How do you define the value of a business? Of your business? Whether you are a seasoned business owner who has built a business over the last 30 years or a new business owner with an innovative technology that will change healthcare as we know it, the question is certainly a fair one. Is there a simple answer? Actually yes… and no.

The easy answer is: the market will define the value of your business. If it was just that, then we could indeed say that the answer is yes, it is simple.

But is it truly that simple? What does it mean when we state that “the market defines value”? Business owners will often look at recent comparables and base their assumptions on that to come to the conclusion of what the value of their business could be. Exceptional deals always tend to stick in people’s minds, the one that got acquired for an extraordinary amount and becomes “the” valuation that everyone refers to. Let’s remember that an outlier is not part of the average.

But when it comes to defining value, it does not stop there. It is joined by a long list of additional questions that come into play.

Is the segment you are in saturated, in high demand, or both? Look at ventilators or respiratory products during COVID, there were lots of players but also lots of demand for that short period of time. What market(s) do you cover? Are you running a consistently profitable business with a solid EBITDA? How about your customers? Are they long term or a constant turnaround? How valid and how solid is your IP? Your clinical validation? Or your regulatory filing(s) just to name a few.

All can affect your businesses value going up or down. And of course, there is the economy, the world at large if you are doing a cross border deal, culture, and people, all of which are key factors often overlooked when it comes to determining your businesses value.

So, what do we mean when we say:

Value = Strategic Fit +Timing ®?

This statement is so true that we made it our tagline.

Strategic Fit:
Value can be based on everything we listed above, but what will actually make the difference in the valuation of your company in a positive way is what can be added when your company is sold to a buyer who sees a strategic fit that will ultimately increase its company’s future value. 1+1 does not always = 2. The better the strategic fit the higher the outcome of the equation becomes.

Timing:
Timing is being at the right time for a company to work on your acquisition. You can be a strategic fit but if a potential buyer is busy with another transaction or if what you are bring to the table is not a current priority, getting traction will be hard. Without that momentum very few deals take place.

Value:
It is when both strategic fit and timing come together to maximize stakeholder outcomes for our clients. It is exciting when this happens!