Operations Payoff

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What Do Business Buyers Buy?

When thinking about process improvement in your business, the first thing to consider is, what do business buyers buy? I recently spoke at a CEO peer group about how to improve business processes that lead to increased valuation of the company. That increased value might drive a higher price for a sale of the business, greater value in a transaction with the management team, or higher return when transferring to family members or other related parties.

In my experience with several business transitions involving private equity, the buyers were looking for three things – revenue growth, profit growth and cash flow. When you think about this, the reasons are obvious: buyers want a high return on their investment, and growth and cash flow provide that. They don’t typically buy a level of revenue or whether your company is Lean or not. They are interested in an expanding return for their investment.

When you ask the question, what business processes should I improve, the answer is, any process that results in increased revenue, increased profitability and improved cash flow.

© 2013 – Rick Pay – All Rights Reserved

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