieve those plans.
While the owners were not specifically wishing to sell the business, they wanted to get it to a point where – if a sale became an option – they would be able to extract maximum value.
Our involvement
We were engaged to help set up the business to achieve its growth plans and its goal of more closely aligning the senior team with those plans.
Step one was to conduct a business valuation and assess the potential to increase that value over the time.
We needed to identify the key drivers of value in the business, as well as the hurdles that would need to be overcome to achieve the growth plans.
We did this by assessing a range of health factors, including the business’s capability, the strength of the firm’s work in progress, forward orders and pipeline, and plans to expand its product and service lines and markets.
Step two was to develop an incentive mechanism that would more closely align the senior team’s performance requirements with the business value drivers we had identified.
The result
The result of our valuation was to indicate a significant upside in potential value for the business, should the growth plans, new products and services, and market be delivered and achieved over the next three to five years.
We also identified management trade-offs around people capability, working capital, the growth trajectory options available and strategic plays to underwrite and achieve sustainable earnings.
We provided an incentive structure allowing key employees to earn equity in the business – up to a maximum 5% – aligned to the business’s performance targets.
We also developed a profit share structure for the senior team, aligned to the same targets, hurdles and drivers.
This project is a good example of our ‘valuation as a management tool’ service. The owners did not engage us with the goal of selling the business, but part of the success of maximising returns and achieving growth plans will be the option, in the future, to sell at the best price.
Testimonial: General manager, Mining and industrial manufacturer and contractor
Engaging JPAbusiness to conduct a valuation and then provide advice on how to improve that value has added a whole other dimension to our business.
James identified our products division as offering the greatest potential for growth. At the time we had some products, but they weren’t cutting edge. He advised us to focus on that area and now, 18 months later, making those adjustments has opened up markets that we wouldn’t have been able to access with our previous products.
Depth of knowledge
Notwithstanding James’ existing knowledge of our business, we chose JPAbusiness to conduct our business valuation for their overall knowledge base; they have experience with a lot of different businesses and different markets. Our business is not one-dimensional – we have a mix of products and services, and we target different industries – so we needed the breadth of knowledge and experience that JPAbusiness offers.
Clear communication
I think James is the best at what he does. He is able to pull apart a business – strip it down to its component parts – and then clearly communicate, in simple terms, how each part is impacting the overall value and performance.
Range of options
In terms of business advice, James has the ability to think outside the square. Many other valuers just provide a number, but with James it’s the diversity of knowledge and advice that accompanies the number that sets him apart. And he doesn’t give you just one option – he might roll through up to 10 options.
Clear starting point
The main benefit of engaging James and his team is that he gave us a clear starting point to grow from. You have to know where you’re starting from, especially when you’re looking at bringing partners or other key people into a business.
Timely advice
The other big benefit of dealing with James is the timeliness of his advice. We will ring him up at short notice and say ‘we need to have a conversation within the next six hours’ and he always gets back to us. And he is so knowledgeable that you might only need to talk something through with him for 15 minutes and he will be able to provide the answer you need – you’re not paying for him to go away and research it for two hours.
If you would like support with any aspect of buying, selling or running a business, contact the JPAbusiness team on 02 6360 0360 or 02 9893 1803 for a confidential, obligation-free discussion.