The economics of business value acceleration
The economics of business value acceleration are very attractive. Because business value is the product of three core factors (revenue, margins, and multiple), a sustained process that improves business performance across all three factors has multiplicative impact.
Consider, for example, a business with $100 million in revenue, 3% growth rate, 10% EBITDA margins and one that would sell for 6X multiple. That business would be worth $60 million today and over the course of five years, it would grow to $70 million (based on the 3% growth rate in revenue).
If you work with us and we help you improve across each of these dimensions, your business could nearly double in value. Increasing the revenue growth from 3% annually to 7% annually would result in $140 million revenue after five years (vs. $116 million at the slower growth rate) – an improvement of 21%. Improving EBITDA margins from 10% to 12% results in another improvement of 20%. Finally, by changing the growth trajectory of the company, increasing EBITDA margins and reducing risk for the new owners, EBITDA multiples may increase from 6X to 8X – an improvement of 33%. The overall impact on business value is very powerful, resulting in a 94% improvement in value.