I attended a conference recently on the topic of adding value to your business. Every business will have to transition ownership at some point in it’s life and a business owner is going to want to create as much corporate value as possible. Obviously a track record of profitability, growth and excellent service is essential, but there is much to it than that. The most important take away from the meeting was that building value in a business comes from running a disciplined business.
Business valuation is usually estimated as a multiple of EBITDA (Earnings before interest, depreciation and amortization). The average business multiple for small cap businesses is around 3.5. For example, if a business has an EBITDA of $250,000, the selling price would be around $875,000. Obviously, increasing the “multiple” can dramatic increase the value of the business.
So, what does this have to do with technology? A great deal, actually. An essential aspect of the value of the business is creating and using good policies, procedures and training inside the company. These building blocks of a valuable company actually will make your company easier to run, better managed, and produce better results. By properly leveraging technology inside your company, you can create a great company.
One example of using technology to enhance business processes is using a Customer Relationship Management (CRM) system. Software such as Salesforce.com, Hubspot CRM, Sugar CRM, or Microsoft Dynamics to name a few, can all implement processes for all aspects of your business. CRM systems are not just for sales teams. Workflows can be built to enhance customer experience from lead generation all the way service delivery. Done right, they can make the company run smoothly and create excellent customer experiences. They also become a knowledge center about the customers, so that if employees leave, they don’t take all the information about the clients with them. Companies that use CRMs add value to their business but also offer best in class services to their clients.
Another example of technology is Business Intelligence (BI) systems. BI systems aggregate information from multiple sources, such as the company’s CRM, accounting software and other information technology systems, and compile reports and dashboards that allow the executive team to identify trends quickly and take corrective action before they become problematic. For example, monitoring a drop in new leads into the sales pipeline may foretell a drop in sales at a later date. Another example would be monitoring delivery timeliness so that staffing levels can be adjusted to meet increase in demand of products. BI systems allow a business owner to adjust tactics to meet the current business strategy, in real time.
There are many other examples of technology systems that can be used to enhance the value of the business and also create a better company. The power of computer systems today can be leveraged to make your business best in class.