Tips for Completing the Model 

Following are several suggestions for strategically using the RVD Model:

• Prioritize the Value Drivers: Even though the rating for each value driver is subjective, there’s a clear distinction between the highest and lowest priority value drivers. Despite this ranking, priorities aren’t absolute but should be considered relative to one another. It’s also worth noting that individual ratings are less important than the overall ranking or priority of the value drivers relative to one another. For example, it’s clear from reviewing Acme’s RVD Model that increasing pricing should be prioritized over improving documentation because it requires less time and money to implement. Because completing the RVD Model is simple and requires little time, Acme could perform this analysis in a few hours with the assistance of an M&A advisor and could begin executing the top value driver almost immediately. There’s no need for extensive planning – the RVD Model encourages lean planning and action, emphasizing results.
• Understand the Importance of Perspective: Don’t restrict yourself to a linear, black-and-white approach. The purpose of the RVD Model is to offer you a high-level perspective of your available options and the associated criteria in deciding your course of action. Once you perform the rational analysis, let your subconscious take over to see if more strategic options evolve over time. Review your potential value drivers several times and re-rate them from scratch several times to uncover inconsistencies or areas where you may need more information to make a more intelligent decision.
• Obtain Multiple Opinions: For a more democratic approach, consider giving a copy of a blank RVD Model to your C-level executives and M&A advisor to complete independently. By asking them to complete it independently, you counteract the bandwagon effect and unveil critical assumptions your advisors may have regarding some of your value drivers. For example, a CEO may have a different perspective than the CFO, CMO, or CTO. Therefore, it’s paramount that you don’t show a copy of your completed model to those working on it for the first time. Instead, ask them to complete the model independently of your input before you collaborate. Finally, consider asking your professional advisors, such as your accountant and attorney, for their input on your RVD Model.
• Reconcile Different Opinions: Once you’ve obtained multiple opinions, summarize the results into one document, and discuss the reasons for any differences with your team and advisors. By carefully weighing everyone’s opinion, you flush out differing views, which helps prioritize the actions everyone believes could have the greatest impact and that could be executed for the least cost, time, and risk. In other words, openly debating the model results in a wiser course of action based on multiple people’s input.
• Assemble a Deal Team: It’s helpful to assemble a deal team to initially discuss the value drivers and formulate and execute your strategy. The more help you have from experienced professionals to execute the value drivers, the more progress you’ll make. This may also be a wise time to consider implementing a retention bonus plan for your key executives. A retention bonus aligns incentives and motivates your key staff to improve the value drivers, especially if their retention bonus is tied to the purchase price.
• Break Value Drivers Into Actionable Items: Consider breaking the value drivers down into specific actions, such as creating a retention bonus for key employees, as opposed to themes or categories, such as “staff.” Ratings, and therefore priorities, may be significantly different for specific actions as opposed to types of actions, and it may make sense to rank the model by specific actions as opposed to action categories.
• Adjust Value Drivers According to Reasons for Acquisitions: In addition to ranking the value drivers, it’s helpful to know why a company may desire to acquire you. Such knowledge also helps you fine-tune the ranking of your value drivers.
• Know How Value Drivers Can Overlap: Realize that value drivers can overlap. One value driver can positively affect multiple attributes of your business. For example, increasing recurring revenue can have an impact on multiple value drivers. Or, increasing the lifetime value of your customers can dramatically change the dynamics of the assumptions in your business plan, which can also affect multiple value drivers simultaneously. 

Identifying your value drivers is a crucial element in increasing the value of your business and preparing it for sale. While working to maximize your value drivers isn’t an absolute requirement for selling your business, it can significantly increase the value of your business while helping to ensure the sale process transpires as smoothly as possible.

Conclusion

Once you’ve identified your value drivers, prioritize and execute them based on their potential impact or return and the risk, time, and investment required to achieve them. 

When it comes to deciding which value drivers to prioritize, the advice of an experienced M&A advisor or investment banker is priceless. The host of factors outlined in this book will give you a head start on decisions that can increase the value of your business.

After you’ve educated yourself on the possible value drivers you can implement in your business, I recommend consulting with an experienced investment banker to help you prioritize your list of value drivers. A knowledgeable advisor can assist you with identifying the value drivers that are most likely to generate the highest returns, that require the least amount of time and money to implement, and that represent the lowest associated risk. They can also help you determine which value drivers are most likely to appeal to all buyer types and which value drivers may only appeal to a specific buyer. Regardless, the guidance in this book is a useful starting point and will assist you in understanding the potential factors that can impact the value of your company before you choose to consult with a professional.