The first step in the Value Acceleration process is to identify and understand:
- A baseline valuation of your business;
- The value-drivers which impact that valuation; and
- The value gaps that exist due to weak value drivers.
By performing a Value Gap Analysis, a roadmap can be constructed which helps you understand how you can increase the value of your business to where you want it to be based on your personal, business, and financial goals. For example, to maintain your current lifestyle after retirement, your financial planner suggests your after-tax proceeds from selling or transferring your business should be $4 million. However, based on a current baseline valuation, your business is worth only $2.5 million with ten years left until your intended retirement. How do you bridge that gap? A Value Gap Analysis will provide a breakdown on what value-drivers needs to be addressed and how best to prioritize your action plan to best fit your objectives.
By prioritizing then addressing the weaker value drivers over time, the value of the business can increase, holding other economic factors constant. The first step in this process in the identification stage by using the Value Gap Analysis. Think of it like planning a road trip. Before you start the car, you want to know the best routes to take, where you may need to rest for the night at a hotel, and what sightseeing you may wish to do along the way. Value Acceleration is no different. It’s preparing a roadmap to a more sellable or transferable business in the future. By planning in advance, rather than waiting until you are ready to sell, you give you and your business more runway to a successful transfer.