Is Your Leadership the Limiting Factor in Building Value in Your Business?
Business valuation seems like it should be a science more than an art, but in reality, valuation experts start with a blank canvas and need to paint the value picture of your business.
When evaluating a business all acquirers will look at your books. Revenue, income, costs and all the financial components that are clear and easy to identify. After the obvious factors are considered, they then look at the possibilities and potential that a business has to offer.
The intangibles and more challenging to evaluate aspects come next, things such as proprietary processes, customer loyalty, market share and position have a role to play.
So where does leadership fit in?
Unsurprisingly, leadership is not highlighted in the 8 factors identified that professional buyers look at. Leadership is notoriously hard to measure, but arguably the best way to do so is by looking at results. So there you have it, your results are driven by your leadership. Your leadership is what is impacting value. In fact, it is difficult to impact the acquisition factors if leadership is not involved.
So how exactly does your leadership affect your value? Here are our top 3 leadership competencies that are underpinning, affecting and often limiting your ability to drive value for the 8 measurable and identified aspects.
A leader’s ability to craft, articulate, align and achieve their vision is just about the ultimate definition of value creation. Surprisingly, many leaders struggle with creating visions that are aspirational, value-focused or even based on reality. Every aspect of your business is shaped by your vision. Don't have one? That’s a great place to start practicing leadership and understanding where, how and why you are looking to expand your business.
Strategic Decision Making:
Being the owner means the buck always stops with you. Every decision, every tie, every time. Some decisions are meticulously planned, others are impulsive and there are probably a few that you avoid. Not all decisions produce the intended results, but great leaders make decisions that are good. Good decisions are ones that align with your vision and values.
Choosing and deciding may on the surface seem like the same thing, but are very different. That’s because when a leader decides, they follow through. They communicate the decision, they take responsibility and ownership for it. This means holding people accountable for their part, ensuring the team understands the decision and taking responsibility for the results.
Everybody thinks they want to choose, but no one wants to decide.
Building Value in Others:
The best leaders don’t just drive value, they cultivate and create it. One of the true tests of great leaders is how their team performs when they are away. The value they create lasts beyond themselves and exponentially builds in their team. Value-building leaders are intentional about creating cultures that thrive and teams that succeed.
One of the 8 factors of building value specifically calls out the Hub and Spoke effect and considers the true value of the business solely based on the leadership potential of the team.
Even celebrated and leadership Guru Jack Welch was not able to effectively create lasting value. Just 7 years after he left GE, all of the value he created had deteriorated.
Just like the market has an “invisible hand” where self-interest ultimately aligns with the rest of the market, your self-leadership ability ultimately guides the performance of your company. Leadership is not necessarily missing from the value equation; it is the invisible hand that is driving your value. A company’s leadership is the underpinning of how they build value.
Every business, and business owner, is at a different stage of their business and leadership journey.