Understanding Your Value: 5 Key Components to Human Capital

When creating an exit plan and preparing to sell your business it is important to maximize the value of your intangible assets. One of the most value intangible assets of a business is human capital. 

 

The five key components of human capital are: (1) Employee talent; (2) Employee experience; (3) Employee management skills; (4) the business’ professional training procedures; (5) Client knowledge. 

 

An estimate 62% of owners indicated that finding and retaining top talent is the biggest challenge they face. Your exit plan should include a plan for developing your employees, creating a series of steps that encourage growth in your employees and your business. Further business owners should consider why top talent would want to join your company. Is your business an attractive place to work? Can you

clearly articulate your business values to your recruits? What characteristics are you looking for in a key employee? How can that key employee 

 

Similarly, motivating your team can create additional value upon your exit from the business. Employees typically want more than just a “job.” They want to be a part of something bigger. Simply, do you have the right incentive programs in place to motivate top talent and keep them motivated? Highly motivated and productive employees will only increase the value of the business and help ensure that the buyer can retain them post-transition. Motivating your key employees can also result in finding a buyer without having to look outside the business. Employee stock option plans and employee succession plans are key avenues to keep top talent motivated and working to increase the value of the business. Further, employee ownership transition can enable the business to be seamlessly transitioned, limiting the post-sale risk to you. 

 

Finally, a business owner should continually analyze the procedures they have in place to develop and train their employees. Besides mitigating legal and regulatory risk, well training employees perform better and result in increasing the value of the business. 

The legal team here at Jacko Law Group, PC (“JLG”) is experienced in advising business owners through the sale and transition of their businesses. Further, JLG with their Certified Exit Planning Advisor, are able to provide support and coordination among all your professionals to ensure that you have a complete Exit Plan that seeks to maximize the value of your business upon its sale or transition.  For more information or to speak to strategic counsel, contact us today.

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