Five Steps to Creating Business Value / by

Lisa Magloff’s article in Small Business Chron, How do I Create Business Value? is a good introduction to the concept of what constitutes value in your business. As she says, ‘It’s more than simply economic value.’ Business value comes from both tangible and intangible assets. To add business value, Magloff outlines five steps. Here are her five steps and my comments.

  1. Make and keep realistic promises on service, quality and delivery.
    This is a great example of intangible business value. Do it well and it will measurably add value to your business. In addition it will result in higher standards of performance and productivity which will produce higher profits.  But if you don’t keep these promises to employees, vendors or customers, that intangible value can slide quickly.
  2. Use information technology to create business value.
    Business owners who grew up with technology see how obvious this is. Owners in fields where technology was not available when they built their business can’t see the value yet, because they still need to invest in the technology to make their business viable for the next generation. Technology adds both tangible and intangible value to the business. It can speed up and simplify transactions, and help the business improve overall results.
  3. Develop and encourage effective decision making practices by employees
    Training and support to allow employees to take control of day-to-day decisions on their projects, helps retain them, increases their value to the business, strengthens the depth of management, and distributes responsibility throughout the organization. It prepares employees for advancement and even succession. It also frees up the owner/entrepreneur for more strategic challenges and opportunities while demonstrating that the value of the business is in the business, not in the owner.
  4. Strengthen your core competencies by investing in development and spending more time and money on those areas that are most important to your long-term success and growth.
    To leverage the full value of your business for an acquisition or sale opportunity, it is essential to be aware of your unique strengths to position every asset you have for optimum value. If your biggest asset is your team, invest in them so they committed to stay. If your biggest asset is the process to develop and launch new products ahead of the competition, invest in that, protect it and highlight the value you can monetize just from that.
  5. Increase your business value by building capability within your business
    Capacity building can be achieved in many ways. It depends on your objective and long term goals. Adding employees is one way, but that’s not just about hiring. Once you add employees, you need to nurture them with training and knowledge to cultivate innovation to continually add value to the business. Capacity building can be about your brand and market perception of your value. It can also be about the right technology or adding technology to support increased capacity to serve the market. Every one of these approaches to build capacity sets up your business to grow, increase revenue, and add value to the bottom-line.

Creating business value is a process. Systematically building both tangible and intangible value will position you better for a sale or acquisition on your terms, on your timeline.

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