8 Drivers to Build Value into your Business

Building value into your business is crucial for long-term success and growth. It enhances your business's attractiveness to potential investors or buyers and strengthens its competitive position in the market. By focusing on value creation, you can maximize profitability, establish a strong brand, foster customer loyalty, and ensure sustainability in a dynamic business landscape.

Here are 8 Drivers to help you build value into your business.

1. Financial Performance

Financial performance refers to the ability of a business to generate revenue and profit over a period of time. It encompasses factors such as sales growth, profitability, and financial stability. A history of producing revenue and profit demonstrates the effectiveness of the business model and its ability to generate income. Professionalism in record-keeping ensures accurate and reliable financial statements, which are essential for evaluating the financial health of the business. Proper documentation of financial transactions and adherence to accounting standards also enhance transparency and credibility, which can be important for attracting investors or obtaining loans.

2. Growth Potential

Growth potential assesses the likelihood and rate at which a business can expand in the future. This evaluation considers factors such as market demand, competitive landscape, scalability of the business model, and access to resources. A high growth potential indicates that the business operates in a favorable market with opportunities for expansion. It may have unique offerings, a strong brand, or a differentiated product/service that can capture a larger market share. Additionally, factors such as technological advancements, favorable industry trends, and the ability to enter new markets can contribute to growth potential.

3. The Switzerland Structure

The "Switzerland Structure" refers to how dependent a business is on any one employee, customer, or supplier. This concept emphasizes the importance of diversification and mitigating risks associated with over-reliance on specific individuals or entities. If a business heavily relies on a single employee, for example, the absence or departure of that employee could significantly impact operations. Similarly, dependency on a single customer or supplier exposes the business to risks such as loss of revenue or disruption in the supply chain. A well-diversified business is less vulnerable to such risks and has a more stable foundation.

4. Valuation Teeter Totter

The valuation Teeter Totter assesses whether a business is a cash suck or a cash spigot. A cash suck refers to a business that consistently consumes more cash than it generates, resulting in negative cash flow. This could be due to high expenses, low profitability, or inefficient operations. On the other hand, a cash spigot represents a business that generates positive cash flow, allowing for reinvestment, expansion, or distribution of profits. Factors such as revenue growth, profitability, cost management, and efficient capital allocation play a role in determining whether a business is a cash suck or a cash spigot.

5. Recurring Revenue

Recurring revenue refers to the proportion and quality of automatic, annuity-based revenue a business collects each month. It is derived from ongoing customer subscriptions, contracts, or repeat sales, providing a predictable and stable income stream. Businesses with a higher proportion of recurring revenue are often more resilient and less susceptible to fluctuations in sales or market conditions. Quality recurring revenue implies long-term customer relationships, high customer retention rates, and low customer churn. This steady income stream can provide a foundation for growth and financial stability.

6. Monopoly Control

Monopoly control measures how well differentiated a business is from its competitors in the industry. It assesses the extent to which the business has a unique selling proposition, competitive advantage, or a distinct market position. A highly differentiated business enjoys a level of monopoly control, allowing it to command higher prices, attract more customers, and have a competitive edge. Factors such as proprietary technology, strong brand recognition, intellectual property, exclusive contracts, or a unique value proposition contribute to establishing a competitive advantage and maintaining a dominant position in the market.

7. Customer Score

The customer score is a crucial component of the 8 Drivers of Company Value, focusing on customer satisfaction and loyalty. It measures the likelihood of customers to repurchase products or services from your business and refer you to others. A high customer score indicates strong customer relationships, positive brand perception, and a loyal customer base. By prioritizing customer satisfaction and delivering exceptional experiences, businesses can foster loyalty, increase customer retention, and drive long-term growth. The customer score is an important metric for understanding and improving the overall value of your business.

8. The Hub & Spoke

The Hub & Spoke point within the 8 Drivers of Company Value assesses the resilience of your business in the event of your unexpected absence for a period of three months. It evaluates how well your business can continue to operate and thrive without your direct involvement. By considering the Hub & Spoke scenario, you gain insights into the strength of your team, the effectiveness of your systems and processes, and the level of delegation and autonomy within your organization. A well-prepared business that can function smoothly during your absence demonstrates a higher level of value, as it reduces dependency on any one individual and ensures business continuity and sustainability.

Use these 8 drivers to help build value in your business.

By focusing on these 8 drivers you can maximize the value of your business and unlock its full potential.  By  assessing and understanding these factors you can significantly impact the value and success of your business.  

Introducing our value building score report, a powerful tool designed to provide you with a comprehensive understanding of your business's current value and growth opportunities. By analyzing key factors that drive value, this report empowers you to identify areas for improvement, set realistic goals, and develop targeted strategies to enhance your business's worth. Take control of your business's future and unlock its true value with our value building score report.


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