The JPAbusiness Strategic Value Checklist examines the business and industry characteristics which can influence your business’s potential strategic value to a purchaser.
It’s important that you consider these characteristics during your active period in developing and driving your business, rather than leaving it until five minutes to midnight just before you plan sell or exit.
This is because while strategic value drivers are not always quantifiable (as we discussed in our free ebook Strategic value in a business sale) they’re not fairy dust either. They can’t be created with a magic wand overnight!
What is strategic value?
Strategic value is the value a purchaser is willing to pay for a business, over and above what an impartial business valuer might determine is ‘fair market value’.
So how much more than its fair market value will a purchaser pay for a business with strategic value?
The answer is largely determined by the potential purchasers’ individual circumstances, which impact their appetite for the opportunity, but it can also be influenced by the vendor’s management decisions long before sale time.
How is strategic value created?
There are a number of factors which contribute to a business’s strategic value. These include:
- Competitive advantage – This is what you as a business do better than anyone else and which another business can’t easily or quickly replicate.
- Business characteristics – These characteristics – which include customer diversity and brand strength – are largely quantifiable and can be influenced by a business owner’s management decisions and actions.
- Complementarity – This is the extent to which the business’s offering complements a potential purchaser’s business, or their investment and strategic objectives.
- ‘X’ factor – This is the qualitative side of the equation and comes down to whether or not the business opportunity prompts a positive emotional response in a potential purchaser.
Strategic value drivers result from real actions you can take to enhance year-by-year earnings in your business, and also potentially assist you to capture extra value on exit of your business.
Use the checklist to support your decision making and help drive positive strategic value in your business.
If you are contemplating an exit or succession event within your business over the next five or so years and you would like advice on potential strategic value drivers, contact the JPAbusiness team on 02 6360 0360 or 02 9893 1803 for a confidential, obligation-free discussion.
