What are you doing to enhance your value drivers?

In a recent article entitled “Economic Downturn Gives Owners Time to Work on Value Drivers,” my good friend Eric Donner, Managing Member of Regal Wealth Advisors reviews how important value drivers are to maximize a business’ selling price.

He goes on to point out that it is the work of the owner – not employees – to create and to nurture them. Value drivers include:

• A stable and motivated management team.
• Operating systems that improve sustainability of cash flows.
• A solid, diversified customer base.
• A realistic growth strategy.
• Effective financial controls.
• Stable and improving cash flow.

Due to the freeze in credit markets and a slowdown of M&A, today’s economic environment – for the foreseeable future – gives owners time to install and/ or improve value drivers in their companies. It also gives them time to demonstrate the sustainability of the value drivers they create. Buyers want to know that success or growth charted in one year can be maintained over several years. They bank on (and pay for) a company’s potential to grow, so they look very carefully at how long a company’s value drivers have yielded positive results.

Experienced owners know that change takes time. Really experienced owners know that positive results from those changes take even longer — likely longer than even they expect.

Regardless of when you might sell, it makes good sense for owners to concentrate on those elements of their businesses that create more cash flow, more sustainability, and more future value. After all, isn’t this why you’re in business?

A great place to start is to evaluate how you’re doing currently with respect to each value driver and then put a plan in place to improve each one – steadily and continually – over time. Then, when it finally is time to sell, you’ll be assured a handsome return for having built something of lasting value.

The Power of “Value for Value” Relationships

“You don’t get something for nothing
You don’t get freedom for free
You won’t get wise
With the sleep still in your eyes
No matter what your dreams might be”
–  Neil Peart, Rush

When I was a child, one of my father’s favorite sayings was “If it seems too good to be true, then it probably is.” He said this most typically in reference to a free or heavily discounted offer we received in the mail or read about in a magazine.  The core of his point was that, absent exceptional circumstances (like your Uncle in the shoe business scoring you a free pair of Nikes), it is reasonable to expect to have to exchange something of value in order to receive something else of value.

Although we conveniently seem to forget this once in a while (Gevalia coffee maker anyone?), as buyers it is a point we generally accept as true.  This is the “value for value” exchange.

If we consider sales, we can now clarify the #1 task of a salesperson as building a sense of value for their product or service to the point where the prospect’s perception is that it exceeds their cost.  Note that their cost might not be limited to money, also potentially including things like time, effort, opportunity costs, and other trade-offs associated with the purchase decision.  The bottom line is this: if the prospect’s perception of the product or service’s value exceeds their perception of its cost, in almost all cases the sale will be made.

Salespeople can’t force their prospects to buy, however.  In the absence of authority, the buying / selling process reverts to influence. In fact, sales is the art of influence. That is, getting someone to do what you want them to do (i.e. buy) because they see that they will benefit from making that choice (i.e. receive value).

Influence and sales are really one and the same.

Take a moment and think about who you typically need to influence during your business day. Your list might include your boss, your peers, clients, suppliers, business partners, networking partners, internal departments, prospects, and others.  In those relationships, just like in sales, your ability to get what you want depends upon how good you are at building the perception of value – the value you’re prepared to give in exchange for them doing what you want or need them to do.  Like Neil Peart said, “You don’t get something for nothing.”

It’s helpful to have an open mind as you consider the value you have to give in these situations involving influence.  It’s also helpful to have an understanding of what the other person really wants and needs.  How do you get that?  Ask, and then listen very carefully.

What you’ll probably discover is that different people want and need very different things.  A supplier might want a referral to one of your clients.  Your accounting department might need information about the structure of one of your business partnerships.  A networking partner might appreciate an idea or two about how she can be more effective with her “elevator pitch.”  And your boss might need some feedback about how his latest initiative is being received by the staff.

To better appreciate how this works in the real world, let me share an experience of mine with Steve, who I met through networking.

Steve and I were having a 1-on-1 meeting over lunch as he shared some of his frustrations as a relative newcomer to business networking.  He is a partner in a limousine and car service business and believed that because he didn’t have many referrals to give others, they weren’t willing to give him any in return.  In short, Steve was stuck feeling like he didn’t have much value to give others in exchange for influence over referrals.  Our conversation continued as follows:

Mark: “How many cars to you have in service?”
Steve: “About 40.”
Mark: “Approximately how many passengers ride in your cars during any given week?”
Steve: (after some back-of-the-napkin calculations) “More than 2,000.”
Mark: “How long, on average, is each trip?”
Steve: “At least 20 – 30 minutes, if not more.”
Mark: “And are your passengers pretty successful businesspeople or people who are hovering near the poverty line?”
Steve: (beginning to get my point) “Of course, they’re successful people.”
Mark: “So would it be of value for you to be able to offer your networking partners exposure to your passengers – say by posting a flyer in an acrylic panel on the back of the front seat?”
Steve: “You bet!”

Steve probably has more value to offer than many of the people he networks with combined.  He just didn’t see it.  When he did, it gave him both the confidence and the ammunition to be more aggressive in offering value for value exchanges leading to the relationships and referrals he wants.

What value can you offer to those you want to influence?  Probably, like Steve, much more than you think.  If you take the time to understand those you want to influence along with their specific needs, the alignment with what you have to give will become clear and you’ll have more opportunities for “value for value” exchanges.  You’ll have stronger relationships and more influence as a result.