Your business is a living organism – something that has potential to grow and thrive long after you’ve played your role in it. Yet many firms are still smarting from a very tough recession, and feel like they are on life support. The “new normal” has accelerated industry consolidation, longer sales cycles, fee pressures, and tight credit. If you are a seriously growth-oriented B2B company, what can you do to ensure that you swiftly return to wealth creation mode?
Most CPAs, attorneys, investment bankers and business brokers will tell you to focus on some fundamental issues to improve your wealth prospects; namely, your company valuation and viability. They will assert that certain criteria are the key to maximizing your eventual exit potential or sales price. They will refer to these as “value drivers.” According to Ned Minor, an attorney, and author of Deciding to Sell Your Business, “Value drivers are those characteristics that influence a buyer’s decision about how much to pay for a company. These include–but are not limited to–a stable, motivated management team, effective financial controls, a realistic growth strategy, and a facility appearance consistent with asking price.”
While these value drivers sound logical on the surface, they only provide a partial definition of wealth for B2B companies. Today, many business leaders are seeking a more meaningful balance between money and happiness. And they understand that money and wealth are not the same. If you want to create meaning and significance in the world, it is essential to define wealth in a way that honors your values, your vision, and your core strengths. Before you begin to worry that you’re being transported into a spiritual dimension, recognize that this expanded mindset about wealth can simply lead to greater self-awareness, a more clearly defined sense of purpose, and more committed teams moving in the same direction.
Our CEO research helped us discover seven contemporary criteria to help you assess your “Wealth Quotient:”
1. You consistently and confidently express and demonstrate your value to the market. Try this simple experiment. Walk the hallways of your offices, and call your top business associates and advisors. Ask them “What is our company’s elevator statement, and why do our customers love to buy from us?” Then record what percentage would provide a consistent answer. If you are like many technology or professional services firms, you will assert (mistakenly) that your tools or methodology make you unique. Sadly, buyers really don’t care about them. They DO care about how you can improve their condition.
2. You are paid handsomely for that value. In these tumultuous times, value is being challenged more than ever. Some law firms are being forced to provide alternative fee arrangements and abandon the antiquated hours for dollars pricing models for this reason. Clients no longer equate hours worked with value received.
3. You continuously innovate. Many companies were launched during previous recessions, including Microsoft, FedEx, HP, and Procter & Gamble. They filled needs that others were ignoring. Don’t let a downturn stop you from regularly assessing your products, services, and relationships. If you are selling services that fall into the competitive category, chances are you are competing on price and can barely distinguish your offerings among the crowd (whose members include “not invented here” and “status quo”). Ensure you are developing breakthrough and distinctive offerings where you encounter few, if any, competitors.
4. You focus on business endeavors that do not exploit and degrade other people. Michel Kripalani, CEO of Oceanhouse Media in San Diego, California, started a successful gaming company several years ago, and grew to 40 employees. But he eventually lost his passion for running a traditional bricks and mortar gaming firm. According to Kripalani, “We were ready to do something that would have a more positive impact on the planet.” Today, Oceanhouse Media has developed over 80 iPhone and iPad apps for Dr. Seuss’ children’s books and Hay House Media. They have experienced consistent growth using a well-managed, virtual business model.
5. Your business endeavors honor the natural environment. Wal-Mart launched the Sustainability Index Initiative in 2009 with the intention to reduce the carbon footprint of inventoried products by millions of tons by 2015. If the world’s largest retailer– a frequent target of environmentalists and labor advocates–can step up to the plate and walk more softly on the land, anyone can.
6. You have enough of the “right” clients – in other words, you know who they are; you can explain your ideal client to others very clearly; and you market to them in an authentic, consistent, systematic way. During the recession, you may have been tempted to accept any client with a checkbook. Today, it’s an ideal time to re-visit how you define ideal clients, and the systems you are using to attract more of them.
7. You provide your stakeholders, investors and employees enough time for family, friends and personal growth. Your culture defines your brand. Your brand defines your value. Your value defines your wealth. Just ask Tony Hsieh, CEO of Zappos. Over the past few years, Zappos employees became accidental role models for living company values. Some of the Zappos core values include “pursue growth and learning,” “create fun and a little weirdness” and “build a positive team and family spirit.” Last summer, they sold Zappos to Amazon last year for $847M in stock. When you apply these seven criteria, you have greater control of your daily activities and growth decisions, and your brand and value is no longer at the mercy of rogue bloggers, finicky customers, and overworked employees. These seven criteria will help keep your company out of the emergency room.
This post originally appeared on FastCompany.com.
[Photo courtesy of http://www.matrubhumitrust.com/]
Copyright 2010, Lisa Nirell. All rights reserved.