Spend some time around start up incubators and talk to enough entrepreneurs and eventually the conversation steers towards their exit strategy.
Valuations are normally viewed in a fairly linear manner: Maximise profit and multiply it by the industry benchmark valuation multiple.
Certain industries have a lower multiple and others naturally have a higher multiple, for example look at an Uber for a high valuation.
However, there is more to this equation.
Yes, increasing profit helps with the valuation; but it is also possible to increase the multiple.
While the full picture requires more depth to fully explain this, have a guess at what variable most affects valuation…
The soft fluffy stuff (superhero Fridays, team breakfasts, birthday cakes….) and all of that “nonsense” (!) has an extremely hard edge to it when it comes to value… (CFOs pay attention)
…and here is why.
There are 3 factors that need nailing in your org (whether you intend to exit or not):
They all intersect of course; The best people create the best culture; great culture attracts great talent; great talent are more capable to execute and so forth…
If exiting your business is not your goal then these three apply even more! They fit into a broader set of levers that ultimately drive revenue (contact me, we can discuss this more…) but don’t underestimate their impact.
…and for those entrepreneurs, get this blend right and you may not want to exit after all…!