Business monetization is the end goal for many business owners — to be able to exit a successful business and hand it off for a significant sum of money, allowing a focus on personal goals. But so many businesses are driven by short-term goals, failing to focus on long-term business value growth. Some businesses could be increasing their worth, but aren’t focusing on certain key areas that require improvement. This is what we call the business value gap.
Defining the Business Value Gap
In order to get the most value from exiting your business, three aspects need to fall into place: Your business needs to be ready, you need to be ready, and the market needs to be ready. When exploring whether your business is ready, one of the key identifiers is your business value gap.
Your business value is worth the exact amount that someone will pay you for it. This might not correlate to your earnings or revenue quite as closely as you think. In fact, many business owners don’t have a realistic expectation of the worth of their business. The business value gap is defined by what you want or expect your business to be worth versus what it’s actually worth in today’s market.
How to Determine Your Business Value Gap
Business value is about what sets your business apart from the competition, or what makes it a consistent performer in the market. But, it’s also about your company’s reputation, how sustainable it is, and how much people enjoy working for you. It can even be about employee turnover or how innovative your products or services are.
The 18 Drivers of Value: An Overview
Chuck Richards, CEO of CoreValue Research, states that there are 18 key drivers of business value. Identifying your business value gap is about exploring each of these 18 drivers of value as they relate to your business, and working out which you could tweak and improve to enhance your company’s value.
Growth
It’s important to remember that business growth is not just about increasing revenue. Business growth includes how it’s growing in value — the core concept of our article today. Are you ensuring each of the below value drivers is contributing toward business growth?
Market Size
How many customers or users can your company engage with each year? Is the market size for your product diminishing? If so, can you diversify or explore different demographics?
Market Share
Conversely, it’s important to understand how much of your industry’s market you take up. Are you a major player or a small but key disruptor? Either can increase your business’s value. It’s all about the impact your business makes on your chosen market.
Revenue
This one is pretty clear. If your revenue is constantly increasing or at the very least staying steady in line with inflation, then you should also see some business value growth as long as your other drivers are in good shape. If revenue is dropping, it’s time to explore what’s causing this and address it head-on.
Barriers
What barriers exist within your company that prevent growth? Are you lacking investors? Are your employees sufficiently trained? Is your product accessible to all? Removing barriers to success helps your business progress.
Differentiation
There are very few products or services that are truly unique. That’s why it’s crucial to have something that sets your product or company apart. This could be excellent service, a crucial selling point, or add-ons and incentives to purchase that can’t be found elsewhere.
Brand
How consistent is your brand? How powerful is your brand? Exploring these questions may identify a business value gap you didn’t know you had.
Margin
Look at where your company performs in the market — is it consistently above the average, or is it floundering? Consistently performing above industry norms can be a massive boost to business value and eventual business monetization.
Customers
Diversify your customer base as much as possible. Demographics are dynamic, so take advantage of this to get your product to as many people as possible.
Company
How you run your company has a massive impact on the business value. CoreValue research shows that both business revenue and value increase over time in well-run companies, but also that well-run companies sell for higher multiples of the earnings value.
Financial
It’s easy to get tied in knots with accounts, especially as businesses grow quickly. Ensuring your finances are looked after by an expert can save you money in the long run.
Marketing
Marketing is such a crucial part of managing a brand’s image and a company’s visible values. Can you quantify the impact your marketing team is having?
Operations
The operational running of your business should be efficient but compassionate, and built with contingencies for various situations. Operational teams and executive management should have clear channels of communication to help assess effectiveness.
Satisfaction
How much do your customers like your product or brand? How do you assess this? Satisfaction surveys are one method of collating data from larger groups of customers at once, to assess where gaps in satisfaction might exist.
Management
Great managers help grow people and teams into effective and happy members of your business. Identifying where managers need training or support can help boost your company value quickly.
Human Resources (HR)
Likewise, your HR teams need to be highly trained, sensitive, and efficient. Be on the lookout for complaints, unresolved situations, and other red flags that could be negatively impacting your business.
Legal
Do you have an in-house or outsourced legal team? Staying on top of regulations and changes to laws can be crucial, especially for any company that deals with personal data of any kind.
Innovation
Finally, businesses need to learn to innovate to stay ahead as many markets become saturated. This could be in terms of products and services, forms of communication or service, or ways of engaging potential or existing customers.
Work with a business advisor and a financial advisor to identify and address your business value gap. The Association for Enterprise Growth can help. Contact us at https://enterprisegrowth.org/ today.
Image Credits: Photo by Daria Shevtsova on Unsplash
