Andrew Marsh, chair of Vistage for the North East and Northumberland, NED for numerous businesses and charities; and successful entrepreneur, spends his days helping business leaders achieve goals and find opportunity.
Recently he’s noticed conversations amongst leaders in the region are increasingly about people, performance and growth, ultimately being factors that add to a company’s value. So, what exactly can you do to increase value? Here, Andrew looks at eight important calls to action…
“Whilst admittedly we all know we’re in somewhat of a cost-of-living crisis, the leaders in the North East are still hungry for opportunity. Every meeting, event, and many blogs from our region’s best, talk about achieving goals, finding ways to grow, retaining the best people and encouraging performance.
“In my opinion, this is what our North East business community is best known for. Resilience. Optimism. Drive. But we would be naive to think that right intentions, with a good dash of hope, are enough.
“Those who are living this talk and are growing, expanding, driving people into senior leadership positions, investing and valuing their people across every level, are following simple, effective strategies. And in doing so, they’re increasing the value of their business, not just for sale or exit, but customer loyalty and to attract the best people in their industry. These both secure the future of the company and help attract investment to take the organisation to the next level, if that’s the strategy.
“To achieve this, ensuring that a company is a place people want to work is imperative. Happy people, satisfied in their job, treated well and feeling secure perform better. Fact.
“Companies that have this right, often follow eight steps that lead to increasing the value of a business. And just because they are doing these steps doesn’t mean they will sell, but it does mean they take themselves seriously as an employer, as a provider, as part of a community. And of course, should they wish to sell, they find themselves in a much better position.
“The eight important positionings, which is what all good Corporate Finance Advisors look at, are:
To have zero dependencies
Dependencies can limit or prevent agility, which can create vulnerability. These dependencies can be found in a business model (for example you only have one supplier), in external service providers (too dependent on one software for example), on employees that are considered a risk to the business if they leave, in financial dependence and on the risk of customers and client’s willingness to pay.
Sometime dependencies can’t be avoided – if this is the case, ensure they’re treated as risks and have plans in place that create resilience, increasing confidence in the company regardless. This can be hard when resources or cash are tight, but it’s imperative to have the plan.
To have a solid financial performance, with a life cycle
The seven stages of financial freedom are dependence, solvency, stability, security, independence, freedom and abundance – each is characterised clearly. To reach stability or above is attractive, but the trend/financial story over the time of the business is key, showing year-on-year progress.
To be scalable but also know what that looks like
To be scalable you need to know if you can quickly find/add clients and when you do, can you service them properly? For others to be confident in this, you need to prove your product/service has traction in the market and works, and that you can deliver it easily. It’s important to be confident that the cost to deliver is not on the same trajectory as new revenues – there needs to be profit.
To have working Capital Forecasts that meet demands
Working Capital Forecasting is the overall financial requirements of the organisation, measuring the cash position or to exercise control over that position. The Cash Conversion Cycle tool explores the time it takes for a company to complete a full operating cycle. This helps get a handle on burn rate, what is needed to run the business, and the investment areas needed to expand, then clear lines can be drawn on self-financing or investment risk.
To have recurring revenue
All revenue is good, but strength can be built upon return customers, subscriptions, annual renewals, long contracts and similar ways of trading. This reassurance makes a company attractive, robust and easier to demonstrate value through longer projected cash/profit and loss expectations, with guaranteed, concrete incomings.
To understand their differentiation on service wrap and intellectual property
Patents, trademarks and copyrights are valuable assets to a company. It’s important to know how they work, as well as understanding what is just part of your service and delivery, which competitors can/are also taking part in. What makes you stand out and why; and is that USP protected?
To have a strong customer portfolio
This one speaks for itself, and also feeds into good recurring revenue. A strong portfolio is made up from a diverse mix of customers, all whom you can easily keep in touch with, market to, upsell/ resell to. They’ll be fans of your brand and product /service and be ambassadors who introduce new customers to your portfolio.
And to have a team, with an understood succession plan and promotional scale.
It’s important that a team is strong, so that if illness, retirement or sudden loss of a key member occurs, the infrastructure and future of the business is not put at risk. Have a team capable of operating with limited input from you, by investing in their training and development. Peer groups, such as my Vistage Emerging Leaders (which has a new cohort starting soon) are ideal for this.
“These aren’t easy things to tackle, so plan, look at how you understand each as a leader, and challenge your team to make them happen too. Score where you are for each of the eight points, out of 10. Then focus on how you can move up 1 or 2 points. And of course, talk to a Corporate Financial Advisor to get early input if the goal of the journey is to sell.”
Andrew, who runs a number of peer groups for both Vistage in the North East and The Experience Bank Group, concluded: “This topic, the actions and how they interweave to increase business value, are just some subjects we concentrate on in our peer group meetings. Understanding and bettering knowledge on growth, sales, strategy, performance, people, governance, marketing, DEI and more, is creating holistic leaders, contributing to creating a bright future for the region.”