The year ahead is going to be tumultuous, with elections affecting approximately 45% of the world’s population – the noise competing for our attention will be louder than ever. To make 2024 count, it’s vital to focus your time and attention on what matters.

So how do you decide what matters?

I often use the analogy of sailing a ship when talking about business growth and value. And a ship doesn’t set sail unless it has a destination. Your business should be no different. What is your ultimate destination for the business?

Surely, it would be to one day – or maybe in three, five, 10 or even 20 to 30 years – exit your business for a premium that will reward your years of risk and investment. But how do we quantify that destination in order to build towards it? It needs a big, bold number, and that number is, at the very least, what you need to be able to retire comfortably.

Let’s explore the principles that enable success and that you can, adjusting your circumstances, use to map out your growth plan.

To start, we need to calculate what your business is worth today. It varies somewhat according to geography, industry and economy, but a rule of thumb is to multiply your most recent profit before tax number by 3. For easy maths, let’s say your profit before tax is R2 million:

R2 million x 3 = R6 million.

This is roughly what a buyer might pay for your business today. But your big bold number is R15 million. How do you close the gap?

The levers of valuation

There are five levers of valuation, which you can build into your business and pull in your favour to increase your multiple. Starting now, you need to build these levers into your business, to achieve the valuation you want, and to give yourself the time it takes to get it to the top.

The first is to understand that your business cannot be everything to everyone – no investor will want a business that doesn’t serve a crisply defined market segment and understand clearly what problem their product or service solves for this market segment, as well as the experience their customers want in getting it solved.

This is what truly sets your business apart in a competitive marketplace, and if you can evidence this, you add a multiple:

R2 million x 4 = R8 million

Next, you need to answer the question: How does it work? How do you deliver on the positioning you have so crisply defined? And to answer this sufficiently you need to have documented systems and processes in place to show how your business fulfils its promises consistently. This is your system of delivery, and if you can show how it all works, you add a multiple:

R2 million x 5 = R10 million

The following question an investor would ask is: Who does it? Who operates this slick system of delivery, particularly if you are not there? If you can show that you have a team that does the right thing, at the right time, is empowered to operate those systems, and is motivated to drive the business forward, without your constant involvement in day-to-day operations, you can show them that the business generates organic growth, consistently, and you can add a multiple:

R2 million x 6 = R12 million

Next, what growth lies ahead if you sell the business? A buyer will only look at your recent history to interpret the growth ahead. If you have had little growth but argue that there is much potential to grow in the future, no buyer will pay you for potential. If you have had good growth before selling, the buyer can forecast that growth. Showing recent growth to confirm growth ahead helps gain a multiple:

R2 million x 7 = R14 million

Finally, the toughest question for any business owner to answer is: How does the business run without you in it? Who has the IP and the relationships with suppliers, customers and industry? Who troubleshoots and gets things done when the going gets tough? It can’t be you. If you can show that the business runs independently of you, you gain another multiple:

R2 million x 8 = R16 million

Each lever builds on the last, and it takes time as all good things do. It’s imperative to start now – figure out your destination and build backwards to ensure your business grows revenue and profits and also delivers a successful exit to secure your future when that time comes.

A successful journey by ship begins with defining a clear destination, locating your current position and charting a course to reach that destination. Your chances of success as a business owner are greatly improved if you start with the end in mind, understand where you are today and develop a plan of action to close the gap – we call it building backwards.