The idea behind this site
Business Value
There’s a difference between running a successful business and building a valuable business.
A business might provide its owner with a good income, but that doesn’t necessarily mean someone else would be prepared to buy it.
Understanding what makes a business valuable changes how we think about owning, managing and eventually leaving it. That is where business value planning begins.
I think about it in three stages: discover where you stand, prepare the business and yourself, then decide what comes next.
Discover: understand where you stand
Most owners know their revenue and profit. Fewer have a clear view of what the business is actually worth, how much of that value depends on them, or how it fits with their own plans.
So the starting point is an honest picture of both the business and its owner, built around three questions. What is the business worth today? What could it be worth? And what does the owner need it to provide?
The answers usually reveal some gaps. There may be a Wealth Gap between what the owner has outside the business and what they will need. A Profit Gap between how the business performs and how it could perform. And a Value Gap between what it is worth now and what it could be worth. Each one points to different work.
It’s also the time to ask who might eventually run or own the business, and whether the current ownership structure would help or get in the way.
Prepare: protect and build value
A business’s value depends on much more than its profit. A buyer or successor is really asking how reliable that profit will be without you. Management capability, dependable systems, customer relationships, governance, risk and dependence on the owner all shape the answer. I wrote about this in Protect Before You Grow.
I find it useful to organise the work into three connected areas.
Business readiness. Improving profitability, systems, management and day-to-day performance so the business relies less on any one person. Practical tools can help here: an operating system such as EOS, incentive plans that connect people to results, and sensible automation, provided they suit the business.
Succession readiness. Preparing the people who may lead or own the business next. Management succession (who runs it) and equity succession (who owns it) are separate questions, often with different answers and timeframes. In a family business, it can also mean agreeing how the family and the business will work together.
Owner readiness. The owner’s own position: financial security, retirement, estate planning and what life looks like after stepping back. A business can be ready well before its owner is.
Tax and structuring run through all three. Decisions about entities, ownership and how profits are taken are often made years before any transition, and they can make a real difference to what the owner eventually keeps.
Decide: keep, grow or transition
A stronger business creates more choices. With the preparation done, an owner can make a deliberate decision rather than one forced by health, fatigue or an unexpected offer. Broadly, there are three paths.
Keep. Retain ownership and continue operating the business, now with a clearer picture of its value.
Grow. Undertake a further round of value creation and revisit the question of transition later.
Transition. Pursue the chosen transfer of ownership. That might be family succession, a management buyout, an external sale, a partial sale or another arrangement that fits.
Not every owner needs to sell. And because businesses and circumstances change, this isn’t a one-off exercise. Owners who keep or grow return to preparation and work through the process again.
A framework for the ownership journey
My approach is informed by the Exit Planning Institute’s Value Acceleration Methodology™, the framework behind the Certified Exit Planning Advisor (CEPA®) credential. Discover, Prepare and Decide are its three gates. The three readiness areas, and Keep, Grow and Transition, are my own way of explaining the work.
The methodology also describes five stages of value maturity: identify, protect, build, harvest and manage. In broad terms, discovery identifies value, preparation protects and builds it, and a transition is where value is harvested and then managed into the owner’s next chapter.
Business value
↓
Discover
Identify value
→
Prepare
Protect and build value
→
Decide
Choose the next step
↓
Keep
Retain and operate
Grow
Create further value
Transition
Harvest and manage value
↺ Keep and Grow lead back to Prepare. The cycle repeats as the business and the owner’s circumstances change.
Alongside it, I draw on valuation, financial analysis, tax, governance, succession and estate planning.
Further exploration
Business value is the thread that runs through everything on this site. More articles will build on these ideas over time, and I hope they help you think more clearly about your own business.