Building Value in Your New Mexico Business
“As shocking as it may sound, I believe that most owners of middle market private companies do not really know the value of their company and what it takes to create greater value in their company. . . Oh sure, the owner tracks sales and earnings on a regular basis, but there is much more to creating company value than just sales and earnings.”
– Russ Robb, Editor, M&A Today
Creating value in your New Mexico business makes sense. Whether you are thinking of selling, plan to continue to operate it, or wish to leave your company to a member of your family, looking at your business from the perspective of a potential buyers helps keep you aware of market opportunities and management strategies.
To build value in your New Mexico small business, consider focusing on the following seven factors:
- the industry
- products or services
- comparative benchmarks
- cost savings
The Industry – It is difficult, if not impossible, to build value if the business is in a stagnating industry. Privately-held firms have a unique advantage: they can shift gears and go in a different direction. The San Marcos Feed store and cafe, for example, already had a large number of ranchers and equestrians who patronized their store and restaurant. They seized upon these relationships with this local community to offer farrier supplies and services both online and through their retail operation. This has been a growth market for them.
Management – Building a management team with depth and creating an exit plan also builds value. Consider asking key employees to sign employment contracts and non-compete agreements.
If you have business partners, consider putting “buy-sell” agreements in place have not already and talk to your insurance agent about instituting a key-man insurance policy. These arrangements also contribute value.
Products or Services–Integrating products or services that support or complement your primary offering can also enhance the value of your company.
Customers – A loyal, repeat customer base demonstrates your ability to retain clients, shows that the market responds positively to your product or service, and is often an important source of word-of-mouth referrals.
Competitors – Being the market leader adds significantly to the value of your company, whether it is in your industry as a whole or a specific niche that your company excels in.
Comparative Benchmarks – Benchmarks can be used to measure a company against its peers. The better the results, the better the value of the company.
Cost Savings – One restaurateur got rid of the trash cans in her kitchen and replaced them with clear, plastic containers assigned to each one of the kitchen staff. Management examined the containers at the end of evert shift. This simple measure helped reduce careless food preparation, alerted them to where more training was needed. As a result, it helped improve the restaurant’s bottom line.
Three keys to adding value to a company are: building a top management team; developing a work force that understands your mission and adapts to change; and implementing a culture that is mindful of emerging trends and market opportunities. Surround yourself with top advisers and professionals.