The Four Kinds Of Capital That Have An Impact On What Your Business Is Worth

Capital is more than just the money you have in the bank. Your employees and your rich professional network all have an impact on what your business is worth. Sunbelt Business Advisors gives business owners insight on the four critical factors affecting the value of your business.

Your Most Valuable Asset – Human Capital

Most businesses don’t depend on a bunch of expensive machinery to keep operations up and running. The hardest thing to replicate, and therefore your most valuable asset as a business owner, is the team doing the work to meet your bottom line. The people on your payroll are your living, breathing factory that make your product or deliver the service you provide.

Human capital should be the first thing you assess as you consider an exit strategy involving the sale of your business. It’s important to make sure you have the right team in place to ensure a potential buyer can maintain the same level of service and anticipate a comparable revenue. Make sure you have the right roles filled by the right people. And sometimes this focus also means you may need to part ways with people who do not complement your company culture or the direction of your business.

Your Customer Capital – Worth A Fortune

The second kind of capital to consider is your customer capital. As you think about your book of business, consider how strong your personal relationships are with your customers. Do your customers rely on your company because your products or services are unique and essential to their profitability? Are your relationships deep, long-term, and contractual? And perhaps the most important question to ask yourself: are these relationships transferrable?

Consider how easily it would be for your customer to replace your business with that of a competitor. If you are starting to feel some weaknesses in the relationship, it’s likely time to invest in improving your connection with your customer.

Structural Capital – The Backbone of Your Business

Just as the structure of a building is what keeps it stable, your structural capital is the infrastructure of your business. Think of the systems and tools essential to your operations, and consider the knowledge assets

you have to offer. Your knowledge assets include your people, processes, technology, and intellectual property that allow your employees to do what they need to do to meet customer expectations and beat your competition.

Document the processes of your business, your organization chart including titles and duties, the technology critical to your business success (including hardware, software, and cloud-based platforms), and your facilities. Make sure to capture in detail any specific processes, people, technology, or facilities that make the organization special – thereby creating a compelling value that a potential buyer is willing to pay for.

Social Capital – Rich with Culture

Social capital takes your people and processes a step further, covering your corporate culture, brand equity, the essence of your team, and your internal and external communications. The culture of your business is akin to its personality, and it’s important to review how your culture and brand resonate with the next generation of employees. Not sure where to start? Now is a great time to get to know Generation Z and the social capital drivers that will help you entice the best talent.

Generation Z – born after 1996 – is less focused on salary, and more committed to contributing to the greater good. This cohort of people is strongly focused on societal challenges like sustainability, climate change, and hunger. And don’t forget about diversity; companies that represent a broad spectrum of differences including race, gender, identity, and sexual orientation will have more success attracting and retaining diverse talent.

It’s critical that any business owner reviews these four kinds of capital as they consider selling to an interested buyer. By reviewing these factors, you can take stock of your corporate successes and potential opportunities for improvement. Sunbelt Business Advisors can help you review the strengths of your business and offer suggestions for investment that will help you yield the greatest value for your business. Contact us to learn more.