Strategy as Valuation Driver

How to Increase the Value of Your Business

Part III: Business Strategy

This article will be of interest to you if you are thinking about selling your business, want to evaluate or enhance your strategy, or just want to make your business great!

Phil’s Profit Points™ in Brief:

• Strategy is best described from your customer’s perspective: how do you help them be more successful?

• Strategy is defined as the intentional alignment and focus of your resources in order to deliver value to your customer. Be specific.

• Operational excellence is the consistent and systematic delivery of your value to your customers.

• Marketing clarity can make it easier to attract and retain the right customers.

• When strategy guides your operations and marketing, you have increased your alignment and made your business more valuable.

Value To Your Customer

Your customer purchases, consumes or utilizes your products and services every day. The key question is: how do they use it to enhance their products and services? When you understand how your customer uses your product and service, you can analyze your different value points such as:

• Speed – how quickly do you respond? Are you faster than your competitors? Do you provide quick advice and results? Customers don’t like to wait. My lawyer and my banker take my calls right away. There is minimal phone tag or time wasted.

• Convenience – how do you deliver your products and services. Do you deliver in batches when you customer needs your materials? Do you provide your services at your customer’s site? A drywall supplier ships the exact quantities to each house under construction as the materials are required. The contractor does not need to carry inventory.

• Quality – how can you demonstrate your quality difference? If your your customer had unlimited cash, would they buy your product or service? Can you provide your customer with different levels of quality so they can choose? One service company provides its customers with different levels of service plans and corresponding response times. Quality can be very subjective so it’s best to hear this straight from your customer.

Operational Excellence

You know that you have operational excellence when your products and services:

• Can be delivered within reasonable time frames or even delivered under a rush basis.

• Are uniform and consistent regardless of the day of the week or the employee performing the task.

• Cost you the same due (or costs decrease) to price stability from your suppliers and consistent production methods.

• Can be produced in various quantities and you have scalable efficiency.

Marketing Clarity

Marketing includes the characteristics of your product or service, pricing, promotion, distribution, online presence, customer experience and branding.

• Characteristics – is your product or service consistent with your customer’s needs? If your product is high quality but has a lengthy lead time, and your customer needs it right away, you either need a pile of expensive inventory, or you’re not meeting your customer’s needs.

• Pricing – the best pricing strategy is to have multiple price points reflecting different levels of value. Too often, entrepreneurs include everything they can think of to make the sale. Unbundle and price separately. Just like retailers who sell add-on warranties.

• Promotion – advertising is the most expensive form of promotion. Giving away some of your knowledge and expertise for free on your website or blog are more cost-effective ways to attract and retain customers. As I said recently, “Long live the yellow pages.”

• Distribution – where, when and how do you deliver your products and services? Technology is making it easier, faster and cheaper to provide services across borders and around the world. I provide mentoring services to clients in Canada, the United States and Australia, all using the free Skype service.

• Online Presence – your website and blog are critical pieces of your marketing strategy. They enable you to demonstrate your expertise and differentiate yourself from your competitors. How often do you update your website and blog?

• Customer Experience – how does your customer feel when they deal with you? Even in industrial or construction environments, emotion plays a part in decision making. A contractor wants to feel confident that their materials will arrive on time, as ordered, and in great condition.

• Branding – what is your brand? One definition of branding is the marking of cattle for identification purposes. Branding can be defined as your customer’s perception of your business. How do your customers and prospects identify your business?

**Tough Question **

How would your customers or your employees describe your company’s strategy?

From the Piggy Bank

If water can cut steel, at 60,000 pounds per square inch of pressure, just think what your business could accomplish with similar focus.

Have a profitable week!