Strengthening Operational Readiness for a Higher Business Valuation

When preparing for a business valuation, most owners instinctively look to the financials first. And while the numbers matter, they only tell part of the story. How your business actually operates—day to day, month to month—can have a significant impact on its value.

Operational readiness is about showing that your business runs efficiently, isn’t overly reliant on any one person, and is built on systems that support consistent performance and future growth.

In this article, we’ll unpack the operational drivers of value, highlight common red flags, and share practical steps to help your business shine under scrutiny.

1. Build Systems, Not Just Workarounds

Valuers (and buyers) are drawn to businesses that can run without daily hand-holding. Documented, repeatable processes show that your operations are efficient, scalable, and not reliant on informal knowledge or heroics.

Focus areas:

• Standard Operating Procedures (SOPs) for core functions (sales, fulfilment, finance, customer service)
• Technology stack (accounting software, CRMs, workflow tools) and how well it’s integrated
• Business continuity plans or disaster recovery processes
• Understand the inputs and their KPI’s, which are then measured against.  If the inputs are met, the output is the delivery, profits, cash flow, and ultimate value.

Tip: If “only Sarah knows how that works,” that’s a problem. Key processes should be documented and, ideally, transferable.

2. Reduce Key Person Risk

One of the biggest red flags in a valuation is when the business success hinges on the owner—or a handful of individuals. If relationships, expertise, or decision-making are concentrated with a few people, it introduces risk and creates personal goodwill instead of business goodwill.

Questions a valuer might ask:

• Who are the decision-makers, and can they be replaced?
• Are customer relationships tied to specific people?
• Is there a succession or retention plan in place?
• How strong is our talent identification, and is our training and investment into employee training best in practice?

Practical steps:

• Delegate more responsibility to your team
• Create detailed job descriptions and cross-train staff
• Consider employment agreements with key personnel (including restraint of trade or retention bonuses)

Bonus: A strong second-tier management team can significantly increase value, especially in owner-managed businesses.  The ability to have multi-taskers reduces operational risk.

3. Understand Your Customer Base

A well-diversified, loyal customer base is a strong value driver. It shows revenue resilience and reduces risk from losing any one account.

Assess and document:

• Customer concentration (e.g., top 5 customers as a % of total revenue)
• Recurring vs. one-off revenue
• Contract terms (length, renewal, exclusivity)
• Churn rates and retention trends

Red Flag: If one or two customers make up more than 30% of revenue, you’ll need a plan to explain how the risk is managed—or ideally, steps you've taken to diversify.

Tip: Use CRM or sales data to show how you’re tracking customer satisfaction, lifetime value, and loyalty.  Keep it current!

4. Tighten Supplier and Operational Dependencies

Just as with customers, operational dependencies can hurt your valuation if they create bottlenecks or fragility.

Key areas:

• Supplier diversity and contract strength
• Inventory management and lead times.  Is the Just-in-Time (JIT) scenario still appropriate?
• Reliance on specific technology platforms or third-party services
• Regulatory licenses or accreditations (and their renewal processes)
  Action point: Document critical suppliers, terms of trade, and any alternatives. A single point of failure—whether a supplier, system, or person—will be scrutinised.

5. Optimise Operational Efficiency

Operational efficiency doesn’t just affect profit margins—it also shows that your business is well managed and poised for growth.

Metrics to monitor:

• Revenue per employee
• Inventory turnover
• Delivery or fulfilment times
• Gross margin trends
• DIFOTIS (Delivered In Full On Time In Spec)

Valuers may compare your operational KPIs to industry benchmarks. If you’re underperforming, be ready to explain why—and what you’re doing about it.

Tip: Small operational improvements (e.g., reducing waste, automating workflows, streamlining delivery processes) can have a big impact on valuation when they lead to sustainable gains in profitability or scalability.

6. Legal and Compliance Housekeeping

Operational readiness also includes making sure your business is legally and contractually sound. Loose ends or informal arrangements can become stumbling blocks during due diligence.

Checklist:

• Employment contracts and staff records are up to date
• Commercial leases, franchise agreements, and licenses are in writing and current
• Intellectual property (IP) is registered and owned by the business—not the founder
• Health and safety policies are current and documented

Tip: A clean legal framework can improve confidence and reduce perceived risk. Engage a commercial lawyer early if you suspect your documentation needs tightening.

7. Prepare a Business Overview or “Info Pack”

A great way to present your operational strengths is to prepare a short, professional overview of the business. Think of it as a “business resume” for valuers, advisors, or potential buyers.

Include:

• Company background and ownership structure
• Key products or services
• Customer and supplier profiles
• Team structure and key personnel
• Business systems and technology
• Recent operational improvements or growth initiatives

This summary doesn't replace formal due diligence, but it sets the tone—and shows you're serious about presenting the business in its best light.  You need to be clear what is for sale, and if anything isn’t.

Final Thoughts

Operational strength is what turns a good set of financials into a valuable, investable business. A well-run business with systems, people, and processes in place will always attract a higher valuation than one that’s chaotic, owner-dependent, or held together by workarounds.

Getting your operations “valuation ready” doesn’t mean perfection—it means clarity, documentation, and reducing reliance on any one person or process. And the good news? These changes not only increase value, they make your business easier to run.

If you’d like help identifying operational risks or building internal readiness, talk to our team at Andersen in New Zealand. We’ve helped businesses across many sectors prepare for valuation, sale, or succession—with confidence and clarity.

Author - Aaron Wallace