Minnesota Lawyer
To readers: M&A Monthly columns consist of paid content from companies and organizations that have information and opinions to share with the business community. They do not represent the views of Finance & Commerce. Columns are accepted on a variety of topics and are subject to approval by Finance & Commerce management. To contribute contact Bill Gaier at 612-584-1537 or [email protected].
By: Leah M. Berend, CPA
Every business should be strategically focused on enhancing the value of their enterprise. To achieve this goal, it requires more than just concentrating on profit. It requires a strategic approach that focuses on enhancing the key factors that drive enterprise value. An environment needs to be created where each channel specifically owns its drive to increase enterprise value and boost the success of the business.
1. Reputation
A strong reputation is one of the most valuable assets that a company can have. A company should view their “brand” beyond the marketing lens. A cool logo is fine but an air-tight reputation will help attract new customers, retain existing ones, and create a loyal customer base no matter how often you update the website. A company with a good reputation is also more likely to attract top talent, which can help drive innovation and growth.
2. Risk Reduction
Reducing enterprise risk is essential for enhancing enterprise value. This includes managing financial risk, operational risk, and strategic risk. A business that thoughtfully addresses customer concentration, vendor concentration/supply chain risks, and smart succession planning is better equipped to mitigate potential risks and avoid costly mistakes that could harm the business.
3. Gross Margin
A high gross margin is a sign of a healthy business and indicates that a company is selling its products or services at a premium and has a strong pricing strategy in place. A company with a high gross margin is also more likely to have a competitive advantage, which can help drive growth and increase enterprise value.
4. Innovation
Innovation is critical for driving enterprise value. A company that is constantly innovating is better equipped to adapt to changing market conditions and stay ahead of the competition. Innovation can come in many forms, including new products or services, improved processes, or new technology.
5. Competitive Advantage
A competitive advantage is a key driver of enterprise value. A company with a unique product or service, proprietary technology, or a strong brand has a competitive advantage over its rivals. A sustainable competitive advantage can help a company attract and retain customers, increase profitability, and create long-term value.
6. Talent
Talent is critical for driving enterprise value. A company with a stable workforce is better equipped to innovate, adapt to changing market conditions, and execute its strategic plan. Hiring thoughtfully and investing in employee development can help drive growth and increase enterprise value.
7. Leverage
Leverage can be a powerful tool for enhancing enterprise value. This includes operational leverage, such as outsourcing or automation. The mix of technology investment and cost improvement can help a company increase profitability, grow revenue, and create long-term value.
In conclusion, driving enterprise value requires a comprehensive strategy that focuses on enhancing key factors that drive success. By building a strong reputation, reducing enterprise risk, diversifying your customer base, improving your gross margin, fostering innovation, creating a competitive advantage, investing in talent, and leveraging your resources, you can create a successful business that generates long-term value. With the right approach, dedication, and hard work, you can drive enterprise value and achieve your business goals.
Leah Berend is the Chief Financial and Chief Administrative officer of Oxbow Industries.
With over $2.5 billion corporate financial transactions completed, Oxbow Industries is dedicated to building businesses in partnership with their management teams. Oxbow seeks to invest in leading middle-market companies with outstanding leadership teams and a significant opportunity for equity appreciation. Learn More at www.OxbowIndustries.com
