Presented by: David Pierce, Certified Petra Coach
Value Builder is an objective measure of where your business stands based on eight drivers in the business. We should always be driving our business value upwards.
David Pierce talks about the eight drivers, starting with financial performance. Every business should be driving improvement in their financial performance.
The next driver is growth potential. This could be new products, new features, or getting into new markets. Every business has some areas that they could explore for growth.
The next value driver is the Switzerland Structure. You should not have an over-dependency on any one customer, employee, or vendor. You should have a plan to limit your exposure to any one customer so you’re not having a risk of a detrimental impact on your business.
The fourth driver is the Valuation Teeter Totter. This refers to the cash flow and your business; high cash flow more value, low cash flow less value.
Next up is the Hierarchy of Recurring Revenue. Revenue can be separated into two categories. One-off revenue comes only once from a certain customer and recurring revenue happens on a scheduled, recurring basis over and over again. The recurring revenue stream is valued at a much higher multiple than the one-off revenue stream.
Monopoly control is another driver of valuation. When you have monopoly control over a customer base, you have a lot more power to control your business.
Customer satisfaction is the ultimate value driver. The more satisfied the customers are, the more likely they are to return and purchase or recommend you to a friend.
The last value driver is hub and spoke which refers to how involved the owner of a business is. It may seem like a good thing for an owner to be heavily involved in an organization, but it could mean that the business wouldn’t be able to run without them there. This poses a huge problem when the owner wants to sell the business and exit the company.