Posts Tagged ‘MAXIMISE VALUE’

As part of our initial investigative work with clients businesses and to help in preparing due diligence and valuation reports we inevitably undertake a benchmarking exercise to measure performance of the business against industry averages and for comparison against competitors in the marketplace. On every client we have benchmarked we have been able  to identify the following :
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Most businesses today are sold on a simple basis of EBIT multiples (EBIT being the technical term meaning earnings before interest and tax  – the base measure of ongoing profitability of the business) where the seller simply accepts conventional or marketplace valuation norms. Most owners don’t understand that by preparing a business for sale they can move outside the norm and access considerably improved valuations. (more…)

A specific area of concern and interest is the utilisation of employee share plans and other equity plans to assist in funding and implementing succession. Australia lags behind both Europe and the US in the uptake of employee equity schemes (in all forms). Anecdotal evidence suggests this may be a substantial stimulus for implementing business succession planning and a substantial benefit to employer and employee alike. (more…)

Boutique businesses are quite a different prospect to scale – they are not focused on volume – but on the opposite – typical words to describe boutique businesses are premium and exclusive. These businesses service a niche and the very best ones drive themselves further and further into that niche, specialising their service offering and their product focus until it is BOUTIQUE.

Some typical examples are (more…)

All businesses sit somewhere on this spectrum and maximising the value of your business  depends upon your ability to recognise where it currently sits and how to improve its position.  The next few blog posts will focus on this model and how to use it to MAXIMISE THE VALUE OF YOUR BUSINESS !

Lets look at the model first – a simple spectrum identifying the different types of businesses – from boutique to scale – neither end better than the other – just a different model for running a business and importantly different value drivers at each end of the spectrum.
If we look at some common examples it becomes much clearer:

Scale– this is McDonalds – a true scale business – value is based on volume. This is a highly efficient factory for churning out fast, convenient take away meals (initially hamburgers but now a wider range of meal options ) – forget the ethical and health arguments for a while and just look at the business. The typical McDonalds franchise in Australia sells for about $1M – $1M FOR A HAMBURGER SHOP ! Why ? – they make money and are easy to run.

This is Michael Gerber’s e-myth on steroids – highly systemised and efficient factories where volume is key – we will look at some of the specifics of the McDonalds business in the next post and you’ll see some amazing factors that contribute to its unique value and explain why they sell for $1M.

In the next few posts we will go in much more detail on boutique and scale businesses and how to drive value in each area – as well as what to do if you get stuck in no mans land. This is the area where we get most client response at seminars – it is a valuable platform for understanding how to build real value in your business.