Value Drivers to Increase Business Valuation

Business owners looking to sell are often interested in a quick way to find out the fair market value of their company. But when the results of the valuation look different than expected, many business managers ask themselves, “How do I increase the value of my business?”

Increasing the value of your company is essential when looking to sell, and can be done through various avenues. Increasing profitability, efficiency and cash flows are all part of value enhancement. Continue reading to find out more about value drivers and how you can increase the value of your venture.

What Are Value Drivers?

Factors that drive the worth of your business are called value drivers. These factors often reduce risk, improve cash flow and position your business strategically to make them more attractive to buyers.  Business owners need to be aware of these factors and use them to their advantage.

Value Driver Examples

Now that we have a rough idea about what value drivers are, here are a few examples that brands can focus on to maximize the company’s value.

1. Technology & Systems

Businesses that have the right technology and effective systems in place to ensure operational efficiency are more attractive to buyers. Companies that can show technological expertise and the development of products that fulfill customer needs effectively and early are often valued higher.

2. Improve Margins & Cash Flow

Cash is still king, and cash also signals stability to the buyer, making it an extremely important value driver. It is important to not mistake revenue for cash flow. The revenue of a brand can be in the millions, but that means very little when the business’ expenses are equally as high, resulting in minimal cash flow. Simply put, you cannot increase the value of your venture without focusing on cash flow and improving your margins.

3. Access to Capital

Companies that are in a better position when it comes to accessing capital are generally also more valuable to buyers. The better your relationships with lenders & banks are, the easier it is to convince buyers about the value of your company. Especially in 2022 where it has become increasingly difficult to access capital for newer brands, this is a strong value driver.

4. Marketing Strategy / Brand Identity

Customers' wants and needs drive them to seek out products and services, and marketing creates the link between their needs and what brands have to offer to fulfill them. Through effective marketing initiatives that convert prospects into customers, business operators are able to show the increased value of their business.

Another great asset is having strong brand equity. A more well known and recognizable brand often comes with higher sales and customer retention, therefore it also represents higher value to buyers.

5. Human Capital

Hiring and retaining staff is another value driver when maximizing company value. Buyers generally seek out companies that can prove their ability to hire and retain highly skilled staff, because a stable workforce provides stability and certainty that the business will continue to run even after a sale.

6. Performance

Investors and buyers use financial analysis to measure the financial health of a business, identify liabilities and threats and measure trends. After all, most wouldn’t make a purchase if the bad outweighs the good. Needless to say, make sure that your financial performance is in tip top shape before trying to increase the valuation of your business.

Final Thoughts

To begin increasing the value of your venture, you first need to be able to calculate valuation. You can learn how to calculate the value of your venture here.

There are multiple ways that entrepreneurs and business operators can use to increase the value of their venture. Which avenue might be best for your brand depends on your strengths and weaknesses.

If you’re specifically looking to bolster the cash flow of your business, apply today to see how Assembled Brands can help you fuel your growth.

We have made it our mission to work with CPG brands to fill the gap and provide emerging businesses with the capital they need to fuel their growth. Working with a partner that specializes in consumer goods can help you remove financial constraints with capital specifically tailored to the needs of consumer goods brands.