Do you know what makes your company valuable? Sometimes, manufacturers and distributors overlook less obvious value drivers that significantly add to their business value.
Of course, it’s wise to keep a close watch on the value drivers that every business depends on, starting with cash flow. Strong cash flow is an indicator of a healthy company. Other value drivers include those that reduce risk, such as:
Diverse customer base: Being reliant on too few customers is risky. If one fails or bails, your company could be in trouble. A diverse customer base means you’re more likely to overcome the financial impact of a customer leaving or reducing ongoing orders.
Deep management bench: Having a smart cadre of executives and managers speaks well of a company. It shows that the owner can hire top talent and keep them motivated. It also hints at teamwork and camaraderie, which are highly desirable qualities in a business environment.
Reliable supply chain: Without a reliable supply chain, a manufacturing and distribution company will quickly falter. Using a variety of suppliers and having backups in case of disaster is a prudent way to do business.
The Less Obvious.
Perhaps more interesting, especially if you are thinking of selling your company, are the value drivers that are less obvious. They’re important but often overlooked. For example:
Workforce: A highly skilled workforce takes time to build and is prized in a manufacturing and distribution company. Be sure to nurture your people with training and education, and solidify your relationships with non-compete or non-solicitation agreements.
Culture: An encouraging and positive company culture attracts the type of workforce you want to have. Culture starts at the top, so be sure your executive team models desirable traits like responsiveness, honesty, and fairness.
Reputation: What do your customers think about you? Are you reliable with deliveries? Do you go the extra mile to ensure their satisfaction? Is your company in the news for the right reasons and none of the wrong ones?
Documented processes: Valuable companies keep their processes up to date, including workflow, HR, and accounting procedures. They maintain documentation, invest in technology solutions, keep tidy records, and produce meaningful reports that keep the company running smoothly.
Good IT: Having good information technology is essential for running an efficient operation. But equally important is how you use your IT to help you better understand data relative to costs, customer profitability, delivery times, plant and equipment efficiency, stock management, and more.
Internal controls: Strong internal controls are key to fraud deterrence. How closely they are followed indicates an orderly operation.
Inventory methodology: Your ability to control your inventory can significantly add or subtract business value. Effective management tools are imperative.
Intellectual property: The amount of intellectual property your company owns might surprise you. Be sure to keep your patents and trademarks up to date. What may seem common to you might be a stunner in the marketplace.
Tell Your Story
These value drivers tell the story of your company. Touting them to your customers, prospects, lenders, and potential investors can make a significant impact on your position. If possible, try to quantify them—a customer satisfaction survey, for example, will show your competitive edge. This type of feedback can set your company apart. We can help you identify value drivers. Contact us to discuss what makes your company unique.