Valuation of Business and What The Future Holds

Introduction

This tutorial is designed to provide insights into the valuation of businesses, especially in the context of recent changes brought on by COVID-19. We will explore how traditional valuation measures may no longer apply, the importance of client engagement, and the role of a proactive finance team in future-proofing businesses.

Step 1: Reassess Traditional Valuation Measures

• Understand Current Business Environment: Recognize that many companies are operating without profits yet maintain high valuations. This indicates a shift in what is considered valuable.

Evaluate Lagging vs. Leading Indicators

• Lagging indicators reflect past performance (e.g., historical profits).
• Leading indicators predict future performance (e.g., customer engagement metrics). Focus on both to gauge true business health.

Step 2: Enhance Client Engagement Strategy

Identify Key Engagement Metrics: Determine which metrics reflect your business’s engagement with clients, such as

• Customer satisfaction scores
• Retention rates
• Develop Engagement Initiatives: Create strategies to enhance client relationships, such as personalized communications and improved service delivery.
• Measure Impact on Valuation: Regularly assess how your improvements in client engagement impact overall business valuation.

Step 3: Foster a Curious Mindset within the Finance Team

• Encourage Continuous Learning: Promote a culture where team members are encouraged to explore new ideas and stay updated on industry trends.

Integrate Future-Focused Thinking: Ensure that your finance team looks beyond traditional reporting and compliance. This includes

• Understanding market trends
• Embracing technological advancements

Step 4: Implement Effective Succession Planning

• Identify Key Roles and Skills: Map out essential roles within the organization and the skills required for future growth.

Develop a Talent Pool Management Strategy

• Create training programs to nurture internal talent.
• Establish mentorship opportunities to prepare future leaders.
• Plan for Future Needs: Regularly update your succession plan to align with evolving business goals and market conditions.

Conclusion

Valuing a business today requires adapting to changing conditions and focusing on both traditional and innovative metrics. By reassessing valuation measures, enhancing client engagement, fostering a curious finance team, and implementing effective succession planning, businesses can better navigate the future landscape. As you move forward, consider how these strategies can be tailored to your specific business context for optimal results.