Unlocking Business Value: A Strategic Approach to Value Discovery and Improvement

In the dynamic world of business, value improvement is not just a goal but a necessity for sustainable growth and successful transitions. Whether you are preparing for a potential sale or simply aiming to enhance your business’s performance, adopting a value-focused mindset is crucial. This blog post delves into the process of value discovery and the creation of a prioritized action plan to achieve significant value improvement.

Understanding Business Value

At its core, business value is a function of quality and profitability. Many business owners equate value with profitability and sales growth, which are indeed fundamental drivers. However, two businesses of similar size in the same industry can have vastly different valuations. This discrepancy often stems from the quality of the business’s assets and its economic engine.

Imagine two cars: One is a brand-new Rolls Royce, and the other is a 20-year-old rust bucket. Both can get you from point A to point B, but their reliability, performance, and overall value are worlds apart. Similarly, businesses with the same revenue can have different valuations based on their operational quality and strategic capacity.

The Discovery Process

The first step in value improvement is a thorough discovery process. This involves assessing the quality of the business’s assets and its economic engine. At Rizolve, this process is completed over 30 days and includes three main components:

1. Assessing Documentary Evidence of Quality

The discovery process begins with a comprehensive review of the business’s documentary evidence. This step is crucial as it provides a foundational understanding of the business’s current state. The types of documents reviewed include:

• Documented History: Understanding the company’s journey, significant milestones, and historical context.
• Industry Positioning and Market Penetration: Evaluating the company’s standing within its industry and its market reach.
• Key Lifetime Accomplishments: Highlighting major achievements that have contributed to the company’s growth and reputation.
• Size Indicators: Assessing metrics such as revenue, employee count, and market share.
• Market Research: Analyzing total and addressable market data to understand market opportunities and threats.
• Products, Services, and Segments: Reviewing the company’s offerings and their performance in different market segments.
• Leadership Talent: Evaluating the quality and experience of the leadership team.
• Organizational Structures: Understanding the company’s organizational design and its effectiveness.
• Human Resource Depth, Quality, and Experience: Assessing the workforce’s capabilities and experience.
• Financial Track Record: Reviewing financial statements and performance over at least three years.
• Operational Reporting, KPIs, Service, and Quality Levels: Evaluating operational efficiency and performance metrics.
• Customer Size, Concentration, Longevity, and Satisfaction: Analyzing customer demographics and satisfaction levels.
• Marketing Channels, Literature, Communication Mediums: Reviewing marketing strategies and materials.
• Governance Practices: Assessing the company’s governance framework and practices.
• Legal Formalities and Contractual Disciplines: Ensuring compliance with legal requirements and contractual obligations.
• Compliance Preparedness and Timeliness: Evaluating the company’s adherence to regulatory standards.

The speed of delivery, availability, and currency of this information are also evaluated to gauge the organization’s efficiency and readiness.

2. Interviewing Key Team Members

Interviews with key team members provide valuable insights into the company’s operations, culture, and strategic direction. At Rizolve, senior advisors with extensive experience in leading functional disciplines in global companies conduct these interviews. These advisors hold Certified Exit Planning Advisor (CEPA) designations and use their strategic expertise to assess the company’s value drivers. This assessment is complemented by a best practice benchmarking tool to ensure objectivity.

The interviews focus on understanding the maturity level of each value driver and identifying gaps and improvement opportunities. The advisors’ experience allows them to provide a nuanced assessment, but to avoid bias, their findings are triangulated with benchmarking tools.

3. Performing Value Driver Quality Benchmarking

Using a comprehensive best practice assessment tool, the company’s current maturity level is benchmarked against similar organizations. This tool evaluates 24 value drivers, providing a situational analysis of the company’s strategic capacity. The assessment involves a detailed questionnaire that segments each value driver and poses several questions to evaluate the quality of the current presentation compared to best-in-class expectations.

Each answer is ranked on a five-level maturity scale. The output highlights strengths, weaknesses, and value gaps, offering a clear picture of the company’s value potential. The algorithm used in the assessment tool also weighs the collection of value drivers for imbalances, providing a holistic view of the company’s strategic capacity.

Evaluation and Prioritization

The evaluation phase synthesizes the findings from the discovery process. The output includes:

• Detailed Evidence of Strengths and Weaknesses: Insights from discussions with owners, management, and key employees.
• Assessments of Documentary Evidence: Evaluations of the strengths, weaknesses, and value gaps in the documentary evidence.
• Benchmarked Quantitative Output: Data from best practice software that assesses strategic capacity and quantifies improvement possibilities.
• Quantification of Company Quality: Benchmarking the company’s quality against best-in-class standards to estimate its value range.
• Summary Presentation: A PowerPoint presentation that summarizes the company’s strengths, weaknesses, and improvement recommendations.

This comprehensive evaluation provides a clear understanding of the company’s current state and its potential for value improvement.

Creating a Prioritized Action Plan (PAP)

The insights gained from the discovery and evaluation phases are used to develop a Prioritized Action Plan (PAP). This plan focuses on value improvement opportunities and integrates them into the company’s strategic and tactical plans. Key objectives are identified, and sprint methodologies with regular reporting are employed to ensure effective project management.

The PAP includes:

• Identification of Key Objectives: Clear, actionable goals that focus on value improvement.
• Integration into Strategic and Tactical Plans: Aligning the PAP with the company’s broader strategic objectives.
• Sprint Methodologies: Using agile project management techniques to achieve objectives efficiently.
• Regular Reporting: Ensuring transparency and accountability through consistent progress updates.

Pivoting to a Value Mindset

A value-focused PAP is particularly important for business owners with liquidity objectives. Shifting to a value mindset often requires a change in strategic objectives and coordination of advisor input. This pivot ensures that the company is not only prepared for potential transactions but also positioned for long-term growth and success.

Adopting a value mindset involves:

Strategic Realignment: Adjusting the company’s strategic goals to prioritize value creation.
Advisor Coordination: Ensuring that all advisors are aligned with the new strategic objectives.
Cultural Shift: Encouraging a company-wide focus on value improvement and quality enhancement.

Value improvement is a continuous process that requires a strategic approach and a commitment to quality. By understanding the factors that drive value and implementing a structured discovery and evaluation process, business owners can unlock significant value and create a transferable asset. Whether you are preparing for a sale or aiming to enhance your business’s performance, adopting a value-focused mindset is the key to sustainable success.

Rizolve Partners help business owners pivot from being just profit-driven to becoming value-driven businesses. If you would like a confidential assessment of your situation, reach out to us today.