Guide 02

The Fundamental Components of Value

This guide will show you how a buyer typically values a professional services business in order that you understand how to systematically grow this value in your own firm.

This guide dwells on the topic of value specifically as it refers to the financial price a buyer would be willing to lay out for your company in the future. Helping you to understand this is an extremely important step in the context of a series that seeks to navigate its readers to a stage when such value has a real, potentially life-impacting, quality. There are many valuation techniques but this guide reveals the predominant approach used in a professional service context and explores what this means for the owners of such businesses. It takes a careful look at profitability (a function of margin, productivity and leverage) and provides a wealth of checklists and ‘Top Tips’ for growing profit in your business. As importantly, it looks at 14 ‘Enhancers’ that will really impact the valuation of your firm and how best to go about working on these aspects from the off.

Finally, the guide explores what characteristics are required before a firm is ‘sellable’, what buyers are out there and typical market valuations. This guide is an integral component of the ‘Understanding’ Part of the ‘Five-Year Entrepreneur’ series as having this knowledge from the outset, even before start-up, is integral to making smart, value-enhancing decisions thereafter.

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    R0201 Capability Assessment Questionnaire

    Following the ‘Multiple Enhancer’ structure described in Guide 02, this simple questionnaire facilitates a self-assessment of where your firm currently stands … in order to prioritise improvement in the future. A perfect way to use this questionnaire is to share it with colleagues and examine the collective opinion; remember, it is easy as a founder, or owner, to have a slightly ‘rose-­tinted’ view of such aspects and your colleagues can keep such opinions grounded and realistic. The answers will also be useful in steering you towards which ‘Five-Year Entrepreneur’ guides to read next. If it  steers you towards a guide that is not yet published in the series, please vote on the website poll (to move this guide closer to the front of the development queue).

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Related Services

Readers of this guide may be interested in specific areas of advisory support such as a facilitated review of your company’s profitability (as a product of margin, productivity and leverage). This, in turn, often leads to the development of improvement strategies and profit growth action plans. Dom is also available to brief executive teams on the optimal way to organise themselves in relation to growing value in your business generally.

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