SME – Consider Valuation Beyond Financial Performance

March 27, 2014
How much worth is past financial performance? A lot. Can you predict the future of an SME looking into the past financial performance. Vaguely.

SMEs can outperform in terms of financial performance many large corporations – hands down.

However, when it comes to real deal making the buyer can have second thoughts about the excellent SME financial performance due to the “smallness”.

The investor will discount the excellent SME financial performance by trying to find answers to following questions:

  • What effects do one key person leaving the company has to the performance?
  • What is the effect if one or two customers are suddenly buying from competition? More importantly, what does it take to get up to feet if a  large customer stops buying?
  • How to find new skilled employees?
  • In what phase of the product life cycle are the products?
  • How to advance product development and when?
  • What is the capacity reserve and how to implement more capacity?
  • How to get more sales and how to even keep the current sales level?
  • How flexible is the work force and employment laws when it comes to temporary employee reduction?
  • Can I serve with the current crew international customers?

Way too often I experience with SME owners, that they perceive their business as “a constantly and easily performing business” even in the future. Perhaps this is true, however the potential partner, being an industrial company or financial investor, will consider the value and potential beyond the past financial performance.

SMEs owners must carefully prepare these scenarios, not only if in need of partners, but also during normal course of operation.

Being prepared to these questions while running a business can make an SME much more successful and alert to abrupt market changes.

Popular Sponsored Recommendations

Shifting Your Business from Products to Service-Based Business Models: Generating Predictable Revenues

Oct. 27, 2023
Executive summary on a recent IndustryWeek-hosted webinar sponsored by SAP

The Executive Guide to Best Practices for Ecommerce Integration

Oct. 2, 2023
Get ready to elevate your post-checkout experiences and thrive in today's unpredictable market. Learn why integration and automation are crucial to run operations more smoothly...

Integrated Scenario Planning: Driving a Better Understanding of Risks & Opportunities

May 31, 2023
Like a world-class chess player, scenario planning allows you to anticipate moves and counter moves to visualize how the “game” will play out and enables you to adjust your strategy...

Simplify Partner Engagement: A Guide for Manufacturers

Sept. 11, 2023
Design a winning partner program. Make selling faster and easier for partners, to increase mutual success with the help of automation. Download this guide to learn more about ...

Voice your opinion!

To join the conversation, and become an exclusive member of IndustryWeek, create an account today!