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Decreased risk means increased business valuation

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Decreased risk means increased business valuation

By , August 9, 2010

We have recently revised upward a number of business valuations where over a period of time and some dedicated resources focused on key recommendations from our initial review we have been able to decrease risk areas within the business. Our process identifies 24 areas of potential risk for business owners and we can then identify those that are not adequately managed within the business and make recommendations about implementing the appropriate changes to reduce the risk. The risk reward ratio is important in business valuation and if we can reduce the risk we can increase the valuation. We have several client examples where working with a team over a 12 to 24 month period has added more than $500,000 of increased value into a business.

Read more How to value a business

Some of the key risk areas which produce this kind of reward are reducing business dependence on a key person, locking in the key staff throughout the business via use of employee equity plan and focusing on business financials to reduce risk (often including debt and gearing levels but also often examining product mix and profitability ).

Whilst this project can take several years the increase in sale/exit value for the business can be substantial and provide funds required for retirement or exit of the business owner.
Decreased risk means increased business valuation was last modified: January 7th, 2014 by Craig West

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Craig West

Craig West

Managing Director | Succession Plus

Craig West is a strategic accountant who has over 20 years’ experience advising business owners. His background as a CPA in public practice, provided invaluable experience in the key issues of concern to business owners. Following 6 years of study to gain two masters degrees, Craig focused on Capital Gains Tax (CGT) for business sales advising on strategic management of tax issues. This experience formed a very strong view that business owners (and often their advisers) were unprepared and unaware of the steps required to prepare a business for exit.

Craig now acts as a strategic mentor for mid-market business owners and has written four critically acclaimed books on employee incentives, succession planning, asset protection and exit strategies. Craig has conducted numerous seminars and keynote presentations throughout Australia & internationally, including adviser education programs for the Institute of Chartered Accountants and CPA Australia.