DFK Gooding Partners

July 11, 2023

Welcome to part three of our series on improving business value. As we’ve highlighted previously, improving business value is often associated with preparing a business for a sale. However, implementing a value improvement strategy also offers a range of ongoing strategic benefits for business owners, such as improving the position of the business before pursuing funding. In this article, we’ll explore one of the most tangible areas of value improvement: customers and staffing.

If you missed our introduction article in our business value improvement series, we highly recommend reading it for an overview of the key value improvement areas you should be considering.

Where to begin with a Value Optimisation Strategy?

Before diving into the ‘what’ of value optimisation, it is essential to understand and define your objectives – your ‘why’. Are you looking to sell the business? Or secure additional investment, or perhaps just to increase profitability?

Once your objectives are clear, the next step is evaluating the resources needed to achieve these objectives. Do you have the required skillset in-house? Do you have the time and financial resources available? Assess your skills, time availability, and financial resources, and consider partnering with an advisory firm to guide you through the process.

If you’re still uncertain about where to start with your value improvement strategy, our Business Risk Assessment is a free online tool designed to identify objectives, existing capacity, and risks.

Key areas of value improvement – Business Value Optimisation (BVO) factors

BVOs are the key areas that businesses should be focusing on to maximize the value derived from a sale. Our recommended BVO areas are growth, succession planning, financial performance, systems, staff, and customers. The second article in this series offers insight into the areas of financial performance, and business systems. This article will focus on customers and staffing.

Value optimisation factor: Customers

A well-executed focus on selected customer areas contributes to enhanced satisfaction, loyalty, and revenue generation. Additionally, value improvement strategies targeting customers can yield softer benefits, such as providing valuable insights during buyer due diligence.

Some of the customer-centric value drivers we advise on within a value improvement strategy include:

Customer Acquisition and Retention:

Can you demonstrate clear, proven processes for acquiring and retaining customers? Doing so not only provides increased clarity around projected future growth, but it also demonstrates a sound understanding of your customer needs.

Retaining existing customers is more cost-effective than acquiring new ones. Your value initiatives should consider implementing strategies to build strong relationships and provide exceptional customer service. Doing so creates ‘sticky’ customers, which will assist with mitigating risk of client churn being associated with departure of key staff.

Developing effective strategies to attract new customers and expand your base is equally important for sustainable growth, and accurate future projections. Consider employing targeted marketing campaigns, lead generation efforts, digital channel utilization, and brand enhancement strategies. Longevity of campaign performance, supported by robust systems and skills is crucial. A short-term campaign in market after a long period of inactivity will be seen for what it is: window dressing.

Customer Advocacy and Referrals:

Who are your top 10 most loyal customers? How much revenue do they contribute? Do you have a clear system in place to capitalise on the power of word of mouth? Cultivating a base of loyal customers who advocate for your business and refer new business drives growth and profitability. Encourage satisfied customers to provide testimonials, reviews, or referrals through referral programs, incentives, or exceptional service.

Customer Feedback and Insights:

Can you show positive net promoter scores (NPS) going back for the last five years? Actively seeking and acting upon customer feedback from surveys, reviews, and direct communication should be a continual process, allowing you to streamline offerings and operations, leading to increased satisfaction and loyalty.

Customer Experience:

When was the last time you did a customer journey mapping exercise? Investing in building and delivering an exceptional customer experience sets your business apart and fosters deep customer loyalty. For businesses operating in a heavily price driven market, this can be a key differentiator that is very difficult to emulate.

Value optimisation factor: Staff

You can have all the best value improvement initiatives in the world, but without staff behind them, they’ll fall flat, fast. Having engaged staff plays a critical role in driving profitability and increasing business value. In addition, a clear succession strategy for business owners involved in business operations is imperative for a successful business sale. The key areas of staffing we typically consider with clients can include:

Employee Engagement and Retention:

How does your staff turnover rate compare to industry standards? Do you know what your average tenure is? Prioritising employee engagement leads to higher productivity, reduced turnover, and improved overall business performance. Strategies such as fostering an empowering work environment, providing growth opportunities, recognising achievements, and offering competitive compensation and benefits all help retain top talent and boost their commitment to your business.

Talent Acquisition:

How do you currently recruit staff? An active, and well-designed recruitment strategy is simultaneously a branding exercise – it communicates the strengths of the company, and ideally – an excellent working environment. However, this needs to be supported with clear job descriptions, targeted sourcing methods, and comprehensive assessments, to ensure the right talent is brought onboard.

Performance Management:

How do you encourage and reward performance? Establishing a performance management system that provides regular feedback, goal setting, and performance evaluations helps align employee efforts with value improvement initiatives, as well as general organisational objectives.

Skills Development and Training:

Investing in the development of employees’ skills and competencies enhances their performance, contributing to business value. Offering training programs, mentorship opportunities, and career advancement plans not only improves individual capabilities but also strengthens the organisation’s overall expertise and competitiveness.

Succession Planning:

How can you show that your business will continue to perform if key staff are no longer there? What is your transition strategy as a business owner involved in the operation of your business? Implementing a robust succession planning strategy ensures that key positions within the organization can be effectively filled when needed. This is especially important when readying a business for sale, and we will cover succession planning in deeper detail for the final article in this series.

Taking Action – Implementing staff and customer value improvement strategies

While staff and customers offer immediate and tangible results for value improvement, it is crucial to consider and implement these strategies alongside other optimisation factors. The extent of engagement with each factor depends on your specific objectives and available resources. Our online Business Risk Assessment is a valuable resource to help get you started with identifying where you should focus your value improvement initiatives.

Alternatively, please contact us directly via the contact form below, and one of our business advisory team will be in touch to discuss your requirements further.

Contact Us

info@dfkgpca.com.au
(08) 9327 1777

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