We recently sat down with one of our Regional Managers to discuss the 5 keys to improving your company’s value and critical considerations for maximizing business valuation.
One of the benefits of Horizon Analytics financial modeling and analysis is revealing the levers you can pull to affect business results and valuation in the short term and the long-term. Following is how Skyline Engineering, a concept company experiencing aggressive sales growth, used their customized analysis to build their own timeline chart and set its strategy today, in two years, and seven years into the future.
Our Horizon Analytics package and subsequent discussions with the company led to the development of a timeline chart like this one, which the company’s management is using to set its strategy in the near term and during its high growth days, with an eye on longer term elements as well.
Immediately you can see that, the key things are the Returns and Cost of Financing. The key levers that they can pull to influence their value right now, are to reevaluate their pricing and look at cost controls. Some of the things that I would recommend for Skyline, in a fine tuning of the Horizon Analytics model, would be to get granular with their revenue, the different elements of their revenue, and get granular with their cost of goods sold. If we can identify what the different elements are that make that up which is easily expandable within our model, we can find where they can make changes to those to improve their gross margin. Another thing that they need to invest in, relative to how the industry does is, to speed collection and decrease their reliance on short-term financing. They may not be able to improve each of these, to the degree that we test in our model, but the model is flexible. The model can be made to include minor changes to a granular element to all of these elements we have identified, to see what it would do to the company on a realistic basis
On a mid-term basis you can see that, they have expanded a little further. The goal that they have are a little vaguer as they should be when you are looking out further. It’s the next stage, the next evolution. If you're talking about looking at your returns, you can look at fine tuning cost control programs, on a midterm basis, a year or two out.
And on a long-term basis, the company has stated to us that they plan to exit in the next three to seven years. And after looking at this, that seems realistic. But they want to increase that enterprise value, and what that sale price will be as much as possible, within the time period we forecast. And so these are some things that they can pay attention to, even immediately with a long-term goal as to how long the project will take.
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