Advice for Entrepreneurs, Business Valuation, Selling a Business, Family Business, Valuation Services, Strategic Advisory
A trusted advisor has suggested you meet with an investment banker. You respond, “I’m focused on growing my business…not selling it. Besides, investment bankers are in interested closing fees and not much else. The last banker I met summed up my company’s value at 3-5x EBITDA based on a quick 5-minute glance at my financial statements. It was a waste of my time as he didn’t know anything about my business or industry.”
When evaluating companies, Mirus looks at some 27 quantitative and qualitative key performance indicators (KPIs) that affect company value and can help with forming a comprehensive liquidity plan.
These KPIs have been chosen through our 25 years of experience and validated with dozens of transactions. While many of these may seem obvious, it is often not the observation that is important, it is the discipline to actually form and execute the strategy itself beyond basic quantitative measures.
As companies grow, they evolve and mature to go through various stages of growth, sometimes consistently across all areas of the company, sometimes not; sometimes consistent with revenue growth, sometimes not.
Regardless, the following KPIs have shown to be indicative of company maturity due specifically to their strong correlation to the ability to scale the company.
- Vision – Not just the existence of, but also validated proof points and extensibility.
- Product Strategy – From single concept to multiple, revenue generating product lines.
- Market Leadership – Market push for new products, to market pull and dominant positions.
- Distribution Strategy – Existence of a valid strategy and the tools to support it, through to global implementation.
- Partner Ecosystem – Establish market impact and ultimately indicative of pull.
- Management Team – Founder dependence is an inhibitor of scalability and clearly a concern for investors.
- Growth Potential – Highly indicative of scalability, incorporates many of the above, with a specific emphasis on future potential.
Individually and together, these KPIs provide a qualitative look into company maturity and are highly indicative of company success and therefore the multiple that investors will pay for the company.
By building your liquidity plan to evolve the various elements of the maturity indicators through the years, company leaders can substantially improve the value of the company.