Succession And Identifying Your Capital Value Drivers

A series for those journeying through family business succession.

One of the most important outcomes succession can achieve is a focus on a business’s capital value drivers.

Ask most business leaders what underpins the value of their business and they would say their profits. But profits are only an outcome and what really underpins capital value is what generates those profits.

These are what I refer to as your business’s capital value drivers and this is where your focus must be. Succession provides the perfect context to reaffirm and reinvest in the capital value drivers of your business.

However, if you believe you personally are one of those capital value drivers, then trouble is brewing. ‘You’ cannot be transferred across generations or sold to a third party, so your value is zero dollars.

Leadership is vital to the performance of any business and establishing your legacy through leadership is critical.

However, it is not a single person, but a leadership team and all that goes with them that creates a legacy. In identifying your capital value drivers, you commence with outcomes, profit, and then move backwards, through tangible assets, intangible assets, and then, finally, the catalysts.

In the 1950s, the focus would have been on tangible assets, such as plant and equipment. That has now shifted to intangible assets, and in the future will be focused on the catalysts. Next week we will look at the catalysts but today we will consider intangible assets. For an intangible asset to hold value it must satisfy the following tests:

· It can be identified and recognised.

· It has a legal existence and can be protected by law.

· You hold the right of ownership and can transfer that ownership

· It came into existence at some point and can be destroyed or terminated.

Here is a list of possible intangible assets to jog your memory:

· Artistic and design expressions.

· Brands

· Code

· Communities

· Data (habits and preferences of your customers).

· Human capability.

· Locations (offline and online).

Create a list of what you believe are the intangible assets in your business that underpin its capital value.

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An Invaluable Resource — ‘Transition — Orienteering The Lands of Succession’

Transition - Orienteering The Lands of Succession

A Topographical Guide To Orienteering Family Business Succession