Strategies for Maximizing Enterprise Value

Video Transcription

With all the noise out there today, it’s really no surprise that most owners and management teams in the wealth management space realize they’re managing an extremely valuable asset, possibly their most valuable asset. Despite that, I find it rare that they can answer the question of how they actually expand that enterprise value. Since 80% or more of the business owners that we work with here are looking to grow and stay independent versus the 20% who are really looking to sell their business with, we often hear, “Why should we care about enterprise value?”

Well, understanding your business’s enterprise value, or EV, is going to carry significant benefits beyond just creating a more valuable asset. Where we find it most helpful is it provides a framework that your team’s going to need to determine the correct next move to address what I’d call the business of the business. While the individual drivers of a firm’s enterprise value are going to be nuanced, there are some commonalities like size, talent, risk, and profitability –all of which significantly influence it.

Here’s a few quick strategies that you can use to help increase your EV beyond solely focusing on the bottom line. First off, chart your course. You need a strategic plan for your business to create that shared vision for your goals and a course for your team to implement. I liken it back to the Apollo missions where if that team was a degree off course, they wouldn’t end up a million miles in space. If you don’t set that longer term target and point your team in that direction, you’re never going to get there. Secondly, you need the right people who are driven to grow with the business, and you need to be fostering a culture of shared ownership in the firm. Wealth management is at its core a people business and one of trust, so bolstering your human capital strategy is going to reduce concentration risk. It’s going to create that pipeline for sustainable new growth in the future, and subsequently, it’s going to make your business more valuable. Third, focus on your organic growth engine, and this is outside of solely market growth. It is absolutely no secret that our industry has a challenge here, and your strategic plan can serve as a baseline to allow you to develop realistic growth projections and set realistic growth goals based on industry benchmarks, as well as plan accordingly. These strategies barely scratch the surface; valuing a business and driving that value up is a truly complex initiative.

If you’re looking for some tailored strategies to maximize your firm’s enterprise value, contact myself or our team here at MarshBerry today. Thanks for watching.