Generally speaking businesses exist to create value; the more the merrier! But when it comes to small businesses it is important that they understand in jargon-free English what drives value for them. Most commonly talked about among value drivers are intellectual property rights, strong brands, patented products, market share, a diverse and winning product portfolio etc. Many of the small businesses may actually have none of these! So, here are some simple tips where small businesses can look to add value from.
Your infrastructure: A flexible one that can change in tandem with your growth needs is a difficult one but not impossible. Your office space, your staff, your IT systems etc should be able to change in size in alignment with your business growth graph. Lean structures, effective control systems, good IT systems, simple and seamless processes can all reduce costs and, therefore, add value. Generally, successful small businesses keep their operating costs within a certain percentage of the revenue.
Your market potential indeed is a value driver but to really add value you would need to dig a bit deeper in to it. Analysing your market size may be a good start. You will need to concentrate on that customer segment that adds to your revenue and profitability; basically quality over size! Again, your customer base is a value driver but the more diversified it is, the less risky it can get. A business concentrated on a few customers can be a riskier than one that concentrates on thousands of customers!
Your strategy: A business plan is basically an idea well structured! Your strategy sets about how you plan to take your products and services to the market. Some strategies are focused on selling more of the existing products to existing markets (penetration), the existing products to new markets (market development), new products to existing markets (product development) or new products to newer markets (diversification). If organic growth potential is limited by competitive pressure your strategy may involve acquiring other businesses. Whatever your strategy, it needs to be effectively communicated across the business. The best way to do it is by establishing key performance indicators (KPIs).
Your cash flow: You can’t grow without adequate funding. Funding received at the right time means you could really go after the growth opportunities. The form of funding you choose, e.g. equity or loans, at the right time can be a critical value driver.
Your people can be the most important value driver for your businesses particularly those in the driving seat. As a small business you ought to believe in a lean structure that can deliver. A qualified and competent team willing grow with the business can be a real value driver. Above all the most important value driver is You, the entrepreneur. You will need to cobble together a team that you can trust, that shares your passion, your ideals and your vision.
