indicatorSuccession Planning

Succession planning and tips for value optimization as a KPI

By ATB Financial 12 February 2021 4 min read

When business leaders begin to transition away from their company and look for the right successor, they also have to find the best path to boosting the value of their business.

After all, if they want to continue scaling the business and make it attractive as a potential acquisition,, optimizing value should be top-of-mind for departing leaders.

In this article, you’ll learn what owners should do during this critical phase in the life of their business.

Measure smart, acquire strategically, boost efficiency

Amanda Vella, senior director for Business Advisory and transition consultant at ATB, says adding value to any business starts with looking at the numbers.

“So many companies value themselves more than they’re actually worth,” says Vella. “Understanding the value of your business can let you know which areas to improve upon. It gives you a baseline measurement to make planning decisions. Knowing your value, just on its own, though, won't necessarily tell you what you need to improve on.”

To reach that value-focused KPI, business owners can also move towards their processes more efficiently. That kind of deep work could result in long-term success simply based on what this strategy provides—a better way of running every branch of the business.

“Do you have extra steps in your processes you don’t need? Can it be leaner?” asks Vella. “Have you looked at certain processes through the customer-value lens?”

Understanding your company’s EBITDA, normalized for one-time items, can give you a deeper look into future expectations of earnings and multiples for businesses in your market, Vella says. It is also helpful for owners to really recognize the company assets, especially the intangible assets that support that business valuation.

Tuck-in acquisitions could be another way to bring value to your business, Vella notes, if that acquired business can easily be incorporated into your existing operations without disruption to your day-to-day business. Owners may want to buy a smaller company in their space, she says, and find administrative efficiencies.? “Now you have contributed to your EBITDA, if you can realize synergies and cut costs or if your business is valued at a higher multiple than it is now,” says Vella. “That’s how you create value.”


There are many methods for cleaning up inefficient protocols or actions within a company. They include the Kaizen model, which builds efficiencies through small shifts in daily work and corporate culture to foster an environment that refrains from punishing errors, but instead aims to prevent them from happening again. In contrast, the Six Sigma technique revolves around steps such as define, measure, analyze, improve and control.

Whatever route you go down, keep in mind the core principles of process efficiency, which are to minimize errors, reduce waste, improve productivity and streamline operations.

The elements of a strong valuation

Don’t underestimate the influence of goodwill qualities that should be identifiable and transition-ready, Vella says. She points to the “Four Cs” idea coined by Chris Snider, CEO of the Exit Planning Institute. “Intellectual capital is basically the easiest way to define it. It’s everything everybody knows in a company,” says Snider.” I like to call it the secret sauce of what makes a company go and what makes a company go well. And I've defined these as what I call the 4Cs: human, customer, structural and social capitals. ... Human is really a measure of the talent level in a company. I think most people would agree that if you have stronger talent, you're going to have a higher performing company.”

Vella adds that a forward-thinking company will ensure they have other features of a positive valuation, such as unique processes, customer lists and trademarks.

Process research, which Vella unpacks in another post, is another important part of a strong valuation.

Building a strong team

The responsibilities weighing on the shoulders of the business leader should be spread out across a strong management team assisting with the transition, Vella advises, because that will lead to greater chances of success. “You want everyone in place to help the owner, from a strategic and visionary CFO to the HR personnel to maybe an M&A advisor if the business is on the way to a sale,” she says. “Many business owners don’t want their management team to know they are exit planning but it really comes down to framing it as implementing good business strategy just in case something happens. Management teams would actually feel more comfortable knowing steps are being taken to protect their future and the business’s future.”

Even as they build towards an exit, business leaders still have key roles to play within their businesses. And the earlier transition planning can segue into succession processes, the better. As a McKinsey report states, “A forward-looking, multiyear planning process that involves the incumbent CEO would increase the odds of success.”

Find out more about selling your business successfully with ATB’s Business Transition Guide. Want to talk some more? For tailored advice around business transition planning reach out to our Business Transition team at atbwealthtransfer@atb.com

Business Transition Guide

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