Owners and Investors – Increase the Value of your Business and Decrease your Risks with a Lean Assessment
The Lean Approach works to Increase Maintainable Profits and Decrease Risk
In determining the value of any business several factors need to be taken into consideration. Business strengths, weaknesses, opportunities and threats as well as value drivers, profit determination and risk factors all play a key role. However, one of the most overlooked areas in any valuation is the evaluation of “maintainable profits”.
Many people simply think about profits when considering the value of their business, but by knowing the risk factors in any business, you have a much clearer picture of what the business is truly worth. Risk factors that affect profits, such as the role of the Owner, inconsistent revenue, non-value activities and cost of doing business all affect the multiple by which the dollar value of the business is determined.
By knowing and decreasing these risk factors, the multiple used to determine value can be higher resulting in the business being worth more in the marketplace.
Maintainable profits are the goal that any business seller should focus on to increase the value of their business to a potential buyer. Maintainable profits and decreasing risks is where a Lean Business Value Assessment can play a critical role because Lean is a strategy and way of thinking that creates more value by eliminating activities that are considered waste. Any activity or process that consumes resources, adds costs or time without creating value becomes a target for elimination. Lean methods are also critical when an owner or investors needs an accurate assessment of the current state and the true potential of any company.
The process used to increase the value of a business using a Lean Business Value Assessment starts with a fair market value of the business. A Lean Assessment is performed and a plan is built that indicates exactly how a company can increase profits and decrease risks. The owner/investor is then knowledgeable about the potential and future opportunity of the company, allowing them to make informed decisions about next steps. A Lean Assessment also helps to decrease the business risks by improving the structure and the transferability of the business by creating more efficient, economic and effective business processes.
Did you know? Most companies have more waste activities than value. Removing the waste properly can add over 50% improvement in cost, quality and speed – resulting in a business becoming more valuable in a short period of time.
