Every quarter, the Acumen community enjoys the unique chance to sharpen their edge by hearing from innovative and inspiring business leaders and speakers at our private, hands-on Advance Leadership Workshop. Most recently, we were all privileged to learn a thing or two from John Warrillow, founder and CEO of the Value Builder System! John has dedicated his career to helping owners protect, grow, and realize the value of their businesses, and he led us through an exploration of what truly creates a valuable business through stories, table-group discussion, workshopping, and more.
Did you miss the workshop? We have good news: you can explore some of its most impactful takeaways below.
What are the key drivers of a business's value?
John's Value Builder assessment walks users through a thorough breakdown of their performance in eight key areas that contribute to the overall value of their given company. His system views businesses from the lens of a potential buyer, but the insights are deep, wide, and applicable for owners at every stage! We won't explore every single one of the eight key drivers today, but here are the highlights of a few we found most thought-provoking:
Monopoly Control: Although many business owners tend to view size as equivalent to quantitative growth and to focus on the cheapest path forward—typically by cross-selling new products to an existing customer base over time—the most valuable companies are the ones that choose to focus on doing only one or two things incredibly well. John gave the example of Stephanie Breedlove, who grew her company over 25 years by focusing on one specific area: providing payroll services for families who needed a way to pay their nannies. Ultimately, her $9 million company was purchased by Care.com for $54 million!
That specific, differentiated product that makes your company unique that you can focus on being the best in the world at providing, is what makes your business valuable to future buyers.
Customer Score: Surprisingly enough, business strategist Fred Reicheld found no statistical correlation between positive answers to the questions asked on a company's customer satisfaction survey and that company's future success. It doesn't make sense, does it? You'd assume that if customers express satisfaction, a company would thrive—it seems like a simple enough connection. Eventually, however, Reicheld did find one customer survey question with answers directly correlating with the company's success: How likely are you to recommend our company to a friend or colleague?
No matter how much a customer likes you, you need "promoters"—people actively interested in purchasing from you again and referring you to others—to grow and succeed.
Growth Potential: Business ownership is a marathon, and one of the biggest mistakes owners tend to make during an acquisition is to instead view the sale as a relay race, with them quickly and simply passing the baton along to the new owners. In reality, the process is usually much more gradual and complex! The new owner is coming in fresh, hydrated, ready to go—and ready to talk about their marathon. While you may feel deeply proud of your business's past growth and current accomplishments, the buyer will be most interested in what can continue to be done. Where's the room for growth? Is there meat left on the bone, a field left to plow?
Focusing on your business's future growth potential by ensuring there is still capacity for growth after your departure is crucial to building a valuable company.
(Interested in finding out what you can do, beyond simply increasing your top line, to build your company's value? You can take the Value Builder assessment here!)
The secret power of recurring revenue
John made a bold claim during the workshop: recurring revenue can and should be created for any business to thrive. He gave the example of H. Bloom, a flower business that focused on creating recurring revenue by partnering with an unlikely industry: 5-star hotels. While traditional flower stores continue to toss 60% of their product at the end of each day and make individual, one-off sales averaging around $29, H. Bloom found a way to attract subscribers with a regular need for fresh blooms, each bringing in an average lifetime investment of $4,524. Focusing on that one thing your company excels at and creating a recurring revenue model around it will result in the most valuable and vibrant business of all!
Recurring revenue makes your business stable, predictable, and valuable.
Take a moment to think about your customer segments. Which has the highest recurring needs? Make a plan to introduce a new stream of recurring revenue from there!
Common questions to ask when considering a business acquisition
John and his team have taken the time to check in with business owners who have sold their companies to get a complete picture of what they wish they'd known—what questions were most crucial to ask—as they entered the acquisition process. Here are a few of the most salient.
Q: What's my company worth? A: Depends on who's buying. Think about the modern, abstract art that sells for millions in spite of looking like nothing more than a splodge. Beauty really is in the eyes of the beholder—and value is in the eyes of the acquirer. Never answer the question, "What do you want for your company?" Let them set the price, and go from there!
Q: What's the best time to sell? A: When someone is buying. Though many may choose to wait for the market to peak to sell their business, the money they get from the sale typically winds up back in the same stock market—so it all essentially evens out whether you sell during a boom or a crash! Don't worry too much about the perfect time to sell. The best time to sell is simply when someone comes to you with an offer.
Q: How should I position my company to maximize my value? A: Use your sales skills for your company, not your product! As a business owner, you should no longer be engaged in actively selling your products. That's what your sales team is for! Instead, use your strong sales skills to start focusing on how you talk about the company, and make sure you're presenting yourself as you'd want a future, theoretical buyer to see you—on your website and everywhere you can.
Interested in more resources on building a valuable business? Check out these blog posts: