8 Key Drivers Of Company Value (Series) — 2. Growth Potential

The likelihood to grow a business in the future and at what rate

This series of articles follows on from an article I published recently, titled “8 Key Drivers Of Company Value That Every Business Owner Should Know”, where I mentioned that I use the Value Builder System™️ to help small business owners grow the overall value of their companies, by focusing on 8 Key Drivers that impact company value.

At the heart of this system is the Value Builder Score, which determines how well a business is performing in each of those 8 key areas. This series of articles provides some deeper insight into each driver with tips on how to improve in those areas.

But ultimately, what makes this important? It’s every business owners dream to be rewarded for all the hard work they put in over the years when they finally decide to exit, so they get to enjoy a long and happy retirement without financial worries.

So, knowing about these drivers and how to improve them, puts business owners on a path to maximizing the value of their companies while giving them the peace of mind to know that they are growing an asset of value before they exit.

Today we’ll look at Growth Potential, which looks at the likelihood to grow the business in future and at what rate.

This is how John Warrillow, the founder of the Value Builder System, explains it:

“The second driver of sellability is growth potential. So a lot of business owners, when they think about their business, they want it valued on what they’ve done in the past. Right? We’re proud of what we’ve done in the past. That’s normal. The fact that you’ve won an association award, for example, or that you’ve got a 20 year business or that you’re recognized for your reliability, whatever it is that you think you’ve done in the past.

And the hard truth of it is that when a buyer comes in, they’re not buying the past, they’re not buying what you’ve done. They’re really only buying one thing. And that is, they’re buying your future stream of profits. What is this business going to do in the future? For you, it’s the end of the game. It’s the finishing line. For them, it’s the start. It’s a different frame of mind.

So for them, they want to understand, okay, what can this business do in the future? So to drive up your score on growth potential, you really want to make the case and focus on what is the future potential of this business?

Can it operate in a different market? Let’s say you’ve been successful in Market A, is it possible to scale this into Market B, C and D? Could you cross-sell additional products and services to your existing customer base? Are there ways that this could work in different cultural markets, for example?

You need to consider all the ways that you could significantly scale up the business. The answer to those questions is going to drive up your growth potential.”

John also delves a little deeper into this topic on his “Built to Sell Radio” podcast:

“Buyers want to acquire a growing company. In this episode, Alex McClafferty talks about how he got internet giant GoDaddy to buy into his vision of non-linear growth for WP Curve.”

Listen in to hear how McClafferty and his partner stitched together a network of contract support professionals in developing countries and quickly grew the company.

So if you’re a business owner who’s planning ahead and considering ways to exit your business on your terms, I hope the information I provide in these articles will help you reach those goals.

If you would like to chat to me about this in person, feel free to book a slot in my calendar and we can discuss it further.

FREE Assessment:

If you want to see how you score in each of the “8 Key Drivers” right now, take 15-minutes to complete this survey and you’ll get a comprehensive 25+ page report benchmarking your business against its peers, plus 49 tips on how to improve those 8 key areas.

Links to all the Key Drivers of Company Value:

1. Financial Performance
2. Growth Potential
3. Switzerland Structure (Key dependencies)
4. Valuation Teeter-Totter (Cash flow)
5. Recurring Revenue
6. Monopoly Control (Key differentiation)
7. Customer Satisfaction
8. Hub and Spoke (Company structure, systems and processes)