Technology plays a role in several aspects that impact overall business value: Operations, capabilities, strategic positioning, agility, scalability, employee and client experiences, and even how you are viewed from an M&A perspective (things like the costs of bringing an acquired organization up to speed and the ease of integrating business systems should always be considered when discussing an acquisition).
This article is here to explore some of the most impactful components of technology as they relate to the value of your business, and to help you consider how you can improve or incorporate new technology to increase your organization’s value. Even if you aren’t looking to sell or merge your business, adding value should always be an important strategic goal so you can stay appealing to new customers and investors alike.
What to Look For
When business owners are looking at the valuation of a business, they typically default to its financial strengths (net income, revenue, costs, assets, etc.). Tech capabilities are often overlooked, though they can be just as, if not more, important to the long-term value of the organization because of how they impact agility, efficiency, overhead cost reductions, and more.
Here are some of the major components of business tech that we would want to know about a company’s technology if we were looking to buy them:
- Infrastructure: Has the company’s IT infrastructure been properly invested in and maintained? Is it up to date in terms of tech norms and how it meets the business’s needs? Does it provide reliable performance? Does it enable the employees to perform more effectively, or is it actually hurting performance with downtime and inconsistency? Does it allow for scaling for new business opportunities?
- Security: With cyberthreats on the rise, has securing the company’s data been a priority? Are there best practices established for handling sensitive information? Are the proper systems in place to secure communications and data? Are access controls in place to ensure only authorized individuals are accessing the data? Is the business in compliance with any applicable industry regulations like HIPAA or PCI? (And, in case you thought this one isn’t a big deal since security can always be upgraded after an acquisition, keep in mind that Verizon lowered their offer to buy Yahoo by $350 million after Yahoo’s massive customer data breaches were made public!)
- Process Alignment and Automation: Has the company invested in aligning their technology with their business processes? Have they worked to automate and simplify operations using technology? Has their strategic use of technology increased profit per person over time?
- Looking to the Future: Business success isn’t always about the past financial metrics; it’s also important to consider how the business has moved to position itself for tomorrow. Have they invested in new technologies to streamline operations, increase capabilities and enhance scalability? The long-term strategy of a company may not necessarily jump out of a P&L statement; for example, a company that cuts expenses across the board to gain a short-term profit margin is not nearly as attractive as a company that has adequately invested in the systems that will enhance productivity, streamline operations, and allow for rapid scaling in the future. These long-term strategic investments have a much more rewarding payoff than short-term profit margin goals.
We understand that you may not be looking to sell your business today or in the foreseeable future, but it’s always beneficial to operate with a mindset focused on increasing business value. To do that, you must consider how you can use technology to your advantage in the long term so you can streamline operations, differentiate yourself, and reduce long-term costs. Doing so will result in increasing the value of the business over time while also making you more competitive.