Inciteful

See part 1 of my blog post in Dynamic Export -its all about how understanding the value your customers helps you define and refine your strategy. 

http://www.dynamicexport.com.au/blogs/part-1-find-out-what-value-customers-place-on-your-brand/

Look out for part 2

With an ever changing world, just think since January 2011 we have had, floods, cyclones, earthquakes and of course broken promises from governments (local, state and federal), all of which provides us a catalyst to reflect on how we have built our businesses.

At Incite our foundations are built of four solid platforms:

• PEOPLE

• PLANNING

• PERFORMANCE

• PROFIT

These four platforms are central to all businesses across all industries. As Business Owners we need to be regularly reviewing our capabilities and resources at our disposal and ensure that we have aligned our development strategies for growth.

So if you are looking to:

• Grow your sales;

• Improve your bottom line;

• Implement marketing strategies that work;

• Get funding to grow your business;

• Outperform your competition;

• Take the business global; or 

• Develop a profitable exit strategy.

The look to see if your business is built on a solid platform based on

• PEOPLE – the right personnel with the appropriate skills and experience;

• PLANNING – an aligned business action plan that covers all aspects of the business and budget to support the execution of its strategies;

• PERFORMANCE – a series of control measures to ensure that the employed resources are being utilised to achieve the optimal return; and

• PROFIT – financial and non-financial goals and targets that truly reflect the real market conditions as opposed to the “nirvana” result.

As Bob Dylan once wrote “Times they are a changin” and yes they are.

Meeting with a client recently we were discussing the “best” measure of business performance. Is it profit?  Market share?  Sales growth?  Staff morale?  Working capital efficiency?     

 

At Incite we believe that the “value” of your business is an excellent all round measure of the performance of your business.  In simple terms its the price an objective third party would pay for your business.  Generally SME business valuations are based on the profit the business generates multiplied by a factor which reflects the perceived risk of the business being able to keep generating that profit and continuing to grow.  The profit aspect is relatively easy to measure, most businesses look at that every month and decide whether they had a good month and are having a good year so far.  The multiple you apply to that profit figure is a bit harder to define, but obviously has a significant impact on the overall value of the business.  For example, consider the following two businesses:

 

	Business A	Business B
Net Profit	$850,000	$780,000
Risk Multiple	4.0	4.8
Business Value	$3,400,000	$3,744,000

 

In this case Business B has a superior value because its multiple is higher despite generating less profit. 

 

We believe that business owners and managers should be taking stock and trying to improve that valuation multiple just as much as profitability.  To do this we have developed a matrix of factors that contribute to the risk of the business.  We weight and assess these factors and every month we assess with our clients what has been achieved to protect and improve the multiple.  In this way we are always working on the overall value of the business, not just its profitability.