How to Double the Value of Your Business

Let’s start with the basics.

Enterprise value is the sum of the value propositions a company has and could have with its customers. Value is created when an enterprise takes resources and activities that contribute to the product or service that delivers the value propositions and sells these consistently for a higher price than the costs it has.

However, there is no such thing as the absolute value of a company. Assigned value only reflects the context in which the valuation took place and the perception and held values of those assigning value.

With that said there are common value drivers that have been proved to significantly increase the value of a business:

• Cost reduction (CR) of the input activities and resources
• Understanding how your customer and their customers see and translate your value proposition (VP) will be key in this process to ensure you create and not destroy value.

It is these and specifically the operational value acceleration activities that I will focus on and provide insight to.

The Three Keys to Cost Reduction

My approach has been to use a cross-functional team of marketing, engineering, finance and operations to identify CR opportunities that do not negatively impact the customers VP.

A systematic approach questioning each major spend area with:

• Can we eliminate the need for this resource used or activity?
• Can we reduce the Consumption of this resource or activity?
• Can we reduce the Cost per unit of this resource or activity?

This will generate a list of CR opportunities. Some of the key success areas where I have found double digit CR include:

• Direct component and material spend
• Assembly and test operations
• Logistic costs (both inbound and outbound)
• External indirect spend e.g. operational expenditure
• Outsourcing indirect functions e.g. invoicing, office admin, marketing

These opportunities are then managed through a project management process to close.

I have seen many instances in companies where forecast CRs can diminish by 75% without strong leadership and project management! After all, part of the challenge is change management and we all know how difficult it is to make change stick in an organisation.

Increase the Value Proposition

Looking at the value proposition from the customer’s perspective is by far the best way to open up other services and revenue opportunities and redefine exiting areas of activities.

These can ultimately result in a step increase in value.

Ask yourself, what does the customer really value?

For example, many industries have moved away from a focus on selling the asset to selling the output from the asset, aligning with the customers primary focus.

Look at UBER; are they selling the taxi or the ride? The customer values the convenience and the ride not the taxi ownership.

Analogies and other business models transposed from one sector to another can be powerful allies in building enterprise value.

Creativity in strategy is essential.

Grow the sales volume of the business – through Sales Optimisation

Sales, like any other function, requires managing with KPIs (Key Performance Indicators).

The volume of leads and speed at which you can convert profitable prospects to sales will determine your growth.

Get your messaging right, your sales organisation trained and motivated, do what your competitors are doing and also what they are not doing that your customers value.  Also, have your sales leadership aligned, instigate a sales prospect tracker and price agreement mechanism and your sales will grow profitably.

Doubling your Business Evaluation

The key is to keep your eye on how your customers see value in your product and services throughout the process or you risk destroying not creating value.

Now, this has been a short overview of some of the things you can do to double the valuation of your business. (There are several more business areas necessary to optimise if you’re going to double your business valuation quickly but this is a top line guide.)

The main takeaways from this article are:

• Understand what resources and activities contribute directly to your value proposition
• Continuously and systematically eliminate and reduce waste and cost without damaging your Value Proposition
• Continuously look for new business models that allow you to leap-frog the competition with short cuts to what the customer wants and values.

This article was contributed by Jonathan Watt, a management consultant and engineer from the UK.