You know you want to grow your business, but what do you mean by ‘grow’? Do you want to get more clients? Add more locations? Hire more staff? Do you want to offer additional services? Maybe you need a bigger property? Or do you want to grow profit? What about growing value?
There are many ways to grow a business, and this will likely fluctuate over time as your business evolves. Regardless of what stage of business growth you’re in, you’ll have more success if you’re clear about what “grow”means for you and your company.
When you first started your business, your first focus was to get customers and to prove that your product or service was a good one. The game you were playing was…grow revenue. You needed clients who were buying what you’re selling. The real measure of success for you at the start was how many dollars were coming in the door - were people buying what you had to offer? This is what kept you up at night. This is where your mind was focused constantly –proving that this thing was going to work.
Then it begins….now you’re selling, you know how to get clients and business is good. You’ve settled into a flow. You continue to set targets for revenue growth, and you keep hitting them. So, you keep on for awhile in this pattern. Growing revenue and spending more money to keep the cycle flowing and growing. Then one day you realize that dollars are coming in the door, but you’re not making any money.
Now your worry is no longer bringing in revenue, it’s a new challenge. Your focus has shifted. Your expenses have grown as well, possibly even grown faster than your revenue. Now, you realize you need to focus on growing profit. You’ve realized that as your business is growing, if you aren’t making any money, this business won’t last long. You’re now looking more closely at all the ways you can improve your margins. Are there different vendors to use? Are there ways to cut costs? Should I raise my prices? Am I using my resources efficiently?
A business can become very prosperous by measuring performance and success based on profit. That, of course, is how you know if the business is making money or not. But what about the long-term future of the business? What about sustainable growth of the company? This next-level focus happens when you take a step back and think about the bigger picture. The real business masters graduate to a more wholistic measure of business success…growing value.
You know the value of your home, you know the value of your car, but what about your biggest asset…your business? Whether you’re looking to get out of your business in 2 years or 20 years, looking at business value now and consistently benchmarking year-over-year will help a good business evolve into a great business. Our favorite value benchmarking tool is TEVO® Score. TEVO® stands for Total Enterprise Value Opportunity, and it is a direct indicator of a business’ multiple and therefore, their value.
TEVO® assessments examine 5 Key Areas comprised of 50+ components that allow you to look at your company from the eyes of an investor or a buyer – someone deciding if they’re willing to invest in your business. It’s a sneak peek at the due diligence they’ll do when they consider your company. Something unique about TEVO® compared to other business value tools is that it not only scores the Financial area of the business, but also scores 4 non-financial areas. We like that it gives a wholistic view of company viability.
Also, the TEVO® assessments are tailored for your business based on size of business and based on industry or in some cases, industries.It creates a more realistic comparative field to know how your company stacks up in the marketplace.
Business value is the ultimate measure of growth success fora company. When your company focuses on the components that contribute to enterprise value, not only will your value increase, but you and your employees will have more fun running that business.