Gerard O’ Reilly, of Crowe, shared with us the importance of creating, growing, and keeping value in your business. In this article, Gerard explains that by focusing on these three things, you will create a business that investors are eager to buy into. Gerard reviewed the concept of value and how you can create it in your business in a way that maximises what it’s worth to buyers. That way, you can be sure you’ll get the best price when you decide to sell or exit your business.
This article is a summary of one of our #BusinessGrowth webinar series. See a list of all our upcoming events to register.
Types of entrepreneur
A Freedom Fighter
A Serial Entrepreneur
1. Identify and eliminate critical value destroyers
Critical value destroyers prevent the growth of your business and impact whether you can find any type of buyer, including family members. For example, Craftworker businesses are unlikely to sell for more than two times their profit because of critical value destroyers, such as:
Dependence on owner
If your business is dependent on you to succeed, for example because of your particular skills or your personal relationship with customers, it can be difficult for it to grow independent of you. This can alienate potential buyers. To counteract this, focus on creating a competent and skilled management team who can run the business independently of you if needs be.
This is different from profitability. A business may be profitable, but it might be necessary for most or all of these profits to be reinvested for the business to grow (for example, in new machinery). If this continues to happen the business will fail to generate cash and ultimately go out of business.
Lack of profitability
It’s difficult to incentivise investors to buy a business that isn’t making a profit. Investors need to see a reason why they should take the risk involved in buying a new business. If your business is just managing to pay the salaries of you and your employees, it’s unlikely to attract buyers.
Helping businesses to create value - Crowe
Crowe is a leading business advisory firm. They have been offering professional services to help their clients achieve their goals and grow for over 80 years. Business owners can join one-to-one or small group programmes to learn how to diagnose growth destroyers and overcome them. They also help businesses loosen dependence on owners or individual suppliers and advise them on obtaining funding to scale.
This article is based on our “Building Value In Your Business – Business Valuations” webinar, hosted by Crowes’ Gerard O’ Reilly. It’s part of our #BusinessGrowth series. Sign up for upcoming webinars focused on helping your business to grow.
Larissa is a Fellow Chartered Accountant (FCA) and is the CEO of Accountant Online, which specialises in company formation, company secretarial, annual accounting services, bookkeeping, tax, and payroll services for micro and small companies in Ireland and the UK.