by Susan Hileman, NWIRC Strategic Business Advisor
If you’re like the majority of business owners, your business is your retirement plan. Therefore, you want to build value to maximize profits. In my article last month, we looked at 6 critical financial aspects owners should evaluate prior to transition, one of which is to know the valuation of your business. That article described using a business valuation tool, such as CoreValue®, to assess how much your business is really worth. While there are other types of valuation tools, not the least of which is hiring a private consultant to provide a Certified Valuation Appraisal (which can be expensive), a quick look at the benefits of CoreValue® shows why this is an excellent option for manufacturers.
CoreValue® is a tested and proven methodology developed at Massachusetts Institute of Technology (MIT) and vetted by multiple business standards and organizations including the Natl. Association of Certified Valuation Analysts (NAVCA). Using a holistic approach and an experienced facilitator as your guide, your owners/management team answer multiple choice questions about your organization across 18 critical business drivers (9 internal operational drivers and 9 external market drivers). CoreValue’s proprietary algorithms then use business sales data to rate your team’s answers against other companies within your NAICS code, calculating your business value within an 85% to 90% accuracy rate. Based on the team’s answers, CoreValue® can identify red flags showing high risks, provide a better understanding of value gaps and, most importantly, provide both a benchmark and recommendations to build value within specific growth opportunities. CoreValue® is just one of the tools that NWIRC facilitates with clients using our Family Business Advisor services, but it is also beneficial to use with any company looking to grow their business. Within a family business, having the CoreValue® assessment completed individually by multiple members can shed light on how aligned the family is to what is going on with their business.
Not only does CoreValue® allow your team to align communication and build cohesiveness, but since the assessment is completed during two half-days, you uncover more opportunities in less time! This allows your team to tackle the ‘low-hanging fruit’ while completing and analyzing the next level’s deeper dive. With a focus on operations not financials, tasks and recommendations are evaluated based on ROI—essentially answering, what can provide the ‘biggest bang for the buck’ to your business. Using simple language, a CoreValue® assessment calculates the strength of your operations, identifying both your current value…and potential value. In a nutshell, it’s a business valuation tool which uses best practices to see how the market views your business. And it’s one of the best ways to help determine next steps in building organizational value and maximizing your retirement.
Susan Hileman is a Galliard trained Family Business Advisor, an Innovation Engineering Green Belt, and has degrees in Business Management and Speech Communications from Clarion University.