In this article, we look at a series of projects that can have a material impact on organic growth and company valuation when delivered as part of a coordinated programme. We have seen clients deploy some or all of these over the years, with proven successful outcomes when executed effectively. To help provide some structure, we have grouped these ideas into three categories: Getting your house in order; optimising your valuation multiplier; and implementing a defence strategy. We will look at each one and offer some practical advice on how to apply them to your business.
Workstream 1: Getting your house in order
This may seem blindingly obvious, but one of the easiest ways to increase value is to increase profit. In short, buy low, sell high. Bringing in more revenue, slashing costs and being tax efficient are the three most important levers, but how to do it well?
Profit growth through bite-sized marketing and sales transformation
Starting in the marketing department, the following ideas can help boost demand, setting the foundations for substantial lead generation and pipeline growth:
- Demand generation: Demand generation is the process of creating interest in a product or service and generating leads. By creating effective (digital) demand generation campaigns, with a mix of educational and commercial content across owned, earned and paid channels (email, search, social ads etc.), businesses can attract potential customers and increase their chances of converting them into paying customers.
- ABM: a highly targeted marketing approach that focuses on specific accounts or clients. By creating personalised content and campaigns for each account, speaking directly to their specific pain points, you can increase your chances of converting those accounts into customers. It’s also highly likely that other accounts in the industry will have similar pain points, so you won’t have to put all your eggs in one specific basket.
- Events: Events are a great way to connect with potential customers and build relationships. By hosting events as part of a wider campaign, businesses can build upon all of the marketing work with face-to-face interactions. B2B buyers interact with three to seven pieces of content before contacting a business. Events are an opportunity to shorten the sales timeline with stronger relationships and objections resolved.
In fact, we used all three of these tactics to support a growth strategy for one of our clients in the customer communications management industry.
While marketing can lay the foundation for growth, the rubber really hits the road in sales with two key drivers highlighted below:
Increase price: Fairly obvious of course, but various strategies can be used to increase price. Timing, scarcity, added value, security, brand loyalty and quality can all be blended to justify a price increase. Try to establish a negotiating framework whereby price is not the predominant differentiator. Linking complex solution based sales to specific business pain points is a good starting point.
Increase volume: We would advocate maximising margin first whilst always considering a strategy of building a scalable delivery model. Once you have a repeatable production or delivery process with healthy margins, turn the volume up.
Cost reduction
Increasing your profit margin by reducing spend is usually the quickest way to have an impact on the bottom line. When you map it all out on a line by line basis, there will be saving opportunities across the business. Depending on your valuation multiplier, every pound or dollar saved could be worth 10 times that in shareholder value.
And this strategy should extend beyond buying the same for less. For example, by using technology to automate time-consuming manual tasks, or by implementing more efficient organisational structures and processes for your employees. Bring costs down by reducing excess staff and disposing of unprofitable business units. Identify cost centres, and use procurement specialists to discover what a supplier can do better and cheaper than what you are currently doing in-house, and re-tender supplier contracts. Look at your bricks and mortar property portfolio and perform estate rationalisation to cut costs smartly.
Tax treatment
Another way of increasing company value is by minimising the tax burden. A qualified tax advisor can help you navigate the many ways to reduce tax, and ensure that you are complying with all tax laws and regulations and avoid painful fines and potential illegalities.
For example, you could look at tax planning strategies to defer income, make pension contributions or accelerate expenses to take advantage of lower tax rates. Make use of tax deductions around business expenses, maximise depreciation deductions, or gain tax credits for R&D. Or even look at incorporating overseas in a jurisdiction with lower tax rates.
Increasing profit by growing revenue, reducing costs and improving tax efficiency; they may seem obvious but they are powerful ways to build value in your business. However, there is a limit to how many costs you can cut and tax benefits you can take advantage of. And the amount of revenue you can grow is restricted by the scalability of your product offering so try to build in a growth strategy as early as possible.
Workstream 2: Optimising your valuation multiplier
Large-scale value creation has many levers, but the most obvious are digitisation, internationalisation and M&A. All of them have the potential to exponentially increase a business’s value, but they come with their risks. Studies from McKinsey find that somewhere between 40% and 70% of organisational change projects fail to achieve their objectives. They cite poor communication, employee resistance and lack of leadership as the main culprits. Managing those changes effectively is key to successful value creation. Commercially, we see two areas that will have a material impact on company value where risk can be sufficiently mitigated:
Build a scalable commercial operating model
Changing your business’s commercial operating model will require some level of digital transformation. For example, pivoting to a subscription-based model will mean implementing recurring payments infrastructure, as well as automating much of the customer journey, parts of your customer service and distribution capability.
Marketing transformation can be the cornerstone for building a scalable operating model, but risks becoming prohibitively expensive if you don’t have a clear strategy. Costs can mount up if the project doesn’t have a clear vision and delivery framework. Here is a simple step-by-step to changing your commercial operating model:
- Assess the current marketing capabilities and infrastructure: Identify strengths and areas for improvement. Include a review of the brand, current performance, processes, CRM systems, people and culture.
- Engage internal and external stakeholders: The project needs buy-in from the leadership team, product managers, employees, and partners with clear communication and training. It may also be useful to survey the opinions of both customers and even competitors.
- Design the new vision and desired operating model: Include the desired marketing and broader commercial outcomes (leads, pipeline value, sales cycle improvements), benefits (i.e. return on investment) and success criteria (with pre-defined KPIs).
- Pilot and test the new commercial model: Identify any issues and refine the model as needed. This could include trialling new lead conversion processes or pricing strategies on a particular product or market segment.
- Deploy the new commercial operating model at scale: Once proven successful by demonstrating the new approach performs better in a live environment, roll out these new approaches more extensively. This should include a phased approach, with clear milestones and timelines.
- Monitor and evaluate the new commercial system: Ensure that it is delivering the desired outcomes and benefits such as more traffic, increased leads, bigger pipeline, and a higher win rate. This should include ongoing measurement and feedback loops to identify areas for improvement.
Focus on the most profitable markets
Entering a new market (whether that means a different region through internationalisation, or a new product category or customer demographic through R&D or M&A) can drive massive value for your company. But you will need to make internal changes to succeed; so ensure you consider the following in your market entry strategy:
- Exiting less profitable markets: Do you intend to free up capacity in the business or look to build a new commercial team?
- A clear and compelling market entry strategy: Having a clear and compelling vision of the new market and the business's objectives is essential to motivate and align employees towards the new direction and prevent resistance to change.
- In-depth market research: If entering a new geography, you need to have an understanding of the new market's long-term value, culture, customs and regulations.
- Stakeholder engagement: Engaging with stakeholders, such as employees, customers, suppliers, regulators, and local communities, is important to build relationships and gain buy-in for the new market entry.
- Effective communication: Communicating effectively with stakeholders, both within and outside the organisation, is crucial to ensure that everyone is aligned and working towards the same goals.
- Continuous monitoring and evaluation: Monitoring and evaluating the market entry process is important to identify any potential issues or opportunities and make necessary adjustments.
This is just the kind of process that helped our client, a global commodities broker, build a platform for growth with a scalable digital brokerage platform and back office automation.
Workstream 3: What is your defence strategy?
Everything that we have discussed so far can be seen, in sporting terms, as part of an offence strategy, but there are some things that shouldn’t be overlooked when looking to build shareholder value: those intangible assets that make your company completely unique. Namely your brand, your IP and your methodologies.
Strengthen your brand
Investing in your brand will increase your value in the eyes of your customers and potential investors. It can start simply as a brand refresh and be consolidated with brand-building content campaigns.
If your brand identity hasn’t changed in several years, feels tired or is inconsistent across your channels, then it is time to take control of it. Rebuilding your brand can help you stay relevant and up-to-date with changing market trends and customer preferences, as well as differentiate you from your competitors. Greater consistency across channels can help improve brand recognition and make it easier for customers to identify and engage with you. It can help realign your employees with your vision and help them become more effective when it comes to increasing profit and starting other organisational change projects.
Conversely, if you have previously updated your brand, this work may not be necessary so, it’s important to conduct research first to gauge how your brand is viewed externally. You and your marketing team see and feel your brand every moment of every day while your customers and prospects only occasionally come into contact with it. It will age faster for you than it will for them.
Invest in your IP and key differentiators
While your brand will help you stand out from the crowd, your IP is what makes you an investable and scalable business. You will need to both develop and protect your products, trademarks and patents to safeguard your future. As an entrepreneurial and innovative company, developing a strategy to protect your IP is vital.
Productise your methodologies
Creating a standardised and repeatable approach to delivering services or products can make it easier to scale the business by replicating processes across different teams, departments, or locations. Standardise your processes so that current and future talent can pick up the reins and help make business growth self-fulfilling. How? Document, train and embed:
- Document the methodology: Include detailed steps, procedures, and guidelines for how to deliver the service or product.
- Create training materials: Manuals, presentations and videos with interactive and hands-on training sessions will help employees apply the methodology effectively.
- Embed the methodology in the culture: Create a shared language and approach to delivering services or products with regular communication, reinforcement and recognition of employees who apply the methodology effectively. Then monitor and evaluate so you can continuously improve the methodology over the coming years.
How are you going to deliver this in 3 years?
Execution, execution, execution. It’s easy to lay out the strategy for change, but if you don’t have the ability to manage it into reality, it will become yet another failed strategy. There needs to be a healthy mix of visionaries and operators working on the project. The first to inspire and get employees bought into the vision; the second to get things done.
Key steps to delivery:
- Decide on your work streams
- Get your core team together
- Set a timetable
- Choose your delivery partners
- Begin a ruthless focus on execution
- Evaluate progress at key milestones
With a 3 year coordinated delivery programme, there will be bumps in the road, but with commitments from a team that is bought-in, it is very feasible.
How to move from strategy to execution mode
A complex transformation programme with multiple work streams requires a central source of coordination. This could come in the form of a programme manager to keep everything on track (someone trained in the art of herding cats), or a dedicated team that sits outside of daily operations.
You will also need to consider whether services are delivered internally or procured. Many businesses are proud of the capabilities they have in-house; but if teams are at capacity, then those capabilities may struggle to prioritise something new.
It’s hard to effect any sort of organisational change when your head is stuck in the weeds of the day-to-day business. This is why consultancies like us exist, and why companies continue to outsource to them. An external partner is able to zoom out for a wider view, and can cut through any politics and ask tough questions without worrying about stepping on any toes. Take a look at our story to find out why we do what we do.
