"Soft facts to increase the value of the company

What increa­ses the value of the company?

Some only like hard-boiled eggs, others soft-boiled! Hard-boiled and soft-boiled eggs or factors also exist in business valua­ti­on. However, no one is well advised to only pay atten­ti­on to one or the other. For an optimal enter­pri­se value, the hard factors must be funda­men­tal­ly good and sustainable. But the soft factors also play an important role in incre­asing the value of the company. 

Hard & soft factors in business valuation 

The value of a compa­ny is deter­mi­ned by a large number of influen­cing factors. These influen­cing factors are basical­ly divided into so-called hard or quanti­ta­ti­ve factors and soft or quali­ta­ti­ve factors. 

Hard factors for enter­pri­se value

The hard factors are key business figures (inclu­ding turno­ver and return on sales, EBIT, cash flow) that can be read or calcu­la­ted direct­ly or indirect­ly from a company’s finan­cial accoun­ting. They provi­de the essen­ti­al numeri­cal basis for various finan­cial theory models for calcu­la­ting the value of a compa­ny. How to calcu­la­te the Calcu­la­te enter­pri­se value, you will learn here.

Soft factors for the compa­ny value

The soft factors include those influen­cing varia­bles for which either no key figures are available or, at best, auxilia­ry indica­tors that can be used to assess their quali­ta­ti­ve signi­fi­can­ce for the compa­ny. For the time being, they are not taken into account in the calcu­la­ti­on of the enter­pri­se value with finan­cial theory models. 

Nevert­hel­ess, they have come incre­asing­ly into focus in recent years. And not without reason. Apart from the fact that they sustain­ab­ly increase the quali­ty ? and thus also the compe­ti­ti­ve situa­ti­on ? of a compa­ny, their importance has increased signi­fi­cant­ly both in the rating of banks in the course of loan approvals and compa­ny purcha­se price finan­cing, as well as in the deter­mi­na­ti­on of compa­ny purcha­se prices. This also appli­es to small and medium-sized craft enter­pri­ses! The standard proce­du­re recom­men­ded and used by the Chambers of Skilled Crafts and Small Businesses for the Working Group of Valua­ti­on Consul­tants in the Skilled Crafts Sector  (AWH), soft factors are taken into account. 

Below we present three soft factors as examp­les and give you tips on how to imple­ment them in your company.

Owner indepen­dence

Most medium-sized enter­pri­ses are charac­te­ri­sed by a strong entre­pre­neu­ri­al perso­na­li­ty. These have led the compa­ny to success due to their special knowledge and skills. Along with this, the proces­ses in the compa­ny are often tailo­red to this person. This appli­es in parti­cu­lar to the speci­fic product know-how, the quali­ty of custo­mer relati­ons and the decis­i­on-making proces­ses. But it is precis­e­ly this focus on a single person that is associa­ted with a parti­cu­lar­ly high risk for poten­ti­al succes­sors or inves­tors. What happens when the old entre­pre­neur leaves? Who will ensure further product innova­tions and stable custo­mer relations? 

In order to make a compa­ny attrac­ti­ve for sale attrac­ti­ve, appro­pria­te measu­res must be taken to reduce depen­dence on one person depen­dence on one person as much as possi­ble. How can this be done?

  • Reinforced Trans­fer of respon­si­bi­li­ty and decis­i­on-making powers on the indivi­du­al employees accor­ding to their skills,
  • If possi­ble, the estab­lish­ment of a 2nd manage­ment level or ? where it is size-depen­dent prohi­bi­ti­on - building up a compe­tent Deputy positi­on,
  • mainten­an­ce active knowledge trans­fer from entre­pre­neur to employee and the employees among themselves,
  • Willing­ness to provi­de suffi­ci­ent Transi­ti­on period (1-2 years) or a Adviso­ry or adviso­ry board function.

Clear­ly formu­la­ted corpo­ra­te strategy increa­ses the value of the company

People who have a goal usual­ly achie­ve usual­ly achie­ve more in life. The same is true for compa­nies. There­fo­re you should regular­ly review the strategy of your compa­ny, adapt it to new develo­p­ments and document them. This can be done by:

  • Regular dates for Develo­p­ment or review of the Corpo­ra­te strategy,
  • Inclu­si­on of managers & profes­sio­nals in strategy development,
  • Defini­ti­on of the resour­ces requi­red (money, person­nel, know-how),
  • Deter­mi­na­ti­on Key figureswhich can be used to check the achie­ve­ment of the planning is verifiable,
  • detail­ed Documen­ta­ti­on of the strategy process and the results.

By develo­ping the corpo­ra­te strategy with your managers or compe­tent employees, you automa­ti­cal­ly increase the sum of aspects to be conside­red when aligning your compa­ny. At the same time, by documen­ting them, you create a standard of compa­ri­son. This provi­des infor­ma­ti­on about the extent of the devia­ti­on from the later actual situa­ti­on. From this, conclu­si­ons can be drawn about any incor­rect planning assump­ti­ons and optimi­sed for future planning. 

A poten­ti­al buyer will immedia­te­ly recog­ni­se that your compa­ny or product strategy is future-orien­ted and is regular­ly review­ed and reali­gned. This contri­bu­tes signi­fi­cant­ly to the value of the company.

Compa­ny value increa­ses with employee quali­fi­ca­ti­on and retention 

The most important capital of any compa­ny is its employees! Everyo­ne knows this, but it is far too rarely practi­ce far too seldom. Due to the incre­asing compa­ra­bi­li­ty of products on the inter­net and the incre­asing demands of custo­mers, the quali­ty of the quali­ty of products and all related services is of parti­cu­lar importance. importance. This appli­es equal­ly to the innova­ti­ve strength of a innova­ti­on in the creati­on of new products or the impro­ve­ment of existing ones. products as well as all inter­nal services. In this compa­nies can only positi­on themsel­ves well in this compe­ti­ti­on if they have parti­cu­lar­ly quali­fied quali­fied employees and are able to retain them for as long as possi­ble. retain them for as long as possi­ble. Parti­cu­lar­ly in view of the incre­asing­ly incre­asing­ly acute shorta­ge of skilled workers, this is an area that every entre­pre­neur must entre­pre­neur has to deal with intensively. 

It is even more important for an inves­tor or buyer of the compa­ny, becau­se he is parti­cu­lar­ly depen­dent on the on the willing­ness to perform and the abili­ties of the employees. employees. This is parti­cu­lar­ly true with regard to the managers, but of course also for all other employees. In order to ensure a high quali­fi­ca­ti­on and a long period of loyal­ty to the compa­ny. it makes sense:

  • In the Corpo­ra­te cultu­re (keyword: recogni­ti­on, inter­per­so­nal inter­ac­tion, open & respectful commu­ni­ca­ti­on, etc.),
  • regular Further quali­fi­ca­ti­on of the employees,
  • Motiva­tio­nal strengthening through remune­ra­ted and non-remune­ra­ted incentives,
  • Attrac­ti­ve and custo­mi­sable working condi­ti­ons.

Conclu­si­on

In additi­on to the hard factors such as turno­ver, EBIT, etc., the soft factors also have a not incon­sidera­ble importance for the final amount of the sales price of a company.

A strate­gic plan and perse­ver­ance are needed to build up or impro­ve these soft factors. However, you as the entre­pre­neur are always the winner, regard­less of whether it is the future success of your compa­ny, the rating with banks or the achie­va­ble purcha­se price for your company. 

Tips for further reading: 

5 important trends in business succes­si­on in 2019

The choice of the optimal succes­sor model

Profes­sio­nal support for emotio­nal compa­ny successions

Image: © Barbro Bergfeldt ? Shutterstock.com


What factors deter­mi­ne the value of a compa­ny?

Hard factors - These are business ratios that can be read or calcu­la­ted direct­ly or indirect­ly from finan­cial accoun­ting. They provi­de the numeri­cal basis for various finan­cial theory models for calcu­la­ting the value of a compa­ny.
Soft factors - In most cases, there are no key figures available, or at best only auxilia­ry indica­tors that can be used to assess their quali­ta­ti­ve importance for the compa­ny. Nevert­hel­ess, they have gained in importance in recent years. Both in the rating of banks in the course of loan approvals and compa­ny purcha­se price finan­cing, as well as in the deter­mi­na­ti­on of compa­ny purcha­se prices. 

How corpo­ra­te strategy increa­ses my compa­ny value?

By develo­ping a corpo­ra­te strategy, you automa­ti­cal­ly increase the sum of aspects to be conside­red when aligning your business. At the same time, you create a standard of compa­ri­son by documen­ting them. This provi­des infor­ma­ti­on about the extent of the devia­ti­on from the later actual situa­ti­on. From this, conclu­si­ons can be drawn about any incor­rect planning assump­ti­ons and optimi­sed for future planning. 

How employee reten­ti­on increa­ses my compa­ny value?

1. into the Corpo­ra­te cultu­re invest
2. Regular Further quali­fi­ca­ti­on of the employees,
3. Motiva­tio­nal streng­thening through remune­ra­ted and non-remune­ra­ted incen­ti­ves,
4. Attrac­ti­ve and custo­mi­sable working condi­ti­ons.

Compa­nies can positi­on themsel­ves well if they have parti­cu­lar­ly quali­fied employees and can retain them for as long as possi­ble. Parti­cu­lar­ly from the perspec­ti­ve of the ever worsening shorta­ge of skilled workers, this is an issue that every entre­pre­neur must address.