Wed 11 Jul 2007
The Importance of Creating a Value-Focused Company
As a small business owner, you earn returns and wealth from primarily due to your business' value. Generally speaking, the value of your business is brought about through the sustainability of its competitiveness.
There are many factors that will influence the value of your business. Here are just a few of them:
- Track record of earnings —the capability of your business to perform financially well, continuously
- The growth of the industry
- The marketplace being competitive and the share your business has in the market
- Customer acquisition, retention and value
- The attractiveness of your product or service
- How easy it is to operate your business, which includes systems and procedures
- The people involved in the business, including owners, managers and employees
- The location of your business
- The assets of your business
It is far better to focus on these factors that influence the value of your business now, rather than later down the road, when you may consider selling it, or a part of it, for a profit.
Apart from the financial factors that influence the value of your business, there are three other fundamental drivers which have an effect on it, and they operate on the 80/20 rule. That is, they have the ability to generate 80 percent of your business's value, while the other 20 percent will be taken care of by other elements.
The three fundamental drivers that are capable of really building your business's value are:
- Actual potential for growth
- A team that has the ability to deliver
- A long-term competitive edge
By focusing on actual growth, building a team that is capable of delivering, and creating a long lasting ability of your business to compete in the market, you will be able to develop a company that is focused on value — giving you great returns!