Shareholder value is the value owners of a business receive for owning shares in the company. This is a value based on the firm’s ability to sustain and grow profits over time.
Increasing shareholder value is something most, if not all, business owners aim for. Whilst you cannot control the economy, your competition and the overall macro environment, there are many strategies to increase shareholder value whether you are holding on to the business or preparing for a sale in the future.
Key Strategies:
- Sustainable Growth – growth needs to be at a profit level not just revenue level to be a sustainable use of capital investment. The tick is to strike the right balance between capital investment needed to sustain growth but not erode shareholder value –i.e. ensure earnings growth exceeds the investment in capital employed (simplistically working capital + fixed assets) to maintain sustainable growth. There are simple KPIs Titan Partners can help define for your unique business to deploy this strategy.
- Strategies that focus on value drivers – think of what you can introduce to your target market & customers that creates value for your business? Companies often have a variety of growth options available to them. Whether its a new product, cross-selling, a new innovation, asset or improvements to your current process it’s important to model out the best use of capital and focus on growth options that maximise shareholder value over the long term. Titan Partners can assist with financial modelling to help you decide which value investment direction to chase.
- Mitigate Risk – understand the risks of your business and build into your planning how to mitigate those risks including but not limited to product mix & diversification, partnerships or strategic alliances, reduce customer concentration, strategies to extend customer contract terms, HR strategies & succession planning to reduce key-person risk and more.
- Protect IP – understanding what the intellectual property is in your business is important. IP doesn’t always necessarily mean software patents, it can be your people, processes, a strategic customer or supplier contract that you have that others cannot easily replicate.
- Tax & Governance – tax it’s often the biggest shareholder ‘cost’ in a business/company sale transaction. Poor tax planning can easily erode shareholder value. There are many tax factors to consider, the aim is to optimise the after-tax position of the shareholders. Titan Partners can provide tax planning advice to ensure shareholder value is maximised on sale.
Titan Partners Corporate Finance employs a long-term mindset and approach to building and increasing shareholder value for clients. Contact us to discuss how some of these strategies could be tailored to help you maximise shareholder value in your business.
