Is Your Business Thriving?


Business behaviors that can increase your business value.

by Chia-Li Chien | May 07, 2012

Book: Great by Choice: Uncertainty, Chaos, and Luck--Why Some Thrive Despite Them All by Jim Collins, Morten T. Hansen

Jim Collins’ recent book, Great by Choice: Uncertainty, Chaos and Luck—Why Some Thrive Despite Them All, contains extensive research into what I call Mission Critical Behavior to create extreme business value in terms of Shareholder Value Creation. The primary focus of the research is on public companies, although many of these behaviors are interchangeable or applicable to small to mid-sized private companies.

 

Collins calls these types of companies 10Xers, or in other words, companies that can create 10 times or more shareholder value over 10, 15, or even up to a 30 year time period. His research has proven that leaders of these companies, compared to those of other companies were not:

 

  • More risk taking
  • More visionary
  • More creative
  • More lucky

Instead, 10xers have Mission Critical Behaviors that Mr. Collins’ defines as 10X Leadership. “They (the leaders of 10X companies in the research) were more disciplined, more empirical, and more paranoid,” said Collins.

When it comes to private companies, often there are constrains in duplicating Mr. Collins’ business solutions such as 20 Mile March, Fire bullets, then cannonballs, Leading above the death line and SMaC. In my experience, private companies, especially ones with less than $25MM annual revenue, face the following:

  • Lack of sustainable economic engine or misalignment of business model.
  • As a result of the misalignment of business model, cash reserves and profitability often get in the way of achieving ultimate extreme business value for the entrepreneur or business owner.
  • This creates significant challenges for owners seeking capital funding (both equity and debt), lines of credit (both traditional or hybrid) or even terms.


Some owners tell me they have limited resources, (people, money, technology, strategic partners, distribution channels, etc.). I often encourage them to revisit their business model. Not having the right business model often is deadly—just like climbing Mt. Everest without any idea of which path is most logical to prepare for, to execute a plan for and then to be prepared to make flexible changes on this challenging exposition.

What impacts business value? There are three broad categories of actions or goals you might consider:

A.    Increase/recast EBITDA
B.    Reduce risk
C.    Employ additional high yield capital

Remember, what buyers, investors, banks and financial institutes are looking for is to increase their ROI (return on investment)  and reduce their investment risk. If you can demonstrate those two benchmarks, then they will view your business as a good match for their investment dollars.

Your goal as an owner is to sell your business anytime it will be profitable. That being said, you must have fundamental value for merger and acquisitions (M&A or exit) regardless to whom you sell. Although not a direct route, here are my comparisons to Collin’s behaviors.

 

Collin’s 10Xer Behaviors My Mission Critical Behaviors
(categories of actions)
20 Mile March Increase/Recast EBITDA
Fire bullets, then cannonballs Reduce Risk
Leading above the death line Increase/Recast EBITDA
SMaC Employ Additional High Yield Capital

 

You must consciously grow your business in value in terms of these three broad categories, which impact your business value. Let me quickly review the three broad categories again:

A.    Increase /recast EBITDA
B.    Reduce risk
C.    Employ additional high yield capital

Attend my next 90-min. webinar. I will take a closer look at building business value in these three categories. Go ahead and reserve your seat now—don’t miss any opportunity to build your business in VALUE—because the goal is not only to grow your business in revenue—but also in VALUE. This objective will ultimately help you achieve your financial independence when you’re ready to cash out! You deserve to be compensated for the amount of risk, time and hard work you put into your business. I’ll talk to you soon in my webinar.

About Chia-Li Chien

Chia-Li ChienChia-Li Chien, CFP®, CRPC, PMP; Chia-Li “like JOLLY!” She is chief strategist of Value Growth Institute dedicated to creating business value that transforms your world. Chia-Li is also a Midas Advisor to MidasNation, a community dedicated to helping private business owners increase the value of their firms.  She is the award-winning author of Show Me The Money and faculty member of American Management Association. Her blog and newsletter was named a top small business resource by the New York Times “You’re the Boss” blog. To book Chia-Li for a workshop, keynote, or strategy session, contact her at: info@valuegrowthinstitute.com or 704-268-9378.


 

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