What Really Drives Business Value

The majority of business owners are in business because they want to make more money and gain financial independence. Over the years, I have seen many successful business owners create value in their businesses and for themselves by focusing on mission-critical activities. However, not every business owner is trained to recognize what will boost the value of their company.

Is successfully running a business a skill that can be learned? We recently conducted a Business Value Drivers Study, designed to help small businesses make effective decisions in creating value in their businesses for the owners and society. The study is ongoing, and participants will receive quarterly reports. To participate, click here.

We found that most business owners, regardless of their current success, are:

-Not aware of untapped growth or value creation potential

-Settling for less-than-ideal results in the current environment

-Limiting risk-taking in their leadership role

The reality is that most businesses are simply trying to make ends meet. Most will not be 10-out-of-10 performers. According to the SBA, 95 percent of small businesses have less than $1 million in annual revenue. In every industry there are business owners who struggle, and there are always the exceptions who do extremely well. So what's the difference?

In most cases, no one actually taught business owners how to create, operate and build a business--not to mention how to build value. The majority don't even know what building value really means. Everyone knows how to start a business, yet not everyone starts a business with an end in mind.

Among those who had participated in the study as of July 2010:

-34% indicated they have more than $1 million in annual revenue.

-76% are women-owned businesses.

-79% of business owners are over the age of 40.

-86% don't have a buy/sell agreement in place.

-48% know when they want to retire or "what's next for them."

Based on our study, the majority of the participants need to take the following steps to create value in their business:

Get more training or information.

  • Intellectual properties have been overlooked and are limited to uses that generate more profit.
  • The most important asset in a business is its people. Not everyone views people as an asset; therefore, businesses fail to approach them as such.
  • Technology is moving fast and is hard to keep up with, let alone leverage.

Create more challenge.

  • Redefine their mission and vision to take the business to the next level.
  • Increase standards. That means raise the bar and measure performance against higher standards.
  • Change the task. Approach things differently, such as creating a new customer base, packaging new products or services, or even considering geographic expansion.

Harness more drive.

  • Revisit and realign passion. Drive is about passion--the internal force that moves us forward.
  • Increase risks. There is no business growth unless the owner takes some risks.
  • Identify risk. Which risk presents the strongest likelihood of success and growth in both value and revenue?

Are you creating the value to make your goal of financial independence a reality? How do you know? You can participate in our study and find out how to make the change toward what really matters to you.