2023 was a wild ride. With interest rates and inflation going haywire, business valuations took a significant hit last year. But the tides are already turning in 2024. Here are the latest emerging trends that could impact your company's value this year.
ESG Matters More Than Ever
You can't throw a rock these days without hitting an ESG benchmark. Environmental, social, and corporate governance metrics are getting real traction with investors. But get this - less than 32% of privately held middle market companies report on ESG factors. Um, what?
That's leaving a lot of value on the table! Savvy leadership teams must step up their ESG game this year to attract capital and pump up valuations. Minor improvements to your sustainability initiatives or DEI programs could make a difference.
Human Capital Management
Valuations are still heavily weighted on hard assets and finances. But in 2024, expect human capital measures like customer satisfaction, employee engagement, training programs, and retention rates to get more attention. Building an excellent culture pays dividends when it's time to sell or go public. Pro tip: Monthly pulse surveys make it easy to track workforce sentiment over time. Bonus points if you benchmark against industry averages!
Location and Automation
Global supply chain issues aren't going away anytime soon. And labour shortages continue to squeeze margins. No wonder more manufacturers are exploring automation and reshoring production. Highlighting advanced technologies or strategic locales that make your business more resilient could boost valuations big time. Even modest moves to balance geographic risk indicate forward-thinking leadership.
Monthly Recurring Revenue Rules
Investors have major heart eyes for predictable monthly recurring revenue streams. They offer stable cash flow and strong visibility into future earnings. Unsurprisingly, SaaS companies boast some of the richest valuations out there. While shifting to a subscription model is only feasible for some businesses, emphasize any sources of recurring revenue in your valuation narrative. Contracts, loyalty programs, consumables, retention programs, and support services fit the bill.
ESOPs Gain Momentum
Employee Stock Ownership Plans aren't new, but they are now having a moment. ESOPs are getting more love as founders look for exit strategies that balance financial returns with corporate mission and employee wellbeing. Plus, selling to an ESOP allows you to cash out slowly.
Are you still waiting to pull the trigger? Implementing an ESOP early can enhance long-term valuations and let you share the upside with your team. It shows you are thinking ahead.
Wrap Up
So these are the valuation visionaries. The companies getting ahead of these trends will reap the benefits at valuation time. What moves are you making this year to grow value?
Reach out to Kick Advisory if you're sick of boring old valuation firms that make your eyes glaze over. Our professional team of financial advisors specialize in keeping the best business valuation services from fresh to death. We perfectly blend financial forecasting, strategic planning, and analytical modelling, accurately serving valuations. Furthermore, we will reveal opportunities you never knew you had to pump up profits and get premium value for your company when it's go time.
