Create & Monetize Business Value

Every entrepreneurial and family-owned business will be sold or liquidated while the owner is alive or after the owner dies.  Corporate Performance Group as a strategic partner with Waypoint Private Capital, a leading middle market investment banking firm, helps business owners increase the market value of their business – and monetize maximum value when they retire or sell their business.

Critical Business Owner Challenges

Business owners face two critical challenges:

Challenge #1 – Generating enough income while building and running their business to achieve their business and personal objectives.

Challenge #2 – Monetizing enough value from their business to achieve their long-term personal, family, and financial goals when they retire or sell their business.

Most business owners focus their attention on the first challenge – but they typically do not think about the second challenge until they start thinking about retiring or selling their business – and that might be too late.  Business owners need to begin preparing for exiting and selling long before they plan to retire or sell their business to get full value for their business.

Focus on Building Company Value

While most publicly traded companies are operated with a focus on company value as represented by stock price, most entrepreneurial and family-owned companies are operated to optimize profits and support the owner’s lifestyle – not to maximize the company’s value.

There are four reasons why business owners should always be looking ahead in terms of building the market value of their business:

#1 – On average, 75% or more of a business owner’s personal wealth is in their business.  Since it is their most significant asset, the best way to increase their wealth is to increase the market value of their business.

#2 – All owners will eventually have to take value out of their business for the next stage in their lives.

#3 – Every business will be sold or liquidated while the owner is alive or after the owner dies.

#4 – 80% of small and mid-market companies listed for sale do not sell.

Why do so many companies not sell?  Many business owners have an unrealistic understanding of the market value of their business – and they are disappointed when they try to sell because their business is not worth as much as they thought it was worth.  When the price offered for their company will not meet their requirements or support their post-sale lifestyle, they are forced to continue operating their business instead of cashing out.

Continuing to operate their business might be a reasonable short-term option – but if the market value shortfall is not addressed while the owner is still running the business, it will have to be addressed by the owner’s estate.

Business owners can avoid this trap by recognizing the importance of consistently building the value of their business – instead of waiting until they are ready to retire or sell their business.    

Monetize Maximum Business Value

Knowing how to build and monetize the value of a business is a unique skill set that most business advisors, attorneys, and accountants don’t have – but it’s what we do.

There are five things every business owner should do to ensure they are able to achieve their personal and business goals when they are ready to cash out of their business:

Know What Your Business is Worth – We recommend that business owners get an independent market valuation every year so they always know their company’s value.  Tracking market value is the most objective way to determine how well a company is performing – and is also the best way to identify and prioritize steps that could be taken to improve the company’s performance and increase its value.  It can also provide an early warning for potential problems.

Every three years, Mass Mutual Insurance Company conducts a Business Owner Perspectives Study to take the pulse of business owners.  According to the 2022 Business Owner Perspectives Study, business owners listed the following as the key reasons for having their business valued:

  • Measure the health of the business
  • Know its growth potential
  • Know the value for sale
  • Know if the value is sufficient to fund retirement
  • Estimate estate tax obligations
  • Obtain funding/line of credit

We estimate the market value of the owner’s business, and, more importantly, we help the owner understand what drives the value of their business.

Establish Target – We recommend business owners work with a financial advisor or wealth manager to determine how much wealth they need to create in their business to meet their long-term personal, financial, and post-exit goals.  A well-defined company value objective gives the owner a target for building value in their business.

Build Value – Building on our experience in helping hundreds of business owners build strong, sustainable companies and using techniques used by leading private equity investors, we help business owners increase the market value of their company by improving financial performance and increasing the company’s valuation multiple.

Most business owners understand that increasing revenues and profits will increase the value of their business – but many business owners don’t know that increasing a company’s valuation multiple can have an even more dramatic effect on the market value of a business.

Protect Value – Even if a business owner does not plan to sell their business, their company may suddenly be for sale because 50% of private company sales and liquidations are triggered by unplanned events – including disability, illness, death, divorce, loss of key people and other life events.  Unplanned ownership transitions or liquidations produce bad outcomes for business owners, their families, and their company.

Having succession and ownership transition plans in place is like life insurance.  It isn’t a “top of mind” issue with most business owners – but it should be.  Their financial future, their family’s financial security and their company’s future depend on it.

We help business owners protect the value of their business and financial security by developing contingency, succession and ownership transition plans.   These plans give the business owner a roadmap for:

  • Achieving their business and personal goals when they leave their company
  • Protecting their and their family’s financial security
  • Ensuring the survival of their business
  • Minimizing, deferring, or eliminating capital gains, income, and estate taxes
  • Controlling how and when they exit their business

Monetize Maximum Value – Business owners have two options when they sell their business.  One option is to sell to family members and/or employees.  Since family members and employees typically don’t’ have enough money to pay full value for the business, the owner has to make special arrangements to help family members or employees buy the business.

The other option is to partially or completely sell their business to a third party.  Partial sales give an owner an opportunity to monetize some of the value in their business while holding onto some equity in the business.  This creates an opportunity to continue building the value of the business with the new owner and then sell their remaining equity at a higher price.  This “second bite of the apple” often produces a significant windfall for the owner and their family.

Most business owners think their business will be easy to sell when they want to sell – but getting full value when a company is sold is hard and requires specialized expertise.

With our extensive experience in buying and selling companies, we help business owners receive maximum value when they recapitalize or sell their company.  We work with the owner to define their company’s “value proposition,” develop a recapitalization or sales strategy, and prepare marketing materials that effectively tell the company’s “story.”

Then we market the company by contacting a broad range of potential investors and buyers, including private equity firms, family offices, and strategic buyers.  By marketing to a broad range of potential buyers, we help owners get maximum value by finding the right combination of price, terms, compatibility and other factors.

Getting Started

The first thing we do with a business owner is to estimate the current market value of their company.  We go through an assessment with the owner(s) in an in-person or Zoom/Teams meeting.  The assessment provides an effective way for us to assess the strengths and weaknesses of the company.

Based on what we learn from the assessment and our knowledge of the market for buying and selling companies, we develop an estimated current market value or “baseline” value for the company.  We also help the owner(s) identify specific actions to increase the market value of their company.

There is no charge for this initial meeting or the baseline valuation.