The right person for the job, tackling financial pressure, and calculating the value of your business

Welcome to our latest Watering Hole update with more advice and guidance from our herd of experts to help SMEs enjoy growth, development, and profit.?If you have any questions about the content or subjects that you'd like us to cover please get in touch with Martin Brown

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Achieving Growth

Are you still the right person for the CEO job? As your business grows, you need to review your management team's expertise. If you've hit a growth ceiling think carefully about who you need to help you to achieve your long-term growth strategy. Hard as it may be, sometimes that may mean finding a new CEO. This could allow you to become chair, move to a role you enjoy more, semi-retire or retire.?As you move through growth phases, we recommend re-setting your strategy and plan, then thinking about the organisational design you need to deliver it.

Establish the necessary structure, roles and job descriptions and get a sense of the gaps in skills, experience and behaviour, which you can address through development and recruitment.

For example, as you plan to grow, you may need a more relevant finance function, with a CFO instead of a Finance Director, or more specialism in sales or marketing. If you plan to expand to multiple locations, you might need a new role in facilities management. And if ESG is a focus, you may need a Head of Sustainability.

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Tackling Challenges

With inflation remaining stubbornly high, and yet another interest rate rise last week, conditions continue to be tough for many SMEs. We know how stressful being under financial pressure can be and all of the herd are available for a no obligation chat with anyone who is struggling. Our advice to clients is to always take positive actions to assess the true position and create a plan to work through the situation. Indeed, taking professional advice from an insolvency practitioner is your duty of care as an officer and director of your business, under the Companies Act 2006. In short, it is good business practice and the right thing to do. This does not mean that you need to put your business into administration,?–?more that you fully understand and appraise all of the options. There's more advice and information here.

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Preparing for Exit

Do you know how the value of a business is calculated? There are three ways.?The most common is to calculate earnings before Income Tax, depreciation and amortisation (EBITDA), then apply a multiplier. The multiplier is arrived at by looking at a range of factors that drive value in a particular market and by looking at comparable deals in your sector.

Another method is discounted cash flow, which means basing value on a cash-flow projection over, say, three years at today’s value. Early-stage firms commonly use this because they don’t have much revenue or profit yet – all the value is in their expected performance.

You can also value a company based purely on its assets. This tends to give a lower valuation because it only includes physical assets, plus some intangibles such as goodwill or intellectual property. Distressed businesses typically use this method.

Curious about what your business is worth? Complete this free benchmarking survey to find out.

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Featured Elephant

Crawfurd Walker is our first featured elephant. He's been part of the herd for six years now and specialises in business finance and exit strategies. Although his experience includes FTSE 100 companies, Governments and Professional Bodies, he prefers to work closely with business owners and high-level decision makers in SME companies.

Email [email protected] if the herd can help your business in any way.?