All Systems Grow!

I wrote this article last month for Victory Woman magazine (view at http://www.victorycircles.com/victory-woman-magazine.asp) to examine the process of growing a company from minuscule to massive...

Now, you might say 'I don't want to be MASSIVE, just medium!' Well, that's fine too. But the bottom line is that you follow the same steps and apply the same principles when you go from a sole proprietorship to a staff of five, as when you make the leap from a staff of 100 to a staff of 1000. The scale is certainly different, but several simple keys will open the doors.

Let's look at the 10 keys that will take your systems from slow to 'grow':

1. Have clarity of vision. Why are you in business? What is so great about what you do or make? Why will people want to give you money? If you can't answer these simple questions, you have a huge problem. Clarity = power. If you don't have a vision and a sense of destiny about your company, you won't grow.

2. Think BIGGER than you are. This is a tough one for small business owners. It's very difficult to hold an imaginary image of your company as a thriving conglomerate in your head everyday, but that is what it takes to design processes that accommodate other people and make long view decisions that will take you to the top.

3. Remember that your business is sales. Your business is not the product you manufacture. Your business is not the service you provide. Your real business is marketing and creating the internal capacity to successfully sell and deliver your products and services to a multitude of consumers.

4. Build a strong brand image. Branding is everything. Your products, services, ads, promotional materials, facility and staff all have to project a uniform image that speaks to your target audience. Align your entire business behind a strong brand that resonates with potential customers, and sales will naturally rise.

5. Determine key metrics. You can't move your company forward if you don't know what criteria really matter. Figure out what activities and metrics drive your business and track them with a vengeance. For some it might be weekly client meetings, for others it might be unit sales, for you it might be inventory turn... whatever matters, pay attention to that.

6. Study your finances. All businesses exist to make money. That means that you have to become a financial guru: researching, tracking, studying, sharing and using financial data to guide every decision. Every financial activity (borrowing, investor offerings, budgets, sales targets, ratios, etc.) should be in your head every second of the day.

7. Know your customers. Customers are king. If you don't have any, you won't have a business for long – much less grow. Know who the people are that you are trying to reach and why they will want to invest their hard-earned dollars with you. Design your entire company to meet their needs and please them. Gather their feedback and make customer service a top priority.

8. Become the threat. Many business advisors will tell you to study your competitors, play off their every strategic move and mimic their successes. I disagree. And my advice to you is BECOME THE THREAT. While every smart business owner knows what differentiates him and keeps an eye on the market, the most successful organizations step away from the pack and make their competition worry about them!

9. Create a culture of leadership and accountability. Eventually a growing company will expand beyond your ability to reach into every corner and crevice. In order to grow a business you have to build systems and mentor leaders, so that you can maintain focus on the bigger picture. Create an organizational culture that raises up great leaders, rewards results, and makes it easy for people to do their jobs.

10. WOW people! 'Customer satisfaction' is not my favorite term. It implies that your goal is for people to walk away feeling 'OK', but not amazed... Satisfied, but not so excited they want to tell all their friends. If you really want to take a leap to the next level I urge you to go for the 'wow factor' and look beyond simple satisfaction.

About Business Valuation Multipliers

Here’s some basic information on industry multipliers and business valuation.

First, an explanation of using multipliers… one of the most widely used valuation benchmarks; this method multiplies the profits or sales of a business by an industry averaged “multiplier” to calculate the company's value. The multiplier, which is based on average sales figures within the industry, is multiplied by either the company's profits or company's gross sales.

The resulting price determined by these multiples typically includes intangible assets (such as brands, copyrights, trademarks, patents, licenses, franchises, customer lists, and goodwill), along with all furniture, fixtures, and equipment. It does not include cash, accounts receivable, inventory, real estate, other tangible assets, or liabilities. These items must be added or subtracted to arrive at the correct equity value for the business.

For example, if companies in your industry value at an average multiplier of 1.5 on gross revenues, and you generate $2 mil/yr in revenue - your business would be roughly valued at $3 mil.

There are a couple of problems with the whole multiplier valuation method. First, this valuation method does not take into account important factors such as the profitability of the business and cash flow indicators for the company. Secondly, since this valuation is based on industry averages, it doesn't factor in the differences between companies within an industry, which can be very different in size, brand value, customer-base, management efficiency and other “soft” factors. Multipliers also negate intangibles such as innovation, creativity, teamwork, location and other core markers for success. All these differences make it difficult to substantiate the validity of a multiplier, which can throw off the accuracy of the valuation. This is why business owners pay big buck for full appraisals that do look at all the variables in their business environment.

www.bizminer.com has great reports with current industry multipliers that won't cost you an arm and a leg. Many industry websites will also offer common multipliers.