“Generators of value”: tips to make your business more successful.
What makes a business successful? Providing value profitably! Value drivers take advantage of business profitability and reduce risk. Value drivers distinguish successful companies from their competitors.
For many business owners, their business represents their life’s work and the majority of their net worth. Sadly, only about 1 in 4 private companies actually sell, according to statistics compiled by the International Association of Business Brokers. So unless you just want to close the doors and retire, it’s smart to take steps to maximize business value.
Value drivers vary by type of business. While reputation and cost control are always important, other factors vary. For example:
Restaurants: They are known for their good food and a positive dining experience. Value (profit) drivers for a successful restaurant include: location, concept, menu, quality of cuisine and service personnel, and cost control.
Technology companies: must have a core product / technology or “know-how” that solves a customer’s problem. Key drivers of value (profitability) include: highly skilled workers, quality and cost control, and R&D (research and development).
Professional Services Companies – They are known for their reputation. Key drivers of value (profitability) include personal relationships, highly skilled staff, and profitable service delivery.
Retail – Brand / merchandise mix and location are critical. Key drivers of value (profitability) include inventory management and cost control.
Often the drivers of value are “intangibles” and employees.
Intangibles (intellectual property) and human resources (going home at night) can be protected and harnessed through a combination of business strategies and legal protections. Business strategies include incentive compensation plans to recognize, reward, and retain high-performing employees. Legal protections include requiring key employees to sign non-compete agreements, register trademarks and copyrights, and take steps to protect proprietary information / trade secrets, such as recipes and formulas. Contracts with key players, including partners, customers, and suppliers, are also important.
What are the value drivers for your business?
Start by using the SWOT analysis – Strengths, Weaknesses, Opportunities and Threats – this will help you identify the “value drivers” for your business. With this approach, you can focus on the key value drivers.
In conclusion, it is easy to get distracted by all the competing demands for the business owner’s time and attention. To maximize the value and profitability of your business, you must focus on the key drivers of value, which can be intangibles and employees, as well as having up-to-date equipment and systems.
An independent perspective can be invaluable in identifying value drivers and coming up with a plan to increase your business profitability.
