By Lynn Shelton
Enterprise Minnesota's Vice President of Marketing
(Lynn Shelton, vice president of marketing, Enterprise Minnesota)
With just a half day's investment of time, CoreValue software gives manufacturers a quick sense of what their company is worth—and what it could be worth.
For manufacturers, knowing the value of their companies goes beyond preparing to put out a “For Sale” sign.
While many are looking to sell or transition leadership from one generation to the next, or one owner to the next, there are others, according to Steve Haarstad, looking beyond to assess the functionality of their operations through “value check.”
Haarstad, one of our business growth consultants, works with clients on Enterprise Value, one of our consulting services that uses CoreValue software to analyze a company from the perspective of 18 operational “value drivers.”
We profile the Enterprise Value program in the winter edition of Enterprise Minnesota® magazine, due out next week.
Haarstad says manufacturers can use the software to help define the strategic direction the business needs to take over the next few years. “They can put together a strategic game plan to increase their company’s value,” he says. Then they'll see where they're strong and where there are opportunities to improve.”
CoreValue was developed over the years by two MIT professors who initially created it for the financial sector. As it gained traction, they refined it for use in other sectors, such as manufacturing. Enterprise Minnesota’s consultants deliver CoreValue to clients through a licensing agreement. It is currently utilized by more than 50 percent of America’s Manufacturing Extension Partnership (MEP) centers.
Taking less than a half-day time commitment to gather inputs about revenue, profitability, employee headcounts and a variety of other perspectives, the software uses algorithms to compare a company’s performance against a massive database of existing information about other companies. It then produces a company’s value, along with an extensive list of factors that could increase that value.
Haarstad has advised several clients who have also received a formal valuation from an accounting firm or a broker. “The output of this core value system has often been within five percent of other valuations,” he says. “Its accuracy is pretty reliable.”
Enterprise Value involves three steps, Haarstad says. The first is typically a 30-minute phone call to set expectations and decide who should be involved. The second is a three-hour session to gather inputs that will assess the operational performance of the business—such as revenue, profit, zip codes, etc. It consists of a series of best practice questions in which respondents self-assess against 18 value drivers. The final session reveals the results.
Haarstad is intrigued by the innovative questionnaires through which company executives provide information. Instead of asking respondents to compare the performance of their companies to best practices on, say, a one-to-five scale, the Enterprise Value program uses casual words and phrases one might use in conversation with a friend, neighbor, family member, or an acquaintance.
For example, an initial question on growth states: "We have grown faster than our competitors in the past up until now. And we have projections that suggest we will grow faster than the market in the future." Manufacturers can then respond with: "Yes, our business is on fire,” or “We're growing at a pretty good clip,” or “Our growth is steady, we're doing okay." The bottom of the scale is something like, "We're really not growing right now."
The program then assigns a potential financial value to each of the 18 drivers and shows where the company can optimize its value. “Companies recognize they’re not perfect in all those 18 areas, so they have something to work toward,” Haarstad says. “The current potential enterprise valuation might be $12 million. But based on their answers, the current value is maybe $8 million. So, there's a gap of $4 million to work on.”
Empowering Your Continuous Improvement
**Exclusive to Manufacturers**
Tuesday, January 8, 2019
9:30 a.m. - 11:30 a.m.
Holiday Inn & Suites
75 South 37th Ave
St. Cloud, MN 56301
What to Expect
You may have integrated lean practices throughout your business, but are you empowering employees to see waste and eliminate it?
Greg Langfield, Enterprise Minnesota continuous improvement expert, will show you how to engage employees in eliminating waste, producing higher quality/volume products in less time, while maximizing productivity.
You will gain:
- Increased employee skills and behaviors that align with company values;
- Increased focus on value-added activities;
- Improved productivity company-wide; and
- Strengthened continuous improvement efforts.
This event is exclusive to manufacturers and is free of charge. Registration is required.
To register please contact firstname.lastname@example.org.