Develop Your Unique Business Value to Drive Revenue
From Real to Ideal
A friend of mine is writing a book that is a 15 year study of what makes things work. He is both an engineer and a student of people. His methodology begins with the idea that you have to begin with the "Ideal" state before we can determine what needs to be built or changed. We then define the "Real", which is where we are today and determine what needs to happen to move from "Real to Ideal".
In the world of business, if ownership doesn't agree on what the "Ideal" state is, there will be no alignment between ownership and management. The "Ideal" is what ultimately determines what the expected "Value" of a company should be. This is why investors invest. They expect that over-time, a company's "value" will increase and the delta is their "ROI" or return on investment.
I presume that there are thousands of companies that have no idea what their "value" is or how to determine it. As a result, they have no idea how to determine where they are in achieving their "Ideal".
If You Get Hit by a Bus...
In a discussion with a client recently, we laid out a process that helped him understand the current and potential future value of his company. I'm not sure he's ever been so excited.
In his current state, he is a sole contributor in his company. If he gets "hit by a bus", his business is dead. Sorry to be so blunt. As a result, the value of his company is no more than the tangible value of his inventory and possibly some cash.
If we can help him develop processes and procedures around his company so that it reduces the dependency on him and can train others to do what he does, then the value becomes much more than just the tangible value of the company. The value of his company becomes a multiple on earnings (EBITDA) compared to other companies in his "category". This is clearly a win for my friend.
However, if we can also help him develop his "unique business value" that clearly defines who he is, separates him in the market, and leverages his time while creating barriers to entry for others in his business - we can create exponential value. His company then becomes attractive to strategic acquisition or Private Equity opportunities for his company. This makes the potential value of his company many times the value defined above.
Our friend now has a roadmap to achieve his "Ideal", which, by the way, changed when he saw the true potential of his business.
I would love to hear of stories about how you have identified your "Ideal". How does the "Real" (your current business) compare to the "Ideal" and what are you doing that is going to help you achieve your "Ideal"?