When you start a business, plan where the value will be. Your customers decide the value, not you. Your business is an investment and a passion.
Today's special guest is Bill Vinck
Thoughts on Revenue
M&A and Revenue Clarity: When is a dollar worth more than a dollar?
Overview
Not all forms of revenue are equally valuable. Revenue types differ in important respects, and types have a hierarchy. A “subscription” dollar can be seen as more valuable than a “product” dollar. Revenue types and their relative values frequently arise in M&A conversations.
We will consider the topic from several related perspectives, beginning with the revenue types typically found in IT businesses. We’ll continue discussing other revenue characteristics and associated metrics, including margin and scalability.
These ideas are arrayed in a matrix that summarizes them in a fashion potentially useful to a management team for planning purposes and facilitating business analysis discussions in an M&A situation.
Revenue Types:
Revenue Metrics:
Summary
Management Matrix (download the worksheet)
Conclusion
By developing and maintaining a matrix like this, a management team has a simple tool to see current discrete revenue trends. It displays a key view of the current revenue picture. Further, it can plan and track revenue characteristic enhancement projects.
For a firm anticipating transition, the matrix is a simple tool to begin business analysis and valuation
Bill Vinck has joined Mighty Underdogs to help our members with succession planning and buying/selling to grow their business or family wealth. "Your business is an investment of time and money. What is the value your hard work has created?"
Categories: : Strategy & Planning