Value Builder Driver #2: Growth

In this episode of the Business Owner Breakthrough Podcast, Pete Mohr discusses the second key driver of the Value Builder System: growth potential. He emphasizes the importance of understanding and enhancing growth potential for business owners looking to scale and prepare for future sales. The conversation covers barriers to growth, strategies for overcoming these barriers, and the significance of exit planning in achieving sustainable growth.

Takeaways

• Growth potential is crucial for long-term business success.
• Buyers are interested in future growth, not just current profits.
• Delegation is essential to overcome growth ceilings.
• Businesses should diversify their customer base to reduce risk.
• Implementing scalable systems can facilitate growth.
• Empowering teams allows owners to focus on strategic growth.
• Exploring new markets can lead to increased revenue.
• Documenting growth strategies is vital for sustainability.
• Thinking big, like 10X growth, can reshape business strategies.
• Exit planning is integral to overall business strategy.

Are you looking to make some changes in your business and your life in 2024?  Head over to speaktopete.com and book a chat with me to see if we're the right fit!

Maximize Your Business’s Value with the Value Builder Assessment!

As a business owner, do you know what your company is truly worth? The Value Builder Assessment is a powerful tool that helps you uncover the key factors influencing your business’s value. Whether you're considering a sale, planning for the future, or simply want to grow, this assessment offers actionable insights to increase your business’s worth and appeal to potential buyers.

Don’t leave your business’s future to chance. Click here to take the Value Builder Assessment and start building a more valuable, resilient business today!

Book a no charge Freedom Call with Pete, to see if you’re a good fit for his business coaching or talk to Pete about speaking at your next event head over to http://speaktopete.com to find a time that works for you!

Pete's Websites:

Pete-Mohr.com
The Exit Ready Business
Kolbe Coach
Simplifying Entrepreneurship

LinkedIn at https://www.linkedin.com/in/petemohr/
Instagram at ...

Transcript

0:00

Welcome back to the Business Owner Breakthrough podcast and our Value Builder System series. Excited to bring to you sort of the idea around our second key driver of the Value Builder system. Today it's the growth potential. And last week we covered the financial performance and we're going to get through all eight of these key drivers. But today we're going to dig into the importance of growth in your business. It's really where the rubber hits the road for business owners who want to scale their operations and position their company for long term success. So the growth potential is really the ability of your business to expand its revenue and profitability over a length of time. And buyers are willing to pay a premium for businesses that can show strong growth potential. I mean, it's not rocket science, but think about the different areas of your business that you could potentially be growing. And here's another thing. When you are ready to sell your business, whether that's 1, 2, 5, 10 years, 20 years down the road, the buyer who's going to buy it probably won't want to keep it the same. They're going to have their growth lenses on. They're going to be looking for ways to grow this business and take it to a new level. So the idea here is we should always be looking for these areas. We should always be presenting them and clarifying them along our journey as business owners. And have it in mind as to the areas in which they could look for growth potential too, for the future owner. Right. There's internal growth and there's external growth. At least how I look at it. Internal growth is really about increasing your market share and improving efficiency and really leveraging existing resources. While external growth is really about the expansion through new products or new verticals, or entering new markets or potentially even acquisitions of other businesses along the way. Right. It's really important to note that businesses with high growth potential are far more attractive to buyers because, you know, they offer a pathway of future returns and not just the present profits. People are buying for the future. Right. They're always thinking about their better life as they own your business down the road. They're thinking, hmm, if I take this business, what can I do with it down the road that's going to make it even better? A couple of common areas that we find with growth. You know, many business owners hit these growth ceilings because their business is too dependent on them as the owner. It's always, it's a problem with a lot of small businesses where the owner themselves is what's hindering the growth of the business. So Here are a few things that tend to be barriers for growth. You know, many business owners hit a growth ceiling because their business is just too dependent on them as the owner. And so barrier number one, I would say, is really this lack of delegation capability within the organization. And if you are the owner and you're stuck doing everything, if you open the door every day, close the door, make all the sales, do all the hiring, all these different things, you can't focus on big picture growth. Right? There are ceiling limits, and you're probably already there. Barrier number two is you don't have a scaling process. And if you don't have your process, we talk a lot about this on the podcast. But if you don't have efficient systems and processes, growth can really become very chaotic and unmanageable up into a certain level where the owner is basically burning themselves out and the wick's burning at both ends. You've heard all the different phrases around it. But essentially building those processes and hiring and aligning the delegation is such an important piece. And here's another thing. Area number three I look at as probably the third most important one is too narrow a customer base. I mean, I do believe in going deep with your customers, but if you're looking to grow, businesses are overly reliant on a few key customers. And when they are, it's really hard to grow. And they're really perceived from buyers who might look at buying this business as a riskier business when it's reliant upon a few individual customers along the way. So depending on your business, whether you're reliant on more than I like to say, around 15% of your business shouldn't be reliant upon one key customer. That's when things get a little bit sketchy as far as looking at selling the business, and people get a little bit concerned around the riskiness of that particular business. So if we're looking for a few strategies to continue the growth, the first one might be to diversify your revenue streams and look for ways to create new sources of revenue through additional products or services. For example, you could consider offering a subscription model, which is highly valuable to most buyers, or maybe expanding into related markets. And I'll use a little item from our shoe stores. You know, we started selling Stanley mugs along with all of the other things that we do for accessories in our shoe stores. And you might not think that selling Stanley mugs at a shoe store is an interesting thing, but I can tell you we're selling a lot of Stanley mugs What are the related items that you could be selling along your customer's path and journey in your product systems and your service systems that might add an extra 10 or 15% on every sale. Right? Different little ways all add up along the way. So step two would be to build scalable systems, invest in automating processes or using software really helping you manage this growth. Now you might include a CRM, maybe a point of sale system, some automated invoicing operational software that's going to help you and your team make things easier. And there's just so much out there these days that is making us more productive around that. And it depends on your industry, but it's worth looking into. And you know what, if you're not going to use it, the next person probably will. And you may want to start these processes and get them rolling so that it's already set up and ready to go for when they take over down the road. And in the meantime, you get to use it and take advantage of it. Right. Step number three is to delegate and empower your team. You know, growth requires a shift from owner centered operations to team centered operations and train and trust your staff to take over the day to day tasks so that you can focus on strategy. And you know, it's easier said than done, but we've talked about the five Ps, you know, understanding your promise, aligning your products, your process, your people to it so you can have the right amount profit. These things all align in together, right? And then step number four is expand your market reach. Just look at all of the different things, those untapped markets where your products or services can fit in. And it could mean geographic expansion or it could mean just targeting a new customer segment within what it is that you already do. You might say, well, how do I measure growth potential? And growth isn't just about having great ideas. It's about being able to execute and sustain growth over time. Remember going back to last week around the financials. You've got to be able to prove and clarify and show all of the growth that you've had and then have them look at the opportunity for going forward. Right. Do you have clear and documented growth strategy in your business? Are your operations set up to handle increased demand, even think about 10xing your business. I mean, most of us think of about getting an x 10% or 20% or even 5% in certain industries as being a big thing. But what would happen if you 10x your business? What about those processes? What about the strategies? What would it take and how much money would it take? How many people would it take? All of these different things. You should give yourself a certain amount of time in a given year to really think out of the box, because that's what's going to help you take it there. Right? Whether you're setting this business up to sell, like I said, Over 1, 2, 5, 10 or 20 years, it really doesn't matter. Exit planning really is just good business strategy. And thinking in that 10x framework of growth is an interesting way because most people can think about growing even two times, and most business owners that have been at it for 10 or 15 years have already grown two times or 10 times. If they look back and they say, you know what? I started this business, we were doing a million bucks, now we're doing 2 million. Well, that's 100% growth. And over the course of time. But looking to go from two to four might be a very hard thing for you to do, but you need to do it. You need to go through those things to get your mind set up, because it's part of setting this business up for a proper exit down the road. Ultimately, buyers want to see how you've projected that the business can grow, and they want to see that those projections are grounded in reality growth. It's the key driver number two of the value builder system. And if you haven't taken your value builder assessment yet, all you have to do is go over to the exit ready business and click on the button. Take the value builder assessment and you'll be able to take the assessment in about 15 minutes and you'll get your score for your growth potential. Along with the other eight key drivers, we'll have a conversation around them and set you up with a plan that's going to move you ahead and get your business exit ready. In the next episode, we're going to talk about the Switzerland structure. It's how to make your business less dependent on any customer, any supplier or any employee, and why that makes your business even more valuable. Now go and make it a great day.