I thought we’d start 2014 with positive thoughts…
Jason Kwiatkowski describes how two of their clients at VSP this past year actually doubled their enterprise value within a two-year period – and these clients were not small, start-up companies.
- Recent Growth – both companies experienced recent growth and actually exceeded the sales and EBITDA targets set out in the financial forecasts from two years earlier;
- Future Growth – both companies had updated their business plans from two years earlier and increased their financial forecasts going forward. The fact that earlier projections were documented and the company actually exceeded targets enhanced management’s credibility with respect to the growth projections going forward;
- Tangible Asset Backing – in order to support the recent and future growth, both companies had reinvested in the business thereby increasing the net tangible operating assets over the past two years; and
- Reduced Risk Profile – as a result of both controllable (i.e. internal company specific) and uncontrollable (e.g. external market conditions) factors, both companies decreased their risk profile (i.e. lower discount rate or capitalization rate) thereby increasing the valuation multiple.
If you are planning to exit your business in the coming five years now is the time to get focused. To get the highest selling price for your business, start planning early. Here are 5 ways to increase the value of your business before you sell it.
- Strive to increase profits and cash flow.
- Grow sales. Period.
- Get systems in place to put your business on autopilot.
- Remove yourself from the business.
- Get the details, like debts and leases, in order.
Source: 5 Way to increase the Value of Your Company - NFIB.com