Beyond the Numbers: Understanding True Business Value

A business acquisition might not seem like much more than a mathematical equation. Perform a cash flow analysis, review comparable businesses, project future earnings — eventually, you wind up with the magical number that is a business’ value.

While these numbers are certainly important, they don’t tell the full story. Whether it’s brand recognition, employee treatment, or company legacy, there is a whole range of elements that not only contribute to a business’s success but add additional value. At Symmetrical, we help business owners understand their true business value beyond the dollars and cents, helping them get the best deal possible. Here are a few key factors that contribute to a business’s true value.

Employee Treatment

How employees respond to a merger or sale is one of the most important indicators of a deal’s long-term success. That’s part of the reason why a strong cultural fit between a buyer and seller is so important: If employees can tell that a buyer shares their culture, their transition will be easier, and they’ll be more likely to start contributing right away.

The upshot is that positive employee treatment can be a major asset in a deal. Employees who feel like their company invests in them, listens to them, and keeps them informed about corporate developments will be much more likely to buy into a potential sale and will trust that the company is keeping their best interest in mind. Buyers know that this kind of corporate culture is not easy to build — and it can add considerable value to a deal.

Legacy

Legacy can be a tough thing to quantify. Like brand recognition, it can only be built slowly over time. The reason a company’s corporate legacy can add value to a transaction goes beyond mere reputation. Why? All of the factors that contribute to legacy — client relationships, customer satisfaction, and employee dedication — directly impact the business in a positive way. Emphasizing your business’ reputation and legacy of great service is another way to add value to a deal beyond the raw figures.

Exit Terms

The terms of the deal itself can also affect its final value. This is where understanding the buyer’s needs along with your own in the course of negotiation becomes critical. The ideal exit terms might be completely different from one buyer to the next: One buyer might be eager to keep the seller involved during the transition period to help achieve better continuity, while another buyer might want a clean state once the deal is closed. If you can align your own goals with those of the buyer, this represents an opportunity to add value to a deal.

Exit terms can add value to a deal through a mechanism like an earnout. In this case, a buyer and seller negotiate additional cash payments in the event that certain performance metrics are met. This could be beneficial to a seller confident in the future path of the business and willing to bet on its long-term success. 

Whatever shape a final deal takes, it’s essential to remember all of the elements beyond the numbers that contribute to a business’s valuation. By emphasizing durable characteristics like legacy and employee satisfaction, sellers can help achieve for themselves the best possible deal. Our team has a deep understanding of what really defines business value, and we can help your business reach its true worth in a deal. Get in touch with us today to learn more about exploring the sale process.

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