Value Adding News - September 2009Welcome to Maxell Consulting's newsletter - Value Adding News.
The newsletter is designed to help businesses increase their value, make their business more attractive or have greater confidence about the decisions they are making about the future of their business.
In this month's issue
How to find the best buyer for your businessIn the current economic circumstances many business owners have found revenue has fallen dramatically, in some cases by more than 50%, profits have dived as a result of increased costs, and investment in new capacity to opportunities has slowed to a crawl.
But despite the hard times, business owners can still achieve an attractive price for their business if the look for the right buyer.
There are two types of buyers out looking for businesses:
In most circumstances, the strategic buyer will be prepared to pay a higher premium for your business than the financial buyer. They will understand what synergies your business can provide with theirs, or the value that your customers, technology or processes can add to their own position.
- Strategic buyers – looking to gain a strategic advantage for their existing business or within new markets.
- Financial buyers – looking to invest in the financial outcome a business provides.
Key characteristics about the strategic buyer include:
So how do you seek out and cultivate strategic buyers? You need to know who would have an interest in your processes, products and services and customers. Once you understand who is within your “sphere of interest” you can then create strategies to develop key relationships with the buyer that is prepared to pay a premium for a good business.
- Seeking out a more competitive scale of business.
- Eliminating the competition.
- Gaining a stronger market position.
- Securing new technology.
- Expanding into related or unrelated markets.
We have speeded up the process of identifying potential buyers for a number of companies using our SaleReady workshop program. This information has helped reduce the time it has taken to identify attractive strategic relationships and allowed our clients to focus on growing their business.
Find out what would attract a buyer to your business and what it might be worth now? Register for a FREE Value Assessment and find these answers now.
Winning And Losing In Business – an audio interview with Harold MitchellHarold Mitchell's seen it all in business, and has his own secrets for success. He reveals what helped him build Australia's biggest media company in a recent interview with Michael Schildberger of Business Essentials.
It hasn't been all clear sailing for Harold though. He was an alcoholic at 23 and went broke years later. From both his highs and lows he's drawn enormous experience and gives valuable business advice in this interview which we are able to provide to you via our relationship with Business Essentials.
To listen to the full interview click here
Top 5 systems every business needsSystems have a major impact on the profitability of a business and how well it deals with its customers. Every business has a set of systems, both formal and informal that govern the operations of the business. They can include the processes you use to acquire new clients, customer service procedures, financial control systems and production management methods.
A business system is more than the computers and software that a business uses. A system is a set of rules, procedures and policies that are used to achieve a certain objective.
Below is what Maxell Consulting believes to be the Top 5 systems every business needs. Naturally each business will have its own priorities and needs, but at the core of each business there are some standard requirements. It is better to have reliable systems in place to manage and report these requirements than to simply “fly blind”.
1. Cashflow management
2. Sales projections
- Cash is king in business and it is critical to understand what your cash position is at any time. This means you need to know what you must pay in the near future, what cash will be coming in (cash coming in is not the same as sales) and what cash you have available now. Ideally a system should be in place that tells you on a regular basis (weekly, fortnightly or monthly) what you cash flow commitments are for the future.
3. Customer communications and contacts
- The only way you can have a reliable cash flow management system is to have a sales projection that is updated regularly. It is a good idea to divide sales projections into certain or “locked in” sales (such as contracted sales or forward orders) and estimated sales. This can give a more accurate indication of the potential variability from one period to another.
- Knowing what promotions you have sent to customers and their relevant contact details is critical in managing sales programs. It doesn’t have to be a complex system, a simple list of customers and the last promotion sent to them will do the job. At least you can plan your campaigns and not bombard customers with random promotions.
5. Profit performance
- This includes capturing all sales and costs and allocating them correctly, as well as ensuring accurate recording of changes in liabilities, assets and equity. A good bookkeeping system will ensure you have a solid basis for cash flow, sales and profit reporting.
Having these systems in place also increases the value of your business and makes it attractive to others. A buyer will feel more comfortable about running your business if they can see there are systems in place to help them.
- At the end of the day, you’re in business to make a profit. It may not be the motivator, but no one wants to make a loss. Historical and projected profits should be monitored so you can make the right management and investment decisions.
Do you have any of these systems in place in your business? Are they effective and do they help you and your team make management decisions?
Maxell Consulting can conduct an audit of your business systems to answer these questions and indicate which areas you need to focus in order to increase the efficiency and profits of your business.
Contact us to now to discuss how improved systems can help increase the value of your business. Give us a call or register for a free phone enquiry, and we can provide you with more ideas to deal with your worst customers.
Client Case Study: Using business value to identify the right growth strategyBackground:
- The directors of a food exporting business had bought into the business from its previous owners over twelve years ago and had successfully grown the business to more twice its original revenue level.
- However they were concerned about how they could exit the business and get the best return on their investment.
- To provide the directors with the knowledge and confidence on what the business was worth, how they could exit the business and how long the process would take.
- Not only did the directors gain a detailed understanding of the value of their business, but the workshops helped identify the strategies that could achieve the value they really wanted.
Contact Maxell Consulting to discuss how your business would benefit from a valuation and the options you have to increase the value of your business.
- “After completing the SaleReady program we had a clear understanding of not only what our business was worth now, but also the strategy on how to achieve the value we really wanted. In a short space of time we had clear revenue and profit targets to support our target value. The layout and structure of the material makes it easy to understand the value of our business." – Managing Director (Food Exporting Business).
Next Month's Newsletter
- Do you have enough cash to run your business?
If there is something you would like to find out about, let us know by sending us an email or by going to our Contact Us page and filling out the enquiry form. We want to provide you with the information and help that you need. We are only too happy to find out about what you want.
- Using spreadsheets to track inventory