How Does Confidence Translate to an Increased Business Valuation?
We see a lot of surveys in the press about business confidence having increased, and I am sure that for every person who is confident about the future there are 5 others who do not feel the same way.
Which led me to think – how does confidence in business conditions translate into a valuable business?
One of the more recent surveys reported that:
- Business confidence in Australia had increased 6% over the past twelve months.
- Was higher than the global average.
- Small business confidence levels reported by the Sensis Index had increased from 47% in June 2014 to 53%.
Businesses that have evidence on which to base their confidence will have based this on some key factors that they can influence or control. This may include:
- A strong position in the market supported by customer satisfaction.
- A pipeline of business opportunities that they have assessed as reasonably expected to translate into revenue.
- A profitable business model that converts revenue into substantial profits.
- Opportunities to improve the performance of the business through innovation and investment.
- An understanding of the processes and strategies that will influence people to spend money on their products or services.
Overwhelmingly, the business that I talk to that are confident have already enacted a plan. They have initiatives underway that will see business improve over the coming months. And these plans do not rely on the inevitability of Christmas sales – they are new actions they will take to achieve a different outcome.
When it comes to assessing value, we want to see two key aspects:
- Evidence of growth or improvement, in order to be confident it will continue.
- Strategies and action plans in place to build on past trends.
Just saying “we expect sales to increase in the lead up to Christmas” is not a plan – it is a hope. The plan are the things you will do to make the hope a reality.
What are you planning to do before and after Christmas to increase the value of your business?