In his new four-part series, business advisor Phil Symchych is going to look at how you as a business owner can increase value for your customers, your company and your shareholders.
What experiences early in your life shaped the business and career you have today?
When I was a teenager, my parents and aunt and uncle bought a seasonal lodge at Clear Lake in Riding Mountain National Park. Years later, I figured out this acquisition was ultimately a lifestyle decision and not a purely business decision. Both families mortgaged everything to the bank, got financing, and bought a business that only operated full-time two months of the year. This was before the internet existed. Interest rates were 23 per cent.
We endured a lot of learning, mistakes, financial challenges, and a few successes. I learned about customer service from my mom and about knowing the numbers from my Uncle Peter. Today, those lessons are still extremely valuable, and I want to share what I’ve learned from Clear Lake Lodge and in the past 30 years of advising, consulting, and coaching small, medium, and a few large businesses.
In any organization, there are three critical points of value creation: for the customers, for the company itself, and for the shareholders. Today, I’ll introduce each of these critical value points. In future articles in this series, I’ll expand on each section.
The Customer Isn’t King
Specifically, in a business-to-business world, your customer isn’t the king. Your customer’s customer is the king or queen. That’s because you help your customers to generate results for their business, and your customers generate those results by helping their customers generate results. It’s more than just value-added manufacturing. It’s about creating results along the way for everyone.
How do you increase your value to your customers and their customers? Ask them. Put on your consulting hat and have a real conversation with them. Go and see how they use your products and services. Ask them what they like and what could be improved. Measure these critical value factors and improve how you deliver them. In a price sensitive world, this conversation about value will differentiate you and increase your customer’s loyalty to you—because you asked and listened. The key is to understand and quantify the value and results you create throughout the customer flow chain.
Adding Value to Your Own Company
The key difference between a small business and a mid-market company isn’t revenues. It’s mindset. A small business is hustling every day to attract and serve customers and to generate cash flow. Speed is important, and they don’t have time to formalize systems or processes. Energy comes from emotion. They’re flying by the seat of their pants, and pants aren’t very aerodynamic.
A mid-market company, on the other hand, spends the time to document their processes so the processes could be repeated, enable employee training, and logically enhanced. They don’t create business plans for the bank. They create plans and budgets for themselves, because their managers actually manage. Mid-market leaders proactively manage their talent, operations, marketing, sales, finances, and information flow. They take control.
The key to adding value to your own company is to think and act like a much larger and more mature business than you currently are at. That mindset shift will accelerate the value of your company.
Creating Value For Your Shareholders
Many small and medium businesses are so focused on their customers, growth, and cash flow that they ignore creating value for their shareholders. In a founder or majority shareholder situation, this can be very negative, because every ounce of energy and capital goes into growth. Now, I’m all about growth, but growth is more sustainable when the company is performing well enough to pay a regular dividend to its shareholders.
“The bank won’t allow it,” you say. They will when you’re meeting all your covenants, have a business plan and budget in place that you follow (and don’t just create for them), and demonstrate sound business and financial acumen. If the bank still won’t allow it, it’s time for a different bank.
In conclusion, creating more value from three perspectives, your customer, your company, and your shareholders, will help you to lead positive and sustainable growth in your organization. Your business can and should support your lifestyle while also providing value to your customers. Don’t wait decades like my family did to create value for shareholders.
Full speed ahead!