As the global economy continues to face unprecedented challenges, many business owners are finding it increasingly difficult to sustain their operations. This has led to a growing trend of companies prioritizing their exit strategies and focusing on enhancing their business valuations.
100% of business owners will exit their business—whether planned or otherwise–and given that the majority of private businesses are owned by individuals at or approaching retirement age, this is the year for owners to start really thinking about how to best pave the path to exit.
Of course, the process starts with business valuation, and it’s a complex and multifaceted one. It involves the assessment of various aspects of a business such as its financial performance, intellectual property, customer base, market share, and brand reputation. Business owners are turning to technology to help them evaluate and enhance these aspects of their businesses and, ultimately, achieve their exit strategies.
While this can be daunting, especially if it’s not an owner’s area of expertise, one of the key areas where technology is being utilized is in the analysis of financial data. There are now a variety of software applications available that can help business owners to track and analyze their financial performance in real time. This enables them to identify areas where they can reduce costs, increase efficiency, and improve their profitability. By having a better understanding of their financial position, business owners can make more informed decisions about how to allocate their resources and grow their businesses.
Technology Can Help Owners Identify Financial and Non-Financials Drivers of Value
As an entrepreneurial risk taker, a business owner invests a lot of effort, time, and money to establish a business. However, they may not have the expertise to identify and mitigate risks, which can be detrimental to the business. This is where valuation models come in, as they highlight the areas that require attention, such as operational and management risks, owner dependence, sales reliance, customer concentration, and technological disruption. It’s not just about financials but also non-financials! Though these factors are often overlooked by business owners, the valuation reveals their impact on the final value of the business, making it crucial to address them for growth and success.
One of the key benefits of using technology for business valuation is that it enables business owners to make more informed decisions about how to grow and exit their businesses. By having access to real-time data and analytics, business owners can identify areas where they can improve their operations and increase their profitability. This can help them to attract potential buyers or investors and achieve a higher valuation for their business.
What if there was a way to see what actions and investments could help business owners enhance their valuation? With technology, this is possible. It’s not just about calculating a company’s valuation at a single point in time, it’s also about understanding the impact of changing and improving different areas of a business and how it can grow a businesses value over time. Technology that provides predictive intelligence will better position owners in better understanding their own business as well in conversations around an exit.
Technology as its Own Value Driver
Another area where technology is being utilized is in the development of intellectual property and intangible assets (both strong determinants of strategic value). Many businesses rely on their intellectual property to differentiate themselves from their competitors and create value for their shareholders. By investing in technology and research and development, businesses can develop innovative new products and services that can help them to grow their customer base, increase their market share, and enhance their reputation.
In addition to financial data and intellectual property, technology is also being used to analyze customer data. By collecting and analyzing data on customer behavior, businesses can gain a better understanding of their customer’s needs and preferences. This can enable them to develop more targeted marketing campaigns, improve their customer service, and ultimately, enhance their brand reputation.
Valuation and risk
As an entrepreneurial risk taker, a business owner invests a lot of effort, time, and money to establish a business. However, they may not have the expertise to identify and mitigate risks, which can be detrimental to the business. This is where valuation models come in, as they highlight the areas that require attention, such as operational and management risks, owner dependence, sales reliance, customer concentration, and technological disruption. Though these factors are often overlooked by business owners, the valuation reveals their impact on the final value of the business, making it crucial to address them for growth and success.
Real-time decision making
One of the key benefits of using technology for business valuation is that it enables business owners to make more informed decisions about how to grow and exit their businesses, in real time as things change. By having access to real-time data and analytics, business owners can identify areas where they can improve their operations and increase their profitability. In the same way changes to the economic factors (such as interest rates) or even industry variables (growth rates of technological disruption) which affect the valuation result are easily identified and their impact assessed. This awareness allows owners to prioritize actions and preparation for exit, to maximise business value. This can help them to attract potential buyers or investors and achieve a higher valuation for their business.
The use of technology for business valuation is becoming increasingly important in today’s economic climate. As businesses face unprecedented challenges, they need to be able to evaluate and enhance their operations in order to achieve their exit strategies. By investing in technology and utilizing the latest software applications, businesses can gain a competitive advantage and achieve their goals.
Craig West is the Founder and Chairman of Capitaliz, a leading digital platform for exit planners and advisors to deliver scalable business valuation, succession, and exit planning outcomes. Capitaliz is a leading digital platform for exit planners to deliver scalable business valuation, succession, and exit planning outcomes.
Business valuations stock image by Rasdi Abdul Rahman/Shutterstock
