IDEASCANNER (Step 1 - Rating your business positioning)
IDEASCANNER is a new evaluation procedure for business positioning based on artificial intelligence. Using so-called success-critical attributes (note: characteristics), a comparison of the company’s current business positioning is made with a large data pool of other successful companies that have already been analysed. Successful other companies are companies that have succeeded in increasing their enterprise value faster and more significantly than the comparison companies. The success-critical attributes serve as indicators for exhausted or still existing potential in the business positioning.
The result of this analysis is the IDEASCANNER report with two parts: The cockpit view, consisting of visual indicators (scores), and the audit report with concrete indications of how the business model would have to be changed in order to increase the company’s value.
The scores contained in the first part of the report enable a quick classification of the business positioning (i.e. all aspects concerning how the company appears on the market) in comparison to the companies already analysed in the data pool. The scores are divided into an overall rating as well as scores for the product, the business model (i.e. how sales are generated) and the market. They enable a quick assessment of where the greatest potential lies that needs to be leveraged to increase the value of the company. Companies such as Amazon, Facebook or Google achieve total scores of well over 70% with their current positioning, while scores of less than 40% are usually so-called “walking dead” positions. These are positions that are not expected to grow or generate significant earnings in the foreseeable future, and thus are not expected to increase in value significantly in the future.
Tips for increasing the value of the company
The second part of the IDEASCANNER report contains concrete advice on how to increase the value of the company. These are derived from the identified existing weaknesses in the business positioning. For the first time, the company has the opportunity to eliminate the radically transparent weaknesses or to develop a plan to turn them into opportunities in the future. This creates a comprehensible value-enhancing future fantasy for the buyer.
To put it simply, the artificial intelligence method IDEASCANNER replicates the assessment of successful specialists from investment banking or strategy consulting. However, it is not based on gut feeling and experience, but on the analysis of large amounts of data. IDEASCANNER AI analyses are 10 times faster and more cost-effective than conventional strategy consulting mandates.
Sustainably increase the value of the company
Besides many destructive effects, the Corona crisis had a kind of magnifying glass effect in the context of company sales. This means that investors are looking much more closely at the sustainable earning power of the business model of a company to be acquired than was previously the case. This does not mean, however, that the classic valuation methods have lost importance. Rather, the quantitative and qualitative methods shake hands and complement each other in their respective weaknesses.
For you as an entrepreneur, this means continuously identifying and uncovering the dormant potential in your business model so that this effect can then be seen in your annual financial statements in three to five years and can be evaluated in the form of, for example, an IDW S1 capitalised earnings value method.
IDEASCANNER (Step 2 - Potential analysis)
IDEASCANNER can also provide concrete assistance in analysing business potential. After the IDEASCANNER report has clarified the levers that can be used to increase the value of the company, it is now a matter of putting this vision of the future into practice with concrete ideas. From the recognition of the weaknesses, improved processes, procedures and new distribution channels should now be found and new products and services developed in order to make the desired path of future earnings growth comprehensible to the buyer.
Often, a good basis for new business potential lies in recognising customer problems that have not yet been solved. This is where the supportive ability of artificial intelligence to analyse very large amounts of data comes into its own.
IDEASCANNER accesses more than 400 million internet sources to identify and classify consumers’ everyday problems at an early stage. These are validated with everyday problem scouts and focus groups in a new procedure in order to achieve the highest possible quality statements.
This is about recognising the shortcomings of everyday life. For example, the founder of the company Bora recognised that extractor bonnets are often loud, ineffective, ugly and annoying in the cook’s head area. This problem area that he identified eventually gave rise to the idea of integrating the extractor function directly into the hotplate. This identification of the problem and the idea for a solution led to the development of Bora, which has since become an extremely successful company.
The potential detection
However, this procedure for identifying potential works not only in the consumer market, but also in the pure B2B area. The only difference is that the sources of customer problems are different here. Here, it is important to systematically use the interfaces to the customer, i.e. the communication of sales and services, in order to record, systematise and evaluate customer problems.
Customer problems are the gold standard for the development of new products and services that help to sustainably increase the company’s value. Value is already created through conclusively identified and validated customer problems, as well as through prototypically tested solutions. Increasing the value of a company does not have to be a lengthy process.
Reality shows that many entrepreneurs cannot or do not want to take three to five years to optimise their business model. However, even then it is invaluable for a potential buyer to be able to point out the potential in your business model that has not yet been realised. It will give him security, even if he is then responsible for the implementation himself.
The enterprise value
Let us briefly return to the starting point of our article: It was the question of the appropriate price for a company for both sides.
We have found that looking into the past only satisfies a prospective buyer to a limited extent. With IDEASCANNER, the seller knows first of all where he stands with his current business positioning. If he wants to improve this and thus increase his company value, he can raise the potentials shown and develop solutions, especially on the basis of real customer problems. This takes time so that the value-enhancing effects also show up in the three annual financial statements before the sale.
However, he can also leave this step to the buyer. Both ensure trust on the buyer’s side and this is reflected 1:1 in the purchase price.
Authors:
Wolfgang Bürger, KERN locations Nuremberg and Würzburg
Roland Greppmair, KERN Munich location
Holger Habermann, KERN locations Munich and Salzburg
Andreas Stütz, IDEASCANNER, Founder & CEO
TIPS for further reading:
Selling your business - How to increase the value of your business Part 1
MBI - Success model for corporate succession
Corona, Company Sale & Now? Part 1
The Cooperative Model - When Employees Follow in the Footsteps of the Company’s Founders Part 1
