Build a Value Creation Model that Fits Your Business
Every business ultimately needs to build value for its owner to obtain his or her desired exit. Business value helps the owner reap the benefits of life-long efforts to build the business and run it profitably. The owner may then earn substantial sales proceeds for a comfortable retirement by selling the business.
Prospective buyers look for business value, so value creation should be the essential component of your exit planning process.
However, value creation is not a one-size-fits-all process. Depending on your unique business situation and needs, value creation advisors will formulate customized strategies for your company.
Creating a value creation model that fits your business is a strategic process. So, start with the basics:
- What are your company values?
- Identify your value gap.
- Identify your company’s needs.
What Are Your Company Values?
The fundamental beliefs and guiding principles that help your people work together toward common business goals are called company values or core values or corporate values. Your expectations regarding work ethics and growth form your company values.
Company values facilitate better decision-making, promote teamwork, and set a code of conduct that you expect your people to follow. It represents your idea of what the company culture should be. If you do not define the company’s culture, then it may evolve into an environment that hurts your business.
As a business owner, identify the corporate values which will help shape your company culture, inspire your employees, and enhance business value. Examples of company values include accountability, constant improvement, continuous learning, leadership, integrity, quality, etc.
Essential Elements for Effective Company Values
Craft a vision statement and use it. Write a vision statement about how you want your company to impact the world (the people, the industry, etc.). The vision statement describes your vision for your company, its direction, and its goals. Your company values form the principles that support the company’s vision statement.
Match the corporate values to your unique business. Do not merely follow what the big companies do. Identify values unique to your company and experience. For example, a value like “think big” could work wonders for more established companies, but for your small business working within your means might be the better approach. So, ensure that your company values work positively for your business. Use your company values to hire people who resonate with them and are willing to work in sync with them.
Keep them simple. Your corporate values must be easy to understand and remember. Don’t go overboard writing florid sentences (values) that no one will remember. Instead, craft one succinct, memorable sentence for each value to motivate your employees.
Updating the company values. As your company grows, you face new opportunities and challenges. The company values should evolve to remain relevant to the state of business and to continue motivating employees.
Identify the Company Values That Will Help in Value Creation
Corporate values have helped many successful companies dominate their markets. For instance, Google‘s values include “focus on your user and all else will follow” and “fast is better than slow.”
Let other company’s values inspire you, but don’t copy them if they are not suitable for your business. Focus on which values will support your company’s value creation process. Identify and incorporate them into your company. If your company’s vision statement includes ill-matched values, remove them. As mentioned earlier, update corporate values to keep them relevant at all times.
Identify the Value Gap
To identify the value gap in your business, know its current value. You’ll need to hire a professional valuation advisor to determine your company’s accurate business value.
While the professionals carry out the business valuation process, your cooperation and insight are equally essential. Depending on the purpose of the valuation, the advisors will ask you to define your exit goals or end goals. Even if you are not leaving the business, these are the business goals you want to achieve within a specific period.
An accurate business valuation requires you to provide the advisors with honest answers and relevant information and documentation.
After the business valuation, see where your company needs improvement and where it needs to create value. The current value determined by the recent business valuation forms the baseline value. The value gap is the difference between the baseline value and your end goals.
Now you know the extent of the value gap you need to fill.
Identify Your Company’s Needs
What should you do to sell your business or to grow it to fulfill the vision statement? Your company values and the value gap help you answer that question.
Jot down the value creation initiatives necessary to fill the value gap. Identify the value-creation initiatives that resonate with your company values and are likely to work effectively in your situation.
Work with exit planning or value creation experts to use your time, resources, and efforts effectively. They will guide you throughout the process and give customized recommendations for your unique business.
Building a Value Creation Model that Fits Your Business
Every business needs to create value as much as it must have a value-creation model that fits it. Building a value-creation model that matches the business depends upon the company’s values. Your company values will form the basis for your company culture and lead you to your business goals.
Next, identify the value gap in your company with the help of a business valuation and your exit goals. Finally, identify what your company needs to fill the value gap. Determine the value drivers that will work effectively for your unique business and develop them within your company. Get in touch to know more.