If you own a business, you’ll know what a tough but rewarding experience it is. It affords you the opportunity to achieve 2 things in life:
- Change the world in your own unique way, set and deliver on your own Purpose, and create a culture based around your held beliefs and values.
- Be financially well-rewarded, for you, your team, and your community.
Over the years I have worked with many companies, and much of the work I do with them focussed on setting Purpose, Values, and ambitious goals for the business, then putting in place the plans to achieve them. This work always leads to a more valuable business – a well-aligned and motivated team drives increased revenues and profits, and a strong management operating system adds significantly to the value of a business.
However, the primary focus of such initiatives is typically not explicitly focused on improving business value. However, as a business owner, focusing on growing your value is important, because:
- It will allow you ultimately to sell the business, and leave a legacy that outlives you.
- It allows you to realise value (i.e. make money) from your years of risk and investment.
- When shared, it can do the same for your team (and get them motivated towards the same outcome).
So why don’t more owners have a stronger focus on building business Value? Having worked with hundreds of companies over the years, I’ve identified the key reasons for this are as follows:
The voice of shareholder value is a minority
This may sound odd, but there is often just one, or a few shareholders, and though they are the most influential and powerful people in the company, their voice often gets drowned out by demands of the market, customers and staff.
Lack of understanding of what drives business value
Most business owners only sell their business once in their lives, so by default aren’t good at it. They don’t have the knowledge and experience to understand what investors look at and value in a company.
Lack of bandwidth to work on it
Projects to drive business value often fall into the ‘Important but not Urgent’ category. For business owners it is hard to get out of the habit of working in the business and not on it, and thereby apply leadership bandwidth to the problem of growing the business’s value.
The actions to really grow business value are hard
It’s common to see companies where incentive schemes for key leaders are based solely on profit. Having a growing and profitable company is already difficult, but it’s far from the only key component of business value.
Some business owners are uncomfortable with prioritising shareholder value, feeling it may be too selfish or materialistic, that leadership is about just focusing on purpose and vision. In fact, the opportunity and the challenge is to build a business that promotes both, a successful business can achieve both.
How to fix it?
Obviously, it takes years to really grow a business’s value. Even if you have the wish to sell the company ‘in a few years’ time’, the process of preparation must start now. Check out my business exit assessment to gain insights on the specific actions you must take to start increasing your business value today.