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How To Increase Your Business Value That Will Help You Maximize Profit

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When it comes to running your business, there is a lot of work involved to ensure its success.

One of the ways that helps its longevity and profit is learning how to increase your business value.

The value of the business incorporates five key elements or as they are often called, business key value drivers. Here are examples of each one and what you should know about their importance to maximize profit potential in your business.

Organizational Value

Organizational values are what your company stands for and its philosophy, so to speak.

Organizational values often use terms such as "customer service" or "innovation" but without the follow-through to these statements, the value is lost.

For instance, a company that claims to strive for excellence in customer service does not have that organizational value if they really do not care about their customers or become slack on providing quality to their patrons.

Customer Value

Customer value drivers are encompassed of things such as:

  • Solving customer problems
  • Allowing the customer to express concerns
  • Provide a true connection to the customers
  • Recognize the contributions that the customer brings to the company
  • Provide support for the customer 

These are simply examples because each company will have their own customer value drivers according to their particular needs, offers, and abilities.

Employee Value

Also known as employee value proposition, this is the experience, skills, and capabilities an employee brings to the company in exchange for a set of offerings and associations the company provides.

For instance, an example of what the company may provide is a stable work environment or an acceptable or even lucrative pay scale.

When the value of the employee is matched to what the company provides in exchange, you have a situation that is ideal.

Strategic Value

Strategic value drivers also encompass quite a few components such as

  • customer diversity
  • management depth
  • contractually recurring revenue
  • proprietary products and technology
  • penetration of barriers to entry
  • effective use of professionals
  • product sales pipeline
  • product diversity
  • industry expertise and exposure
  • written growth plan

Basically, your strategic value driver takes all of the important parts of your business plan and mixes them together to form a strategy that is successful. 

Financial Value

Last but certainly not least, your financial value driver is one of the most important of the business key value drivers because without financial value, you cannot sustain your business.

Your financial driver combines specific components:

  • Structure. Finding the ideal combination of terms and instruments
  • Optimizing the Cost. Locating the lowest cost source of financing
  • Allocation of Capital. Using your capital in a way that is both efficient and productive

This financial value driver includes all of the things that lower that cost of capital incurred by the business in order to finance the operations. This is what defines the company's capital structure - basically the ratio of debt and equity.

These key value drivers (organizational value, customer value, employee value, strategic value, and financial value) each have their own components yet must be cohesive in order for the company to excel and be a success.

You simply must take all of the drivers and put them in a theoretical pot and mix them together to make the perfect meal or in business - the most successful company.

We help ensure that your business has all of the tools to make it a success. If you want to learn more about how we can help, simply contact us so we can help.

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Topics: Accounting Advice Business Advice