Chances are you’ve heard of a little online business called Amazon.com. The retail giant debuted in 1994, selling books. Today it is an international multibillion dollar e-commerce site that has 160 million items for sale. And it’s not just books anymore – electronics, furniture, food, vacation packages, fresh flowers, and the list goes on.
And one of the things Amazon implemented from the beginning that has been modeled by countless sites since was a rating system. When a customer makes a purchase, they can submit a written review and rating score about their shopping experience. Amazon’s rating system has become a valuable tool to help people make their shopping decisions.
You can apply a similar model to your business to identify your value drivers and the key elements that build or protect the value of your business.
Key indicators, similar to ratings, will help determine the current and future value and sale-ability of your business. If you’re in the market to sell, showcasing your key indicators will dramatically affect how your business is perceived by potential buyers.
And even if selling your business is not your immediate goal, focusing on key indicators can have a powerful impact on the value of your business down the road. When a product manufacturer gets poor ratings on Amazon.com, it can be a death sentence for that product. Negative exposure with an audience of that size can kill the success of a product, and the reverse is also true. Positive reviews of a product can generate more sales and more revenue overnight.
Measuring and giving attention to your key value drivers can help your business generate sales and revenue, build customer loyalty, retain quality employees, and increase profitability.
These are the activities that are most likely to increase your business value in the shortest amount of time possible:
Measure Key Performance Indicators
The Key Performance Indicators (KPIs) from your list of value drivers are the activities that directly impact progress towards your goals and are most critical to your success. KPIs are the activities you want to track and will help you rate your performance. KPIs should be developed for key facets of any business where quantifying results can reveal problems, suggest solutions, and provide a better understanding of the business. Value Drivers and KPIs can be generic, industry-specific, or business-specific. The following are generic to every business:
Business Fundamentals
Business Fundamentals include those factors that reduce your exposure to risk of loss. Reducing risk is an essential part of a smart business strategy. Before you focus on increasing the value of your business, you should invest in protecting the capital you have invested.
Strategic Planning
Strategic Planning is the overall game plan, and too many business owners operate without a solid business plan and set of goals in place. A strategic plan with established goals and objectives allows you to measure your progress and value and work towards a common goal based on a realistic growth strategy.
Internal Operations
Many businesses that have grown from small operations to multi-million dollar corporations were built on a model based on performing the same tasks the same way, every time. Car manufacturers and fast food restaurants are two examples of an assembly-line style of production that produce consistent results. And that’s the kind of service customers always gravitate to. Creating systems should be at the heart of what you do every day.
Financial Measurement and Management
Successful business owners use financial measurement and management to ensure that day-to-day activities enhance their strategic planning efforts. It’s the practice of using your dashboard on a regular basis. Trying to build business value without specific financial goals usually results in a less efficient path to success. Performance goals and limits provide the framework for successful operations and a more valuable business. To identify the key value drivers in any business, start by using the SWOT Analysis – Strengths, Weaknesses, Opportunities and Threats – this will help you identify the “value drivers” for your business.
