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With six areas of focus, knowing how to grow value in each takes time and effort – time a business owner doesn’t have. Let Management Insights™ provide the shortcut to creating a more valuable company.
Understand how each area of business excellence is critical to your success:
Strategic Value addresses industry dynamics such as barriers to entry, regulatory requirements, economic impacts, and technological changes within your operating environment. Competition, market share, and product substitution all impact valuation.
A high score in Strategic Value indicates that your company is a leader in its industry and may have conquered most of the challenges related to brand awareness, your customers’ changing behaviors, staying ahead of technological changes. If your company is acing this, it’s worth a lot more than your competitors.
A lower score reveals some weakness in handling day-to-day issues market and industry dynamics that affect your company’s overall industry position.
With the right advice from your Action Plan, your company is worth more.
Organizational Value encompasses a company’s culture and internal communication, systems, and processes. The internal structure of a company is the main defense in preventing fraud, workplace, accidents, and litigation. The culture of a company, although intangible, can undermine progress or propel your company forward.
A high score here indicates that your company’s internal communication and systems are running smoothly. Employees know what to do, when to do it, and how to accomplish their tasks. Your processes are current and documented leading to a consistent and repeatable delivery of products and services. Your staff has a shared value and belief system with the company that governs how people behave.
A lower score lets you know that you need to work on your internal communication and processes. Weak systems lead to mistakes and lower productivity and can affect all aspects of the company, including customer relations and product satisfaction.
Use the information in your Action Summary to improve organizational value and increase the worth of your company.
Employee Value considers the strength of employees, especially the management team. It looks at experience in the industry and tenure with your company. Most importantly, in small to mid-sized businesses, there is often a disproportionate amount of revenue generation, client relationship management, and leadership centered in one or two individuals.
In these cases, a “key man” discount is often applied to the value of a company because if the owner sells the business or leaves the firm, his/her value is not transferable.
If your company is staffed with industry experts and seasoned managers, and no one person is indispensable, a high score is possible for Employee Value.
If your company’s revenue, reputation, and leadership is dependent on one or two people, this indicates significant risk in your business. Growing talent internally takes time and acquiring talent from the outside is expensive. Getting ahead of this issue early is important to driving company value long term.
Use your Action Plan to understand if this is an issue in your company and how to fix it.
Customer Value reflects the health of your customer base. A loyal and growing customer base is achieved when your business provides a value proposition in which customers receive benefits that outweigh the costs.
When it comes to revenue, customer retention is hugely important to consistent growth and financial performance. Customer diversification, repeat customers, and customer satisfaction are important indicators of the health of your customer base.
A company with a diversified set of customers, high customer retention, and high customer satisfaction receives a high score for Customer Value.
If your company is constantly scrambling for new customers or, alternatively, has a high amount of customer concentration, your Customer Value score may be low.
Use your Action Plan to understand what steps you can take to reduce customer concentration and measure customer satisfaction in order to improve this score.
Financial Value reflects not only the revenue growth and profitability of a company but also the financial controls and systems in place to manage the business. High-quality financial systems, associated data, and timely information output are essential to support growth and profitability and instill confidence in the financial activity of your company.
Does your company have high-quality financial systems in place as well as great periodic reporting to help you make the right strategic and management decisions? A company that focuses successfully on revenue growth and better operational efficiencies generates a higher Financial Value score.
If your company is not tracking its EBITDA, or measuring its cash flow generation ability, there’s work to do.
Use the Action Plan to understand how to better manage your company’s finances.
There is a growing recognition that ESG integration is a fundamental part of doing business. The integration of ESG considerations into the planning and operation of companies to foster major innovation is contributing to the next wave of sustainable, global competitiveness and higher business valuations.
Is your company promoting social responsibility and environmental awareness with its suppliers and customers? The benefits of social responsibility are better reputation and brand awareness as well as higher employee engagement.
A company that follows good corporate governance practices balances the needs of both internal and external stakeholders. If your company has independent directors and separation of senior roles within the organization, this score is higher.
A low score indicates work needs to be done on the company’s reputation for social awareness and employee engagement as well as better governance practices.
The Action Plan report helps your company understand where it falls short, and what steps to take for improvement.
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