How to Create Value

Create ValueCreating and building value for your business is something you want to bring up high on your agenda and at an early stage of your business! Of course, but…“generating value is one of the most misunderstood tools of innovation” according to Fast Company. Why is that?

It may well be that it’s a misunderstood concept. So how do we define value creation? It’s aiming towards best practices with an ongoing focus on continuous improvement. Value creation is something you create both internally and externally with a heavy focus on customer services.

We also know that value creation directly correlates with the future valuation of the business. The external customer focus, something that a business owner relates to, is a necessity if you want to stay ahead of competition. However, the internal focus on value creation often falls short to the detriment of the future worth of the business.
So again, why is not more emphasis put into this part of running a business? In my experience, the CEO or business owner fails to make the time to work ON the business on a regular basis. Another reason may be that you don’t have enough resources. Maybe you are managing instead of leading and are running out of time. We also know, just like with any new technology or software, you have to invest in an upfront effort to plan and execute accordingly.

Improving organizational capabilities is an intangible aspect of value building. This activity examines its own leadership, talent, accountability, collaboration, speed, mindset and learning. It is a longer term view and effort. Getting your ducks lined up just before you are ready to sell, or transfer the business over to a family member, is going to be too late. Value creation happens over time and is continuous.

Let me share with you a big picture view and a starting point in how to address the Value Creation Process and how you might begin the process. Start with these three disciplines:

1) Operational Excellence
a. Efficiency
b. Streamline Operations
c. Supply Chain Management

2) Product & Services Oriented Leadership
a. Strong marketing and innovation
b. Dynamic Markets
c. Development – short time to market with high margins

3) Customer Intimacy
a. Exceed Customer Expectations
b. Tailor Products and Services
c. Deliver on time

Behind the three disciplines listed above are no doubt a lot of details. Let’s assume you have focused on customer intimacy (3) and it is well established. If not, create a benchmark or baseline around these activities and set a new standard so you remain competitive. Operational excellence (1) and leadership (2) is where many companies fall short. The art of business is to balance both external and internal value creation over time. Planning these activities is essential and will take some time and effort, however, no matter what your next stage, it will be worth your while.

I know as the leader of your company your demands are never ending. Begin your process one step at a time, just like writing a book, one chapter at a time. Begin to identify the low hanging fruit, something that is easy to fix and has the most positive outcome. Maybe it is shortening the number of phone rings for a receptionists. Achievable with immediate positive outcome for you, the employees as well as the client or vendor.

If you find your business experiencing a reduction in market share or have difficulty in keeping costs down and you are doing it all alone, consider an outside group of advisors by establishing an Advisory Board. More private companies are investing in creating an Advisory Board to help them with their strategic intent and guidance in how to plan and implement such goals.

I hope this is a good first step for you. Begin to work ON the business for at least 4 hours a week (in one block) and things will begin to happen. I will be speaking on the topic of Value Creation and Finding the Right Advisors in the next two weeks. You are more than welcome to attend.

My next blog will be on “Working Horizontally” discussing how to aim for organizational collaboration addressing the first discipline of this blog. If you want to receive these blogs directly, please click the button on Follow Rudi’s Blog.

Make comments on this blog or get in touch with me with any ideas or thoughts. You can find my contact information on my new website Stop-Compromising.

With gratitude, Rudi

Prepare for Bullish Market

Confidence among midmarket executives is up and market conditions still seem to favor a buyers’ market and more companies are engaged in actively seeking acquisitions and raising capital. That also means that fewer companies are sitting on the sidelines, increasing the competitive edge significantly.

Major reasons for buying are:

  1. Increase Revenue
  2. Meet market expectations better (especially lower midmarket)
  3. Expand geographically within the US

According to a Deloitte Survey (Dec 2014), the confidence among midmarket executives is highest since 2011. They are eying expansion opportunities and some are contemplating an IPO, an increase of 10% within the past 6 months. The other interesting factor according to this report, is that revenue, profits and productivity are all up and in much better standing than a year ago. This gives the companies a stronger foundation and greater confidence to expand.

Organic growth for a midmarket business continues to be harder to achieve, so how will you evaluate your business? Do you show strong fundamentals? If not, an important step for you is to pay attention to your operational profitability before venturing out to make an acquisition. Focusing on both top and bottom line growth is essential and can be achieved simultaneously.

The other good news is that executives feel more confident about raising capital (2015 Citizens Financial Group) for the following reasons:

  1. Capital expenditures (51%)
  2. Acquisitions (39%)
  3. New products and services (33%)

The majority are considering debt financing, especially true in the lower middle market. The larger midmarket companies are contemplating private equity at a higher rate than the smaller ones ($5-$25M in annual revenue).

So what does this all tell you? All this activity in the midmarket is telling us that competition is real. If you want to compete in this active market, you must stay on top of the game.

For your business to reach its next stage, here are some next steps to consider:

  1. Assess your business today
  • What are your strengths and what are your weaknesses in the market place?
  • Where are your inefficiencies and how can you fix them?
  • What is holding you back from expanding the business? Systems, Cash or People?
  • What is your timeframe to fix or change things all together?
  1. What are your expansion opportunities?
  • New products and services
  • New markets
  1. What path will you take and how will you evaluate the opportunity?

    • Acquisition or Management Buyout
    • Strategic Partnerships
    • Develop your own products and services
    • Opportunity cost

Knowing how to prioritize and develop a Strategic Plan so you remain competitive and are not left behind, will be of critical importance. For certain, reach out to the right advisors and experts who can support you and lead you in the right direction.

“The mid-market will undoubtedly play a key role in sustaining the economy’s upward trajectory moving forward,” adds Roger Nanney, leader of Deloitte Growth Enterprise Services. “As these companies move on to the next stage of growth, it will be critical for them to prioritize investments and focus on areas that are most likely to fuel growth.”

Together, let’s determine the most likely areas to FUEL YOUR GROWTH. The NSS team is passionate about helping businesses get to the next stage. Call us to start the conversation at 617-449-7728