Creating a Valuable Business

3. Security

3.1 Businesses that are relatively stable are usually considered more valuable.

• A business with volatile profits is less valuable than one with fairly predictable year-on-year increases.

3.2 Assets can be a significant element of security.

• Intellectual property can be an important element of value.This is particularly true in the IT industry, where ownership rights to software and products are a major issue.
• Freehold or long leasehold property can provide capital growth as well as security.
• Your customer mailing list may have significant value.

3.3 The value of assets needs to be protected.

• Maintaining assets helps generate value, while failing to do so can destroy it.
• Intellectual property should be patented, copyrighted or trademarked.Trade marks can be an important part of your branding (see 4.2).

3.4 The smaller the percentage of your business' value represented by assets, the greater the risk.

• All the intangible value needs to be protected.For example, in a 'knowledge' business whose value largely reflects the skills of its employees, the business risks losing value to the employees (see 5.4).
• Protect your customer database and other key records by creating back-up copies and keeping them off-site or in a fire safe.
• Back up data on your IT system.

3.5 The ability to anticipate change is an important way of protecting value.

• Set up systems to monitor the business climate.You need to be aware of forthcoming political, economic, social and technical changes (eg changing customer needs).
• Systems that allow you to anticipate problems and plan ahead will help you create a strong, consistent track record.