Improving the intrinsic value of your business series:

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For this installment of our series on improving the intrinsic value of your business, we discuss the importance of operational excellence and manufacturing efficiency.

For all the medtech manufacturers reading this, what does it actually mean to have operational excellence and true efficiency for your manufacturing? And why does it matter for your stakeholders today and for tomorrow’s exit strategy?

It’s important to remember operations and finance are intricately linked, but it’s not uncommon for there to be a disconnect between the two within your organization. KPIs can sometimes push your team toward operational excellence to meet customer expectations while at the same time de-prioritizing margin performance.

Every day, with proper KPIs, people on the floor want and need to know, “What can I do today that lifts sustainable margin?” To positively improve output on the manufacturing floor you need your team to be in control. And being in control means seeing problems in real time and acting on them within the shift – not next month. This means sometimes they must be able to stop production to prevent poor quality outputs. Other times, it means listening to them to incorporate even the most minor production tweaks to improve workflow and output.

When building KPIs, be sure to set ones specific to your business and trace directly to the financial statements. World-class medtech manufacturers create tiger teams to track margin by product and compare what you think to what’s actually flowing through the system. For example, product mix may explain why margin % is stable while margin dollars fall (or vice versa). If a SKU is negative on margin dollars, force the conversation: is it price, cost, or mix? Dig into each component, quantify it, make it actionable, and track it!

To stay best in class, insist on the why behind your numbers. When margin % moves, is it mix, price, yield, or overhead absorption? When labor % drifts, is it training, changeovers, or rework? When lead times increase, is it supplier cycle, internal WIP, or sterilization queues? Answering these whys – consistently, with data – signals control, improves cash conversion, and expands sustainable earnings. That combination raises intrinsic value which positively impacts all your stakeholders (including employees, suppliers, customers, and shareholders) every day! Intrinsic value impacts future enterprise value. When you’re preparing your business for a sale, one of the single biggest value unlocks is closing the gap between operations and finance. Great margins create excellent EBITDA. Great EBITDA generates excellent valuation multiples.

In the event you’re considering a sale sometime in the future, operational excellence will undoubtedly be a focus. In diligence, clean KPIs reduce perceived risk and support higher multiples. Buyers (whether strategic or private equity) care about cash flow, margin, working capital discipline, growth capacity, and minimized risk.

For all medtech companies, product-market fit and regulatory clearance get you into the game. But operational excellence – how reliably, efficiently, and compliantly you make and ship – decides whether you scale, win tenders, and create durable enterprise value. The companies using tiger teams to improve margins and lean manufacturing to standardize work while visualizing performance will outperform on growth and valuation.

And as a reminder, whenever exit strategy intersects with intrinsic value and market timing, it’s a very exciting day for all stakeholder outcomes!

About the authors: CEO Florence Joffroy-Black is a long-time medtech M&A and marketing expert. She can be reached at florencejblack@medworldadvisors.com. Managing Director Dave Sheppard is a former medical OEM Fortune 500 executive and an experienced medtech M&A professional. He can be reached at davesheppard@medworldadvisors.com.

MedWorld Advisors
https://medworldadvisors.com