15 Feb Around the Web: A Week in Summary
A recent Axial article “How Recurring Revenue Increases Business Value” explains that creating a recurring revenue stream is a great way to boost the value of a business. This important and often overlooked aspect of a business is typically a low-effort, guaranteed income for the new owner, and usually results in higher profit margins than other types of income.
The article also mentions how recurring revenue models address several value drivers of a business and help build a better value through increased growth potential. It is important to note that a business’ main focus doesn’t need to be around recurring revenue – it can be added or worked into an existing sales channel to drive more value and growth potential. With some creativity and effective planning, almost any business can add a recurring revenue stream to help increase value to get a better sale price.
A recent article in ITProPortal entitled “Buying a Business? Due Diligence is Vital” explains how doing your proverbial homework is so important when looking to buy a business. Though the buying process is exciting, it is vital that, as a buyer, you don’t miss anything and you have all of the available information you can get on the business you are purchasing. The article outlines 8 important pieces in the due diligence process:
- Getting Started
- How Strong is Existing Management?
- Draw Up Heads of Agreement Early
- Getting Financing in Place
- Established Business or Startup?
- Actual Results vs Budgets and Forecasts
- Earnings Before Interest Tax Depreciation and Amortization
- The Deal Depends on Driving the Process and Communication
Due diligence is one of the most important pieces in the buying process: if you don’t know everything about what you’re getting into, you risk the possibility of making a bad deal that will only hurt you in the end.
The article “Business Succession: Is an MBO or Employee Share Ownership Plan Right for You?” published recently in Divestopedia dives into the world of management and employee buyouts and how they can be beneficial to a business moving forward. For one, these types of transactions keep a business local and helps carry on the legacy of the previous owner after they leave the company. But these deals also help employees take more ownership and increase their stake in the company; a positive for happy and loyal employees.
The article explains that in a management buyout, a strong management team is key, due mainly to the fact that they will effectively be taking over the company. If all of the major departments can be taken over and run successfully by the new team, a business under a management buyout can really thrive.
Another focus point in the management buyout process is the new management getting off to a good start in owning the business. The article explains that new owners shouldn’t let the buyout affect their specific role within the company. This process can help bring out new ideas and new ways of management, but each team member must still adhere to their job function in order for things to continue to run smoothly.
It is also important to note that there are options allowing for 100% employee ownership in larger deals when financing comes into play.