ENJOY IT – 21 Steps to a Succession and Exit Plan. Download your free copy.

Where is Your Business on the Value Spectrum?

Blog

Where is Your Business on the Value Spectrum?

By , June 5, 2019
Blog_Content

Every business has a range of values depending on the buyer’s view. Maximising the value of your business depends upon your ability to recognise what value it has at today, what has to happen to increase it and how you position the business for the best outcomes for you and all of the stakeholders. There is a simple spectrum identifying the different types of businesses – from boutique to scale – each is just a different model for running a business and more importantly different value drivers at each end of the spectrum.

Some common examples illustrate this much more clearly:

Scale

This is McDonald’s – a true scale business – value is based on volume. This is a highly efficient factory for churning out fast, convenient takeaway meals (initially hamburgers but now a wider range of meal options ) – forget the ethical and health arguments for a while and just look at the business. The typical McDonalds franchise in the UK sells for between £400k – £800k plus fees and other extras, so you may be looking at nearly £1 million to buy A HAMBURGER SHOP! Seems like a high price but what you are buying is a tried and tested business that makes money and is easy to run. This is Michael Gerber’s e-myth on steroids – highly systemised and efficient factories where volume is key with some distinct factors that contribute to its unique value and explains why they sell for nearly £1 million.

Boutique

These are speciality businesses servicing a niche market or clientele – like Hanzell Vineyards in Sonoma County, California – an vine-to-bottle wine producer who will be capped at on 7,000 bottles a year of premium wine that is highly sought after or Westerns Laundry – a unique restaurant in Highbury East, London who had built special relationships with Cornish suppliers to create great demand for excellent seafood in unexpected places.

In the middle sits –

NO MANS LAND

Not a great place to be – simply put this is when you try to serve a hamburger in Western Laundry or try to cook langoustine with bloody marie rose in a kitchen at McDonalds – many get caught trying to produce and serve a product that the factory is not designed for. Due to the cashflow pressures of start-up or ignorance of real value drivers in a business, many enterprises get caught in this trap and end up taking on clients / products / markets that are not in their target group and therefore they move their business away from either end of the model and towards no man’s land – where value reduces.

Knowing how to drive value in your business, as well as what to do if you get stuck in no man’s land, is a valuable starting point for understanding how to build real value into the future of your business.

Deciding whether you are a boutique or scale business is the first step to understanding the best route to your succession plan.

Christine Nicholson

Christine Nicholson

Partner

Christine is a Chartered Management Accountant with a Law degree who brings 25 years of wisdom, know-how, and experience of working with SME’s. Her long and varied career has included working overseas, rescuing technology companies, building a healthcare business from scratch and running a zoo.

She started her first successful multi-million turnover business in 2002 and has grown business ventures for others including a bankruptcy to 8-figure exit in 18 months. Christine’s engagement consistently gets her clients increasing their turnover with improved profitability and fewer working hours.

She has saved clients thousands and increased the value of their businesses by millions. Since 2008 she has generated over £100m of crystallised value in business exits.

Christine is also an author of 3 books on Finance, Business Management and Technology businesses. She is a seasoned speaker and Professionally Accredited Member of the Association of Business Mentors.