I recently had a very interesting conversation with Chuck Richards, the CEO of CoreValue Software. Chuck is in the business of helping private business owners evaluate what drives value in their business and where there are gaps that can be filled. He does this through his software product, which I use and highly endorse.
During our conversation Chuck told me profits have nothing to do with creating value. At first I pushed back very strongly but in a very short time I realized he was correct. Profits are a result and not a leading indicator of creating value in a company.
Creating value starts with being tactically excellent. This requires that we look inside our company and see if we are delivering our product and service in a predictable manner that our customers have come to expect. This is the first step in tactical excellence. We talk about exceeding our customers’ expectations, but before we get there we need to make sure we are meeting those expectations.
Trust is built between customers and suppliers by having a predictable relationship. If you are going to be late you need to contact your customers and let them not only know you’re going to be late, but also what you’re doing to fix it. Without this you lose trust and the value of your company becomes significantly diminished.
The second level of creating value comes from strategic initiatives. Tactical excellence is a given in a strategically great company. The companies that create true value take advantage of strategic opportunities that are presented to them. These are typically things you can do that change your process of delivering service, the way you identify your customers, the way you innovate to provide high value services, or finding a new need from a customer that creates a small, high value niche.
Strategic initiatives require focus and require senior management not only support them, but be intimately involved in their design and execution. The main reason I promote the concept of owners being operationally irrelevant in their business is so those owners have time to work on strategic activities that can drive extreme value in their companies.
Profits are important, but they’re a trailing indicator. Back to my conversation with Chuck. Yes, profits are important. Without them most of us will run out of cash. What I learned from our conversation is that with a business that constantly creates high value, cash is often not an issue. It’s an issue with companies that are just barely getting by.
Are you a company that’s creating value or just struggling to meet payroll? Examining where you fit is a good place to start.
We have a tool that we use that our friends at CoreValue have developed that allow you to take a quick look at your business. This complementary conversation will take 30 to 45 minute of your time and look at 9 internal and 9 external areas of your business. You’ll get a report that is also doesn’t cost you anything and you’ll be able to decide what you want to concentrate on.
If you’re interested in this process, click on the link below to set a date and time to speak with us. Or, you could call Melissa Provost at 802-846-1264 to set a time to speak with us.