CEO's: Use Business Valuations to
Increase Your Company Success

Often, when we work with CEOs, they have an unrealistic perception
of how successful they are and what their business is worth from a
buyer's acquisition point of view.  They may pay themselves well,
take generous benefits and vacations out of the company and have no
boss -- so from their ownership perspective, business is good. Their
thought process is centered on their sweat equity and emotional
connection to the business they built and live every day. This
misperception of value sometimes hinders their business growth
capacity because they have an inflated financial picture of their
true net worth. Subsequently, they implement our Value Forward CEO
business growth suggestions too slowly.

One key business tool CEOs can use to grow their company through a
staged process that we recommend is getting an annual business valuation.
Having an annual valuation performed on your business helps management
teams strategic identify success gaps in their marketing, strategy and
sales programs. When done correctly, valuations pinpoint business cash
flow issues, strategy needs and produce an independent third party view
of your business' value from a potential buyer's point of view that is
not financially or emotionally attached to seller's needs.

There are many methodologies used to calculate a company's business valuation, including:

Book Value: The book value of a business is based on the accounting records and
is determined simply by subtracting the company's liabilities from its assets.

Discounted Cash Flow: This valuation method uses the projected future unencumbered
cash flow of the company (meeting all the liabilities) discounted by the  firm's
weighted average cost of capital (the average cost of all the capital used in the
business, including debt and equity), plus a risk factor beta that is calculated
and measured.

Market Value - (Public Companies): The market value is calculated by multiplying
the quoted share price of the company by the number of issued shares.

Asset Accumulation: The Asset approach is based on the value of the business if you
liquidated or sold off the property, plant and equipment (PP&E) assets of the company
and paid off all of the company's liabilities. The net proceeds would accrue to the
equity of the company.

Multiple Valuation Methods (Sales, EBITA . . .): Business value is calculated based on
a multiplier of the company's annual sales and/or its earnings and compared to other
like business sales within its industry (and sometimes its geography) to get a buyer
comparable. This model often looks at intellectual property valuation based on a roll-up
added value as well.

Price Earnings Multiple Valuation: The price-earnings ratio (P/E) is simply the price of
a company's share of common stock in the public market place divided by its earnings per share.

Of the 6 methods mentioned, method number two -- Discounted Cash Flow -- is the best CEO tool
to help you understand your current success level by analyzing the true available cash your
business throws off so a qualified buyer can calculate your business's true worth and their
return on investment if they buy you. Even if you have no short term exit strategy planned,
knowing what your business is worth can help drive your business decisions better. If the
valuation is low as compared to what you think it should be -- it helps you truly identify
the growth goals you need to focus on. Use business valuations as a strategic business
driver to make better decisions.

To measure your business success -- get a business valuation every year.

To your outrageous success!
Gerhard Vierthaler

Gerhard Vierthaler is CEO and Founder of the Value Strategy Group, LLC. We are a managing partner of the Value Forward Network and have consulting partners in five countries making us one of the world's largest management consulting groups focused on helping companies increase corporate revenue capture.
 
We work with senior executive teams to integrate sales processes, marketing methodology, corporate strategy and financial management into one outbound revenue capture program to increase corporate revenue. We do this by assessing the value your customers see and the value you think you have and then measure the "value variance" gap between the two. Once we have identified the "Value Variance" between the two, we then make appropriate strategic and tactical recommendations on your corporate strategy and marketing programs to close the gaps. When this is completed, we then train your sales team to sell to management more effectively using techniques that are linked to our recommendations.
 
Top-performing organizations are increasing their companies' revenue, within a constricted economy, by investing in our revenue capture strategies.  For more information, call Gerhard Vierthaler directly at (907) 222-2703