What makes a business attractive?

You will no doubt have personal reasons to care about your business, whether you built it from the ground-up, inherited it from a family member, or joined it later in its life. You may admire the people in your team or be proud of the businesses’ journey through different challenges: whatever the reason, when it comes to down to it, personal passion is subjective, but third parties will want to see the numbers. Perception, reputation, and brand are still important, but all these need to be supported by black and white facts. 
 
Besides your client base, there are three main groups you will need to ‘attract’ during a business’ life: employees, investors and lenders, and potential acquirers. So, can you do to appeal to each of these groups? 

Employees

This aspect of attractiveness drives recruitment and retention, and has therefore been carefully studied and documented. The polling organisation Gallup have done a lot of research on ‘Employee Engagement’, what drives it and what it produces. 
 
According to Gallup, some of the key drivers behind employees feeling engaged and happy at work are: 

• A sense of purpose and seeing the difference they make through their work
• Personal development and a sense of career progression 
  
• A caring manager that they can talk to and trust
• Ongoing conversions, and a sense that they can talk to the company about their needs
• A focus on their strengths within their role, as well as the chance to develop these further 
  

A happy team and healthy company culture will aid retention, and will also make your business look more appealing to new employees, both through word of mouth and what they witness on trial days.

If that wasn’t enough incentive, there is clear evidence that a more engaged workforce contributes strongly to a more successful company. If your team is engaged, you’re more likely to experience:

• Strongly improved customer ratings
• Increased productivity levels
• Decreased staff turnover, safety incidents and theft
• Decreased absenteeism 

It’s probably also fair to say that a more engaged company with a more engaged workforce will be a more positive experience for the company owner!

Investors & Lenders

What makes a business appealing to investors?  This varies as the company moves through the spectrum between start-up to large-scale. The viewpoint also changes a little for a lender versus an investor – they are interested in slightly different risks and rewards.
However, there are some common themes for both: 

• Having a good profit track record
• Solid, well-documented financial information
• An actionable plan for growth
• Defensibility of niche, brand
• Quality of management
• Intellectual property
  

Investors and lenders are going to want to see a solid plan and concrete figures – grey areas will quickly lose their confidence and trust. Make sure to keep all aspects of your business operations well recorded, as well as your plans for future growth.

Buyers

What makes a company attractive enough that someone will not only buy it but pay a good price for it? 
 
There is some commonality here with the investor group: potential buyers, too, will be interested in solid financial figures and some assurance that the business has a stable, profitable future. However, a buyer is no simple financial backer: they are looking to take these operations on in a hands-on way, so they will also have some unique concerns as well. A buyer will think about the following: 

• Financial performance, and whether this is sustainable
• Growth potential
• Absence of dependencies  
  
• Positive cash flow cycle 
  
• Recurring revenue 
  
• Customer satisfaction 
  
• Current team talent and satisfaction 
  
• Intellectual property

Business Valuation

A business valuation is a practical way to calculate an actual value figure for a company. These might be carried out by a potential buyer or investor, by a business owner when they are looking to sell or get an idea of where they stand. Valuations of successful trading companies are often driven by their earnings potential, whether this is measured on a DCF basis, or with an earnings multiple. 
 
A good valuer will take account of all the factors above. They will consider the sustainable performance of the business, but also what multiple might best match up to its quality and growth potential. Even employee engagement is relevant, and a good valuer will take this into account as well. 
 
So, how does all of this make your business more attractive? 
 
To add real value to your business, any changes you make must be real. From employee experience to profitability, the proof is in the pudding: each of these groups will be asking important questions when they evaluate your company, and you want to make sure you have solid answers to meet them with. 
 
If you have areas of your business that you know need improvement or tightening up, it can help to reach out to a professional advisor. It’s about getting your cash management sorted, making your sales process work, and having the right company culture. Running your ideas past someone who can inform and guide your plan making, and raise any areas you may have overlooked, is the safest way to plan any significant company change. If you have a plan to address all of these areas well, you can truly transform your business. 
 
If you have any questions about exit strategy, valuation or any other related matter, get in touch for an informal, confidential chat.