Whether new or experience in the world of exit planning, the concept of value acceleration is foundational for advisors of all specialties. This strategic approach focuses on increasing the equity value of a business by identifying and enhancing key drivers of business value.
For exit planning advisors, understanding and implementing value acceleration can significantly impact the success of their client’s exit strategies.
What is Value Acceleration?
The Value Acceleration Methodology™ is a comprehensive framework designed to maximize a company’s value through actionable steps. Coined by the Exit Planning Institute (EPI) and covered in CEO Chris Snider’s book, Walking to Destiny: 11 Actions an Owner Must Take to Rapidly Grow Value and Unlock Wealth, this methodology involves improving financial performance, operational efficiency, and market positioning. 
These efforts are all in an attempt to make a business more attractive to buyers, investors, and lenders.
By helping owners focus on these areas, advisors can ensure that they significantly increase their business valuation, ensuring a more prosperous future.
Click here to download the infographic on Capitaliz and the Value Acceleration Methodology™ .
Three Legs of the Stool
Another element of value acceleration in language used by EPI, the “three legs of the stool” concept encapsulates the holistic approach to exit planning and value creation, representing the business, personal, and financial components that must be balanced for a successful transition:
- The Business Leg: Maximizing business value through strong value drivers, a solid market position, and a clear competitive edge.
- The Personal Leg: Preparing the owner for life after business exit, addressing emotional aspects of transition and post-exit lifestyle plans.
- The Financial Leg: Aligning financial planning with the exit strategy, including wealth management, estate planning, and tax strategies to preserve and grow wealth generated from the sale or succession.
Balancing these legs ensures a successful transition and maximizes the business’s value. By taking an integrated approach, exit planning advisors can help business owners achieve their personal, financial, and business goals.
Capitaliz advisors see the “three legs of the stool” when assessing exit readiness using the Value Gap Assessment. Advisors know that balancing all three legs of the stool is essential in being able to close the asset gap and best prepare their biggest asset (their business!) for sale or transition, even if that is several years away.
The Key Drivers of Business Value
The effectively implement value acceleration, it’s crucial to understand the key drivers:
- Financial Performance: Involves increasing revenue, profitability, and improving financial data analysis. Advisors who implement technology to streamline these processes can see and demonstrate to owners any improvements in this area.
- Operational Efficiency: Enhancing productivity through optimized processes and using technology to increase automation is key to value acceleration.
- Market Positioning: A strong market position makes businesses more attractive to potential buyers. This value driver involves building a robust brand and loyal customer base with the use of effective marketing strategies.
Case Study: Smith Engineering
Consider Smith Engineering (name changed for confidentiality).
Initially valued at $5.31 million, the company underwent a dynamic revaluation process that included implementing a corporate governance structure and improving non-financial scorecards.
As a result, the business’s value rose to $9.05 million, demonstrating how targeted improvements can lead to significant valuation increases over time.
To further review the case study, check it out here.
Value Acceleration: De-Risking & Planning
Another critical aspect of value acceleration is de-risking the business. For advisors, this means making sure that owners have clear shareholders’ and buy-sell agreements, funding arrangements, and insurance in place.
By reducing risk factors, business owners will ultimately see an increase in their businesses’ valuation, making it more attractive to potential buyers.
Strategic planning and succession planning are essential for advisors seeking to help owners balance the three legs of the stool. Strategic planning sets actionable and achievable growth targets with regard to the key value drivers, market environments, and profitability analysis.
Succession planning ensures continuity during transitions by introducing strategies like employee incentives, such as Employee Share Ownership Plans (ESOPs), to motivate employees and further reduce the risk of employees leaving.
The Role of Technology and the Future of Value Acceleration
Technology is vital in value acceleration.
The Dynamic Revaluation™ feature was added to the Capitaliz platform to give advisors the ability to constantly update and re-evaluate business value, projections, and exit readiness based on planning tasks completed in the platform.
Leveraging the technologies embedded in the Capitaliz platform helps to ensure accurate and up-to-date valuations, helping owners and advisors track progress towards closing the value gap.
Real Data Insights
To demonstrate the tangible impact of value acceleration and the use of technology to implement strategies, consider the following:
We recently reviewed Capitaliz data for a sample of Succession Plus clients that have been on the platform for more than 2 years to include 185 AU reports across 68 businesses in multiple locations and industries.
The total value of all businesses was $587,052,421 (avg 8.6M) when they joined Capitaliz. The total value increase achieved is $318,687,639 (avg $4.7M), or 53%.
The average year-on-year increase was nearly $3M, or 33%.
Check out the real client example here. If your client’s valuation graph doesn’t look like this (or you don’t have one to refer to), it’s probably time to assess the Value Acceleration Methodology™ for your advisory.
Value Acceleration is a powerful tool for exit planning advisors. By focusing on key drivers, de-risking the business through planning, and leveraging technology, advisors can help business owners increase their value. Value Acceleration Methodology™ aligns business, personal, and financial goals, ensuring a successful transition and prosperous future.
For exit planners, understanding and implementing value acceleration can make a significant difference in the success of their client’s exit strategies. By taking a proactive approach and focusing on the areas that most impact business valuation, advisors can help owners unlock their full potential and achieve their long-term goals.
For more information on integrating value acceleration using Capitaliz, click here.
