“Value drivers” distinguish successful companies from their competitors.
While it’s easy to be distracted by all the demands competing for the business owner’s time and attention, successful companies focus on the key value drivers – which are frequently “intangibles” and employees.
Value drivers vary by type of business. While reputation and cost control are always important, other factors vary.
Restaurants – are known by reputation for good food and a positive dining experience.
Key value (profitability) drivers for a successful restaurant include: location, concept, menu, quality of cooking and wait staff, and cost control.
Technology companies – must have a core product/technology or “know how” that solves a customer problem.
Key value (profitability) drivers for tech companies include: highly skilled workers, quality and cost control, and R&D (research and development).
Professional Services Firms (e.g., lawyers, accountants, consultants) - are known by reputation.
Key value (profitability) drivers for professional service firms include personal relationships, highly skilled staff and cost effective service delivery.
Retail – brand/merchandise mix and location are critical.
Key value (profitability) drivers for retail businesses include sales personnel, inventory management and cost control.
So the recurring theme is that “great employees” and “intangibles” (intellectual property and ways to doing business) add great value to a business.
Hence, it’s important to protect and leverage these aspects of the business by using a combination of business strategies and legal protections.
Business strategies include incentive compensation plans to recognize, reward and retain high performing employees.
Legal protections include requiring key employees to sign non-compete agreements, registering Trademarks and Copyrights, and taking steps to protect proprietary information/trade secrets such as recipes and formulas. Contracts with key players, including partners, customers and suppliers, are also important.
What are the value drivers for your business?
Start by using the SWOT Analysis – Strengths, Weaknesses, Opportunities and Threats – this will help you identify the “value drivers” for your business.
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