According to Catherine J. Durham (2017), successful business owners generally rely on a variety of managerial frameworks to help them make sure they are on track with strategic plans and implementation. The following framework can be used to set strategic direction to drive value in the business and can guide business owners and the team to follow through when making day-to-day business decisions.
Eight key drivers of value
The following are eight key drivers and examples of questions associated with each driver of value.
1. Financial performance: The history of producing revenue and profit combined with the professionalism of your record keeping.
Questions: Am I promoting the right services at my firm, at the right prices, in order to get to the profits needed? Do my accounting practices reflect the overall level of professionalism in my business?
2. Growth potential: The likelihood to grow the business in the future and at what rate.
Questions: Is my company keeping up with industry trends in terms of process, products, pricing, and quality of employees?
3. Switzerland structure: The business's dependency on any one employee, customer, or supplier.
Questions: Do I rely so heavily on one employee, customer, or supplier that without them I would put the business at significant risk?
4. Valuation teeter totter: Whether the business is a cash suck or a cash spigot.
Questions: Am I creating sufficient cash flows to support day-to-day needs of the business?
5. Recurring revenue: The proportion and quality of automatic, annuity-based revenue collected each month.
Questions: How can I create consistent cash flows with recurring orders versus starting from scratch each month?
6. Monopoly control: How well is the business differentiated from the other competitors in the industry.
Questions: What is the "why," or reason my company exists, and how am I delivering on that in a way that my competitors can't or won't?
7. Customer satisfaction: The likelihood that customers will re-purchase and also provide referrals.
Questions: How have I trained and empowered my employees to handle customer complaints or share customer praise to make sure we are doing the right things and making it right when we fall short?
8. Hub and spoke: How would the business perform if a key employee were unexpectedly unable to work for a period of 3 months?
Questions: How am I creating advancement paths to retain key employees for their best interest but also so that the business is not as dependent on me daily?
The eight key drivers of value help guide business strategy and day-to-day decisions.