Let’s talk about what drives company value.

Specifically, the 8 drivers of company value if you’re thinking of selling a business in 5-10 years. These are measurable factors that help make an impression on a new business acquirer.

The 8 drivers of company value are:

• Financial Performance - The financial history that reflects revenue and profit is a crucial element. Additionally, it also shows your record-keeping abilities to ensure potential growth.
• Cash Rich Exit - The likelihood to grow a business and determine the growth rate for the future prepares brands for a cash-rich exit when selling to third parties.
• Switzerland Structure - This is the company dependency structure. It helps to assess if your business has a low or high level of dependency. Brands with higher independence with respect to employees, customers, suppliers, and others have high company value.
• Cash Flow - The ability of a brand to attract and acquire more cash.
• Recurring Revenue Hierarchy - The proportion of the revenue automatically generated in an annuity-type structure.
• Monopoly Control - A brand's unique selling proposition. The ability to stand out from competitors with a competitive advantage.
• Customer Satisfaction - It identifies if the brand has high repurchase numbers from customers and high referrals.
• Hub and Spoke - The number of decisions that have to pass through the business owner to operate a business smoothly.
• I continued my conversation with Todd Perry on building value in your business. Todd is Vice-President at Kehoe Marine Construction, an engineer, shareholder, and ex-President at McIntosh Perry, an engineering firm that builds roads and bridges.

And I’m pleased to bring you this power-packed short masterclass series with Todd in which be dig into the drivers of value a bit more. (The full details, are on this podcast episode, if you prefer the audio medium)

Monopoly Control (or competitive advantage) as a key business value driver

This is a brand's unique selling proposition and its ability to stand out from competitors with a competitive advantage

Todd talks about how you can define monopoly control through simple and consistent action. A good part of monopoly control for McIntosh and Perry came from a company culture that separated them from other engineering consulting firms. Since there were a lot of existing players in the market, Todd and Jim started their business with simple policies like returning phone calls.
Todd further highlights the importance of taking responsibility in a business. Sometimes, it is easy to avoid responsibilities because of bandwidth, but he cautions that you can also miss out on opportunities by doing so. That proactive stance goes a long way in creating competitive advantage. Todd talks about how taking control of mistakes and sharing bad news quickly with peers were some essential business factors that helped McIntosh and Perry gain respect, and grow. 

Hub and Spoke structure as a key business value driver 

In a business, the number of decisions that have to pass through the business owner to operate a business smoothly makes a difference. In order to reduce the dependence, systems and processes need to be built.

Todd says that he recognizes the need for policies and procedures to run a business but does not enjoy them. He says that in the initial days, things were extremely nimble at McIntosh and Perry. They were working on different things on a daily basis without a lot of overhead policies.

Todd likes to think about how people work with him and not for him and not fall into the entrepreneurial trap of playing “boss” all the time.  It is vital to ensure that not all company decisions are bottlenecked by the business owner, he says. Whether a company has 65 people or 300 people, every member should have a different role for optimal operations and maximum profit for the brand.

Within an organization’s structure, policies give the right employees and business partners the chance to level up their careers. It brings a lot of opportunities within the company so nobody has to look outside for growth. And this can be a huge benefit. 

Want to get your own company value builder report? Drop me a line and we can set up a conversation.

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