This is a question asked by owners, CEO's and presidents of small and medium sized manufacturing companies. This is especially true of those companies either in the midst of or considering a transition of ownership, leadership, sale or take over. It's easy and standard practice to look at profit and loss statements, balance sheets, year over year financials, and asset listings. This would give a prospective buyer or an incoming leader some idea of the value of the company. And these documents would give a great indication of the current worth. However, these standard items have two limitations.
- They are all a snapshot of the company at a certain point in time
- They are all backward looking and don't project a company's sustainable ability to generate cash
If I was buying a company or considering a leadership role at a company, I would absolutely look at the financial statements listed above. I would also want to have a quantitative value of the strengths and areas of opportunities of the company to give me a more comprehensive view of the company. Trouble is, this is usually a multi-month effort that requires many people of different expertise, investment and results in a report that doesn't meet the time frame for which I would need to make a decision.
This may sound a bit infomercially, but I have found and have used a tool for doing just what I described above. It is called CoreValue and MAMTC has been using it for a few months. It not only provides a company with an enterprise value, but it also provides the owner and the leadership into strengths and areas of opportunities along 18 core drivers applicable to any company. These drivers include recurring revenue, brand value, company overview, leadership team, growth potential, market share, innovation, legal as well as others.
It works in two phases. First, an introductory 18 question survey which should be answered by the most senior leader in the company. This provides a fairly accurate value and assessment of where the organization is along the 18 drivers. The second step is a more comprehensive, 72 question survey which provides a more accurate value and assessment. This step not only provides more detail regarding the potential value of a company, but lists tasks within the 18 drivers to help close the gap between current and potential value. It also can act as your project management platform to house action plans, progress reports and completed tasks.
I would love to go through this process with you and your company to determine how to increase the value of your company. Contact me to discuss.