The 7 Drivers of Transferable Value
Growth is not the same as value
Example: Company A and Company B compete. Both are for sale. A has much higher sales than B, but the buyer prefers B.
Why?
Because B focused on building transferable value in addition to growth. A just focused on growing.
As a CEO or Business Owner, you understand that without growth, a business cannot survive.
But, simply increasing your top and bottom line results does not necessarily increase the company’s value. Buyers or successors usually want to know not only how much your company did, but also how you did it.
If your business runs in a manner that makes it difficult, expensive or risky for a buyer or successor to take over, your business may be less valuable at your exit.
For example, if you are your company's most valuable employee, this probably reduces the business's value to anybody else but you.
The Transferable Value Score
This post is inspired by Patrick Ungashick’s live “Growth Myth” workshop. He discusses how to determine if you are building true transferable value for your company.
Patrick provided us with a diagnostic tool called the Transferable Value Assessment.
The assessment evaluates the intangible conditions within your company, unrelated to revenues or profits, that make it easier, less costly and less risky for a buyer or successor to continue and capitalize on the business's success going forward. Without Transferable Value, your exit goals such as getting maximum cash, reaching personal financial freedom or sustaining a business legacy all become problematic.
Your goal for the assessment is to score as close to 90 (out of 100) or above. When you’re scoring is 90, you’re hitting the marks necessary for a “happy exit.”
The 7 Drivers of Transferable Value
These are the 7 Drivers of Transferable Value:
1. Proven and Dedicated Leadership Team
2. Owner Independence
3. Financial Clarity
4. Compelling Business Plan
5. Diversified Operations and Risks
6. Sustainable Brand
7. Scalable Systems and Processes
Building transferable value can take at least five years – assuming you have a strong, tenured leadership team. It’s difficult to build transferable value 12-18 months before you sell (exit).
Check out the video I captured during Patrick’s presentation for insight that just might guide and influence important decisions you need to make today to prepare you for your exit five years from now.