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Understanding Your Business Value

Understanding Your Business Value

September 12, 2022
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Utilizing the Five Stages of Value Maturity to Ready Business (and Business Owners) for an Exit

The Five Stages of Value Maturity is one of the core concepts of the Value Acceleration Methodology. In its simplest form, it shows the five stages a business owner must take to successfully grow and harvest the value in their company so they can manage it for a lifetime. Following these five stages will allow a business owner to embrace and integrate the Value Acceleration Methodology into their company. Thus, taking their company from annual year-over-year success to a significant company that is attractive and ready to be sold.

The stages relate directly to the three gates inside of the Value Acceleration Methodology and speak to the actions that the business owner, their leadership team, and their professional advisory team must take. The first stage is Identify. In this stage, conducted annually, we identify and assess business value by measuring and analyzing both tangible and intangible factors. We do this in the Discover Gate through an assessment called an Enterprise Value Assessment. Once we have completed this, we know where to begin to better our company and drive happier people, customers, and stronger profits annually. This also directly builds value for the future.

Next, we move into the Prepare Gate of the Methodology where we Protect and Build value. Protecting value includes the simple things we do in our company to build a stronger foundation and mitigate some of the risks to ultimately begin driving more value into the company. These action items could be upgrading a system or equipment, auditing inventory, securing intellectual property, documenting strategies, or writing standard operating procedures. Actions to Build value become more strategic. These include diversifying the customer base, expanding into new markets, changing culture, or strengthening the management team and making personnel changes.

The Protect and Build stages run in 90-day cycles. Constantly reevaluate and select new actions to work on in your 90-day sprints until you harvest the value from the company.

The Harvest stage is in the Decide Gate. This stage is where we are executing an exit option. This option could be internal to employees, management, or family or could be externally sold to private equity or corporate strategic buyers.

Once the owner has successfully done this, they move into the last stage: Managing value. The ultimate stage for any owner. You spend years, sometimes decades, growing your company. At some point, we will want to harvest the value and manage that value for a lifetime to come. Here the net proceeds from the sale of the company are managed and invested to provide for the owner and their family in the next phases of their life. Typically, this process is managed with a wealth manager or financial advisor.

These are the Five Stages of Value Maturity. The critical element to note is that these stages come to life through implementing the Value Acceleration Methodology. An effective exit strategy is a business strategy. A business owner does things in their company every day that impact their value. Implementing these five stages and the methodology will give the owner a better company today with more value tomorrow.

Over the next few weeks, we'll detail the Five Stages of Value Maturity from The Exit Planning Institute's Understanding Your Business Value.

Securities and investment advisory services offered through qualified registered representatives of MML Investors Services, LLC. Member SIPC. Integrity Benefit Partners is not a subsidiary or affiliate of MML Investors Services, LLC, or its affiliated companies. 200 Clarendon Street, 19th & 25th Floors. Boston, MA 02116. 617-585-4500. CRN202507-2694019.