“Is this creating value?”
Put the company’s money where it creates value.
You know what each part of the business earns on the money in it, and every call on where the money goes next is made with that in front of you.
What owners tell us
- “We want to buy a competitor. What can we pay?”
- “We’re growing, but are we making money on what we put in?”
- “Which of our companies should get the next investment?”
- “Should we borrow, or bring in a partner?”
- “The family wants a dividend. The business wants to reinvest.”
- “The family takes what it needs from the company. Is that a problem?”
Can your numbers answer these?
- Do you know what each company, unit or product earns on the money tied up in it?
- Can you say which investment would add the most value, and which the least?
- On an acquisition, do you know what the target earns once the seller’s own adjustments are stripped out?
- Do you know what you could pay, and how you would fund it?
- Is there a rule for what gets reinvested and what goes to the owners?
Where the answer is no, that is where we start.
What you get
- A strategy, set down in writing, that guides every decision on where the money goes, and the steps that close the gap between where the company is and where it means to be.
- What each part of the business earns on the money tied up in it, and what the next money would earn in each place it could go.
- The return on investment and the IRR of each option, set against the risk it carries.
- A plan for where the next money goes, what it does to the rest of the business, and how to fund it.
- On an acquisition: what the target really earns, what you can pay, and how to fund it.
Why it matters
Deciding where the company’s money goes next is what finance calls capital allocation. It is where a company’s value is made or lost, and it is the work an investor does every day.
The answer is not always the part of the business with the best return today. It is what the next money would earn, and what each choice does to the rest.
What moves the value
Profit sets the base, and the cash it ties up weighs against it. The value is that profit times what a buyer pays for each dirham of it. That price depends on how long the profit will last, how fast it can grow, and what could break it.
Buyers pay more for a business:
- that customers find hard to leave, and competitors hard to copy;
- whose sales can grow faster than its costs and the capital it needs;
- that runs without its founder, on systems a new owner can take over;
- whose revenue comes back each year without being won again;
- that no single customer, supplier or person can sink;
- whose numbers hold up when a buyer checks them.
Most of this is built over years, well before a sale.
The first step is a call.
Then we look at what each part of the business earns on the money in it. If your numbers cannot show that yet, we build them first. That is where the choices start.
A 30-minute intro call with Charif.