5 Things To Know And Do To Increase Your Business Value


Add These Action Items To Your Daily Routine

by Chia-Li Chien | Nov. 10, 2013

Chia-Li Chien, Increase Your Business ValueI’ve grown to really dislike the word “diet.” It implies that I’m going to have to give something up. That I will have to stop doing something. That there could be suffering and disillusionment.

Okay, maybe that’s a bit dramatic, but I’ve decided for myself that perhaps adding to my day what it takes to make myself eat healthier and develop better habits for a lifetime, is the way to go for me. The philosophy is that by adding in behaviors and choices that are better for me than say, a fast food burger, I won’t want the fast food burger because I’m already filled up on things that are healthy.

Likewise, I may forgo stopping for a Frappuccino or a pre-dinner adult beverage and replace it instead with a trip to the gym or taking a class I enjoy. Then, I don’t have time to indulge in a high-calorie way to spend some time, because I’m already spending that time burning calories instead. You get the idea.

It may be the way for your business to go, too. Do you tire of all the experts and pundits telling you what to avoid, what to stop doing, and what you’re doing wrong? We all want things we can do—positive actions and ideas we can add to our business day.

And with that in mind, today I wanted to give you five action items you can start adding to your routine to increase your business value, reducing time wasted on activities that do nothing to grow your business. These activities can replace what doesn’t work and become a part of an overall more effective way to approach your every day life in business.

Action #1: Create a sustainable economic engine by aligning your business model with your core competencies.

If I asked you, "What does your business do?" you could probably answer in 30 seconds. However, if I asked, "What is your business model?" you might pause a while before coming up with an answer. A lot of business owners aren’t able to answer this question.

There are three components in a business model: 1) What you are passionate about; or your business purpose; 2) A list of your core competencies, and; 3) The economic engine or profit formula. Most businesses have misaligned their business model, so they don't have a sustainable economic engine.

When it comes to business, whether it’s for-profit or not-for-profit, there is always a set of core competencies for investment within your business. There will be a few that do not fit that you should outsource, allowing you to invest your time and efforts effectively and get the most out of your core competencies. Core competencies have two parts: 1) resources and 2) processes.

I recently worked with one of the local Habitat for Humanity affiliates. Like any other non-profit organization, they have their fair share of challenges as the economy is in constant change. As I analyzed their core competencies, it became apparent that they’ve been missing a huge opportunity—outsourcing a specific service that is NOT a part of their core competencies. This could significantly reduce their operating expense.

So what was the non-core competency I suggested they outsource?

Finances. While it may not seem obvious, business finance is not in their mission statement nor what they do best. So why spend so much money and manpower to do something they’re extremely frustrated with?

It’s no different in your business—take a hard look at your core competencies. You might find ways to maximize your time, effort and energy investments in a business action item that truly fits your core competencies. Give yourself permission to outsource something you’re not really good at and/or don’t want to do.


Action #2: Deploy both push and pull marketing—strategically.


Many businesses excel at push marketing, which includes marketing activities such as advertising, phone book listings, building a website, public relations, social media, etc.

But very few businesses strategically deploy pull marketing along with their push marketing. Find your market makers and deploy this strategic marketing method to pull your customers and clients to you.

Carrie, a good friend of mine, started her business when she was twenty-four years old. By the age of twenty-seven, she had over $4 million in annual revenue, four offices in the U.S. and Canada, and two licensed or franchised offices.

Carrie created important relationships with her market makers—Fortune 500 Companies. Not just one, but eight of these companies agreed to sponsor a national tour for Carrie. She was booked as a presenter, paid to speak and teach to an average of a hundred different businesses per event. She now serves as the marketing arm for the same eight market makers. Best of all, she created her own market; with her firm now a market maker for her clients. Many of her clients currently buy and sell services within her network.


Action #3: Establish predictable profits.


Is your business making a profit? How about predictable profits? I’m not talking about just revenue, but also profits. Profits matter. Profits will determine your value and how much wealth you create in your business. Profits will determine your ability to be financially independent.

There are two major measurements to help you achieve predictable profits:

1) Critical success factors or CSF’s: CSF’s can tie into your pull marketing strategy and indicate the number of market makers need to have in place and 2) Key performance indicators or KPIs can provide the guidelines for how to measure your critical success factors.

Paul has a thriving third party administrator (TPA) business, surviving the recent down economy. Paul bought the company ten years ago when it was not clearing a profit, but now he has led the company into a profitable stage. Great news, right? Well, not quite. His company bank account is empty and no bank wants to lend to him or extend a line of credit or capital to expand his market share. Frustrated, Paul wonders if the accounting entries were incorrectly entered in the system.

Not a surprising story, because many business owners really don’t understand finances. While most of us would say we’d like to increase our financial IQ, to be quite honest, we just want to know what to look for and what to do with it. But in plain English—you must periodically check your financial statements, including profit and loss reports, cash flow sheets and balance sheet statements.

In assessing his situation, we determined Paul’s Critical Success Factors (CSF’s)—major objectives—to make the business successful:

•    Become a known industry expert in order to attract qualified market makers and customers.
•    Effectively deliver on-line proposals.
•    Have an effective key management team in place.

To successfully work ON your business (as opposed to simply IN your business), you must define a list of CSF’s and KPI’s to help you understand what’s going on with your business—even without you in the picture. In addition, it will help you look at your business in a different way—kind of balance the scorecard, to put it another way.


Action #4: Know the ROI of each employee.


However you’ve established your workforce, you should know the ROI  (return on investment) of every person and how their ROI affects others who work for your business.

For example, do your sales representatives actually add value to your company? How do you know? What is the return on investment, or ROI, on each one of them? Do you have a way to communicate with your sales force? How about sales support staff and others in the company effected by sales?

Joyce has been in the staffing business for twenty years. She now wants to expand her region and diversify her revenue sources. She hired a VP of Sales, Chuck, from one of a major competitor’s smaller divisions. Chuck is confident he can bring in an additional $5 million in revenue within one year to Joyce’s company. He plans to bring his entire book of different staffing business with him. Joyce is thrilled to have him on her team, and she pays him top dollar.

Now, Chuck makes more money than Joyce. So we have to wonder—what is the return on investment for Chuck? What are the total rewards Chuck receives? Can the additional expenditures be recouped within the one-year timeframe he promised?

As it turns out, Joyce should expect an additional $7.5 MM in new revenue just to break even with Chuck’s total compensation. Luckily, Chuck brought in $20 MM additional in new revenue, so Joyce and Chuck both turned out to be winners!

Many business owners have a hard time determining the return on investment (ROI) on their producing employees or equipment. Understanding your ROI and effectively communicating your ROI expectations with your team will not only increase productivity but also your profits.

As you assemble the team that can lead your business to where you want it to be, you must know the ROI on your least and most productive employees. Are they the right people for your team?


Action #5:  Capitalize on your "know how."


You must maximize your intellectual property—your know how. At the end of the day, it is where your business wealth lies. It's something you must capture over time so you can increase the value contained in your business.

It goes back to the core competencies we discussed in Action # 1. Focus on what you do well, create processes to sustain and build on them, making them repeatable and replicable. When investors and buyer look at your books (made stronger by Action #3), these systems, processes and tools that are unique to your business will be in the asset column, and you’ll be sitting in the driver’s seat.

Systematized proprietary processes are valuable intellectual property and necessary to your business. Take time to explore the tools and systems that will allow you to capture your processes and thus, capture your wealth. It’s something to add to you business that will ultimately save you time and help the business grow in value.


Do these things!


There’s no need to put your business on a diet—add the five action items above that are good for your business, and daily habits or other behaviors that don’t benefit your business will automatically be eliminated—because you won’t have the time or need to continue with them.

Every business owner I know is more interested in doing than not doing. When these action items become a part of your daily business lifestyle, it’s only natural that your business wealth and value will start and continue to grow, with the promise of fulfilling the future lifestyle that you’ve envisioned.

 

About Chia-Li Chien

Chia-Li Chien

Chia-Li Chien, CFP®, CRPC, PMP; Chia-Li “like JOLLY,” Succession Strategist of Value Growth Institute, dedicated to helping private business owners increase their company equity value. She is the award-winning author of the books Show Me The Money and Work toward Reward and a faculty of the American Management Association. Her blog and newsletter was named a Top Small Business Resource by the New York Times You’re the Boss blog. Contact her at jolly@chialichien.com or (704) 268-9378 .

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