The key to business growth often lies in the installation of Value Drivers. Value Drivers are elements of your business that can help you make it attractive to potential buyers as you approach your inevitable business exit and could help you grow your business while you're still running it.
Today, we'll look at a fictional but representative company whose owner leveraged Value Drivers to help his company grow despite difficult changes to his industry.
Protecting the Future
Clyde Funkhouser was a third-generation owner of a trusted oil field equipment company. For over 100 years, his family business had grown and provided for his family. Clyde realized that the competitive environment was changing, and to sustain his business, he needed to make changes.
Between the burdens of regulations, economic changes, and cultural pushback on the products and services his company provided, Clyde needed to shift his company to address changing conditions.
Years earlier, he and his Advisor Team had begun planning for how the business would evolve in a new environment. They identified four Value Drivers that would put his company on a path for success. The Value Drivers they installed included:
Their goal was to grow Clyde's business, position Clyde to exit with financial security, and sustain the company in the face of shifting sentiments about the products and services his company had historically provided.
The Benefits of Value Drivers
Value Drivers can be especially important when your company faces outside challenges to success. In Clyde's case, his company provided services that some people, including loyal customers, had begun viewing negatively. By installing Value Drivers that encouraged the company to evolve with the needs of its prospects and clients, Clyde positioned himself and his business to succeed despite conditions. Here's how he did it.
1. Harnessing Experts to Evolve
The first step Clyde and his Advisor Team took was to install the most important Value Driver of all: a strong next-level management team composed of outside experts and internal employees he had trained to take the business
to the next level.
Clyde's expertise had always been in oil field equipment. He knew that demand for these products and services was still strong but that he would likely need to address concerns among prospects and current customers about how
his products and services affected the environment. He had invested in making his equipment the safest on the market and the cleanest it could possibly be. But to continue growing, Clyde needed expert help from people who knew more about the emerging clean energy industry than he did.
By combining the outside expertise that he had brought in with the trusted relationships his internal sales teams had with prospects and clients, Clyde was able to develop a clean energy arm that supported his core oil field equipment business. This helped him expand his offerings to people who otherwise may not have worked with him based on their opinions of his core
business.
Installing this next-level management team allowed Clyde to diversify his customer base, which made it less reliant on a few big hitters for success. This inherently made it more attractive to potential buyers, since those
potential buyers wouldn't have to take this step after buying the business.
In addition, these experts installed additional Value Drivers to protect his oil field equipment business while expanding into clean energy solutions.
2. Standing Out Among Competitors
Clyde and his Advisor Team sensed that many of his competitors would dig in and not make changes to their businesses despite changing opinions about their products and services. To flesh their suspicion out, Clyde and his team dedicated resources to surveying prospects and clients about what they thought would make them successful.
Their surveys consistently showed that prospects and customers of Clyde's company wanted the option to explore clean energy solutions, even when they had no intention of switching to a clean energy source entirely.
Though it was a difficult step to take, Clyde understood that if he could offer prospects something that his competitors couldn't—in this case, an alternative energy source—he could both expand his sales footprint and differentiate his company nationwide.
Following through on this strategy required investments and research into technologies that Clyde's company had no history of supporting. However, thanks to his next-level management team, his company was able to invest in research and development that made his oil field equipment company the only one to also offer cleaner energy options when people requested them.
This opened his company up to a brand-new prospect base while still providing the products and services that current customers had trusted for decades.
Clyde and his team referred to the strategy as the "as you like it" strategy, giving prospects and clients the choice to choose which product and service they wanted as they liked. Because other competitors weren't offering this choice, Clyde's company stood out as one that spoke to the needs of its prospects and clients.
3. Training the Team to Succeed
When Clyde announced to his internal team his plans to expand into cleaner energy solutions, their biggest fear revolved around how their customer base would view the change. To tackle their concerns about their company's authenticity, Clyde and his team needed to create a strategy that spoke to two groups that were often at odds with each other: fossil fuel proponents and clean energy proponents.
To position his company to pursue this strategy successfully, Clyde and his next-level management team committed to updating their sales training. The updates to sales training gave his sales team the knowledge and confidence to ask the right questions to determine how Clyde's company could help prospects and customers continue to succeed.
This updated sales training helped diversify the company's customer base and reach new potential customers via a combination of selling products with proven demand and products that addressed emerging demands. This allowed the business to continue milking the cash cow of their trusted oil field equipment while offering additional clean energy solutions seamlessly.
4. Keeping Everyone Onboard
Threading the needle between supporting both fossil fuel and clean energy solutions required a deep knowledge of customer needs and the ability to speak authentically and expertly to the pros and cons of each solution.
To ensure that the experts who could do this would stay with the company, Clyde offered generous incentive programs that rewarded outstanding work while handcuffing the experts and preventing them from leaving the company (unless they were willing to give up their bonuses for all their hard work).
How It Paid Off
By installing these four Value Drivers, Clyde's business managed to evolve to changing conditions. They were the first—and for a long time only—company that successfully supported customers regardless of whether they needed
fossil fuel or clean energy solutions.
Clyde’s company consistently stayed ahead of the competition and began to draw the attention of large companies in both the oil and clean energy sectors. Clyde began to receive inquiries about selling his company for an amount
of money that would make him financially secure for five lifetimes. And though he wasn't ready to exit his business quite yet, he had positioned his business and himself to thrive when he was ready to exit.
As Clyde's story shows, installing Value Drivers well before you're ready to exit could position you to grow your company while you're still running it and allow you to exit it on your terms when you're ready.
We strive to help business owners identify and prioritize their objectives with respect to their businesses, their employees, and their families. If you have questions on this topic, we can help with more information or a referral to another experienced professional.
