Michael Levison

Engagement is not just a corporate buzzword; it’s a catalyst for instilling company values and visions within the heart of every team member. For Small and Medium-sized Enterprises (SMEs), where resources are finite and the margin for error is slim, having a team that is fully engaged is not a mere luxury, but a necessity. Achieving organizational goals can become an uphill battle if the essence of engagement is lost in translation. The Link Between Employee Engagement and Business Performance Numerous studies have underscored the correlation between high levels of employee engagement and improved business performance. The research firm, Garner, has reviewed numerous studies over the past decade.  They highlight that organizations ranking in the highest quartile of employee engagement significantly outpaced their competitors in terms of business performance metrics such as average revenue growth, net profit margin and customer satisfaction. Engaged employees are usually more productive, exhibit a stronger alignment with company values, and contribute to enhanced customer satisfaction. Conversely, disengagement comes at a high price—higher turnover, lower productivity, and a diminished customer experience. The Pillars of Employee Engagement Strategies to Foster Employee Engagement in SMEs Drawing from personal experience, I’ve seen a remarkable difference in outcomes when teams are involved in devising solutions as opposed to merely implementing prescribed plans. When teams take ownership of solutions, the level of engagement and the quality of execution is often exponentially better.  It takes more time, and is usually more frustrating, but it is worth it. I have always found that conducting employee surveys stimulates engagement as well.  Team members that take the time to complete them are, in fact, engaging.  The data always provides helpful insights and the process just sends the right message. Measuring the Impact of Employee Engagement: A consistent approach to measuring engagement and analyzing its impact is crucial for driving continuous improvement. It’s through a cycle of measurement, feedback, and adjustment that SMEs can fine-tune their engagement strategies for better alignment with organizational goals and improved business performance. Employee engagement is not a one-size-fits-all proposition. It’s a nuanced endeavor that demands a tailored approach to resonate with the unique culture and aspirations of your business. By focusing on clear communication, involving teams in planning, promoting a balanced work-life dynamic, and adopting a consistent approach to measuring and enhancing engagement, you can can cultivate a fertile ground for engagement to flourish which will go a long way towards propelling growth and success.

Key Performance Indicators (KPIs) are not mere metrics; they are powerful narratives that plot the trajectory of a company’s journey. For managers, selecting and using KPI’s is an exercise in vision and strategy, connecting past achievements to future ambitions. Understanding the Purpose of KPIs: Beyond the Numbers KPIs need to be business-specific. Consider the tech giant Apple. One of their KPIs might include “Number of New Innovations Patented” which ties directly to their core value of innovation. Every business has unique characteristics and, therefore, unique KPIs that should encapsulate those nuances. It’s not just about reflecting on past accomplishments; KPIs must also anticipate and align with future challenges and opportunities.  For instances, metrics that gage important “pipelines” are really important to identifying potential problems before it is too late. Tie KPIs to Financial Performance For executives, the bottom line is paramount. The right KPIs can be critical drivers of financial outcomes. For instance, if a retail business focuses on a KPI like “Customer Return Rate,” understanding and reducing this metric can lead to substantial savings, directly impacting profitability. Segment KPIs by Department and Align with Strategy Each department has distinct roles and requires specific KPIs. However, these KPIs should be in harmony with the broader corporate strategy. For example, if a company’s strategy emphasizes customer satisfaction, the customer support department might adopt “Average Response Time” as a KPI. It’s essential to ensure that these metrics are measurable to prevent a scenario where you’re “sailing without a compass.” Setting SMART KPIs and Ensuring Reportability The SMART (Specific, Measurable, Achievable, Relevant, Time-Bound) framework is more than just an acronym; it’s a blueprint for effective KPIs. Before setting a KPI, it’s crucial to ensure that systems are in place for accurate reporting. For instance, if considering “Market Share Growth” as a KPI, ensure that there’s access to relevant market data. Also, there’s wisdom in the adage: “Less is More.”  A common mistake many businesses make when establishing their KPI’s is that they identify too many and, in doing so, they dilute the impact of them all.  By honing in on select, impactful KPIs, a business can channel resources more effectively. Engage and Empower Your Team At the heart of every KPI is a team striving to realize it. Garnering team buy-in is essential not just for morale but also for practical insights. The people on the front lines can often provide insights about data accuracy or the feasibility of a specific metric, ensuring a balance between aspiration and reality. Establishing KPIs isn’t without challenges. Data silos, resistance from departments, or even changing market dynamics can be obstacles. Proactive communication, continuous training, and regular KPI reviews can mitigate these challenges, ensuring your metrics remain relevant and effective.

In an era where hiring and retention challenges are at the forefront of business concerns, the importance of effective onboarding has never been more critical. For business owners and seasoned leaders, the struggle isn’t merely to attract the best talent, but to keep them engaged, motivated, and loyal to the company’s mission. After years of trial and error, I found a formula that, if followed, generally (not always) delivered better results.  In this post, I will summarize the key elements: Pre-boarding Preparations Before a new hire’s first day, the preparation groundwork can set the tone for their entire journey. Advanced preparations, such as ensuring the availability of essential equipment and tools, not only show professionalism but convey a sense of value towards the new team member. Additionally, sharing pre-joining materials, like organizational charts or in-depth project outlines, can assist in bridging the knowledge gap even before their formal induction. First Impressions Matter The adage, “First impressions last,” holds genuine weight when bring new people into your organization.  Crafting an enriching first-day experience can echo throughout an employee’s tenure. This doesn’t merely encompass a warm welcome but extends to concise presentations on company goals, immediate tasks, and team introductions. A well organized, yet personable, approach conveys that your organization is professional and employee focused. Company Culture & Values Indoctrination While experienced leaders are aware of their company’s mission and vision, explicitly articulating and reinforcing these values to new hires is crucial, and it should be the very first issue covered in training. If possible, this part of the onboarding process should be delivered by senior managers rather than training personnel as that will convey the significance.  Rather than just disseminating a handbook, consider hosting interactive sessions that introduce these core philosophies. Personal anecdotes, stories, and historical accounts can embed these values more effectively, fostering a deeper allegiance to the company’s ethos. Training, Training, Training This is where many companies fall short.  Job specific training, especially in smaller companies, is often informal and inadequate.  For businesses aiming for excellence, it isn’t enough to just touch upon job essentials; the training must be so thorough that by its culmination, every new hire feels wholly prepared to not only tackle their role but to excel in it. This goes beyond conventional training modules—it necessitates a deep dive into real-world scenarios, past challenges the company has faced, and the nuances of the industry. Mentorship & Buddy Systems Onboarding should not end when the initial training does. It is really important to provide new hires with a reliable go-to person well beyond their first few weeks. By sticking with a new team member longer term, mentors can answer questions, provide ongoing feedback, and offer insights based on their own experiences. This consistent touchpoint helps new hires navigate common challenges, ensuring they’re never left in the dark. For the mentors themselves, taking on this role shouldn’t feel like just another task on their checklist. It’s a practical way to ensure team cohesion, smoother workflows, and quicker problem-solving. When mentors see their role as an integral part of a new hire’s success, rather than a burden, both parties benefit and the company sees better results. Goal Setting & Expectations This is another area where many companies fall short.  Often times, new hires get through the onboarding process and move into their new role without a clear understanding of management’s expectations around their performance. The setting of clear, tangible goals and benchmarks isn’t just beneficial for performance metrics, but it signals clarity of purpose. For experienced hires, it’s not just about what they should achieve, but understanding the ‘why’ behind those goals. Providing a roadmap for career progression, aligned with the company’s larger objectives, can inspire dedication and a proactive work ethic. Social Integration Beyond professional integration, fostering a sense of camaraderie and belonging can significantly boost morale and, ultimately, retention.  While team-building exercises are valuable, even simple gestures like group lunches or coffee chats can nurture bonds. Encouraging new hires to participate in company events, clubs, or initiatives can further their immersion into the company’s social fabric. Onboarding isn’t a static process. By actively seeking feedback from new hires about their onboarding experience, leaders can identify areas of improvement. This proactive approach not only enhances the process for future hires but showcases an organizational commitment to growth and excellence.  This step lead to many of the changes we made to our process over the years. In today’s challenging business arena, onboarding isn’t just a routine—it’s a powerful competitive edge. Leaders who prioritize a robust and ever-evolving onboarding process aren’t merely facilitating smoother transitions for new hires; they’re forging stronger teams prepared for the challenges ahead. Ignoring or underestimating this crucial phase leaves and organization vulnerable, missing out on harnessing the full potential of their talent.

French economist Jean-Baptiste Say characterized an entrepreneur as one who “shifts economic resources out of an area of lower productivity and into an area of higher productivity and greater yield.” This expands the term’s literal translation from the French for “one who undertakes” to include the concept of value creation. Enterprising founders epitomize the principle of creating more value with less resources, particularly when hiring. While it may be tempting to try and hire C-level executives with extensive resumes and impressive LinkedIn profiles, smaller businesses usually cannot afford such seasoned professionals. To combat this, value creators need to develop a knack for hiring talented people about to blossom. High Potential Employees, or HIPOs, might have thin resumes—but spotting their burgeoning talent allows you to create significant value that others overlook. This is challenging to do well since most HIPOs have limited credentials for you to evaluate. Here’s a three-part process for spotting HIPOs, developed by Skubana co-founder Chad Rubin, who built his company to $5 million in revenue with the help of a team of HIPOs before deciding to sell it to 3PL Central.  Rubin criticized the traditional hiring process as “broken.” How can you evaluate a candidate’s potential in just a 45-minute meeting? Rubin’s alternative solution comes in a three-part approach:   1.      Hide a Golden Egg Many young candidates apply for any (and every) job they come across, but Rubin sought detail-oriented applicants who took the time to understand his business and the specific role. He embedded an obscure request within each job posting to identify those who had read it in full. For instance, he asked candidates to include the name of their favorite ’90s band in their cover letter. Rubin’s intention wasn’t to compile a new playlist; he wanted to see who had read the entire posting.   2.      Pattern Recognition Aware that traditional interviews wouldn’t suffice to gauge a candidate’s potential, Rubin turned to pattern recognition assessments to evaluate their intelligence. He discovered an online puzzle that required candidates to recognize patterns in a set of images, and he found this to be a reliable measure of their intellectual potential.   3.      Measure the Fit Once satisfied with their cognitive abilities, Rubin aimed to gauge how well a candidate would mesh with his team. Instead of relying on a conventional interview, he used a Culture Index psychometric test to assess psychological attributes beyond IQ, thereby measuring their fit within the company culture.   Another psychometric assessment you can leverage is the Kolbe A Index. It measures the ways people instinctively take action and is a great barometer to use when evaluating the value that new employees will bring to your business. Let’s walk through a concrete example of how you can use a Kolbe score to assist your hiring process. If you need a manager who will run the daily operations of your business, here’s what to look for on the four attributes Kolbe measures, on a scale from 1 to 10: Fact Finder This attribute measures how someone gathers and shares information. For someone running the day-to-day operations of your business, look for the sweet spot of someone who gathers a lot of info before taking action, without succumbing to analysis paralysis. Here are some questions that might help you assess that skill: Follow Thru This category focuses on how candidates organize and design. You want someone who initiates systems, structure, and organization, so he/she should score relatively high here.  Questions you might pose to assess follow through are: Quick Starter This one’s about how a candidate deals with risk and uncertainty. Look for someone with a healthy dose of risk aversion. Watch out though, because if they score too low, say a 1, they might not be a fit for an entrepreneurial company. Implementer This last characteristic covers how a candidate handle space and tangibles. Ideally, you’ll find someone in the middle who is able to keep things working the way they should, and construct practical solutions when needed.  Consider posing these questions in the interview: This unique three-part hiring strategy, paired with these effective assessment tests, will empower you to consistently recruit high-potential employees—even when they’re entry-level—and unlock hidden value for your organization.  

In the intricate tapestry of entrepreneurship, the founder emerges as the guiding light, steering their venture through uncharted waters. Armed with a potent combination of vision, dedication, and tenacity, founders often find themselves at the heart of every aspect of their business. However, as indispensable as their role may be, an over-dependence on the founder can inadvertently breed a series of challenges that hinder growth, impede employee development, compromise customer satisfaction, and even impact the founder’s own well-being. In this article, we take a look at the intricacies of the founder’s pivotal role, the impact of being overly entrenched in day-to-day operations, and the imperative of dedicating time to focus on the future. The founder’s role is, of course, pivotal in shaping the trajectory of a business from its inception. He or she is often a multifaceted professional, balancing responsibilities ranging from strategic decision-making to hands-on operations. While this intense involvement can initially foster a sense of control and precision, a long-term over-dependence on this model often impedes a company’s growth potential. A business overly reliant on its founder often struggles to seize new opportunities and expand its horizons. With the founder at the helm of every part of the business, there’s a limit to the number of initiatives that can be pursued. This can lead to missed chances for growth, diversification, and innovation, as the founder’s bandwidth becomes saturated with routine tasks. The business can become trapped in a cycle of repetitive tasks, stifling its ability to evolve. Slowing Employee Development and Reducing Engagement While a founder’s hands-on approach might provide immediate solutions, it can inadvertently sideline the potential of the workforce. When employees are excluded from key decision-making processes, their professional growth can stagnate. Furthermore, an environment where the founder is the sole decision-maker can discourage employees from contributing ideas, as their input may be perceived as inconsequential. This lack of empowerment can dampen employee engagement and hinder the emergence of fresh perspectives and innovative solutions. It is important to recognize the importance of delegation as a means to empower employees and create a collaborative ecosystem. By entrusting capable team members with decision-making authority, founders can free up time to focus on higher-level objectives. This shift also nurtures a culture of accountability, fosters skill development among employees, and encourages the emergence of leaders within the organization. Impact on Customer Satisfaction A founder’s role in directly managing every facet of the business can have cascading effects on customer satisfaction. As the business scales, it becomes increasingly challenging for the founder to maintain the same level of personal interaction and attention to detail. This can lead to delayed responses to customer queries, inconsistencies in service quality, and a general decline in customer experience. The founder’s innate ability to build and nurture relationships can be compromised as the business stretches its resources to meet growing demands. The Struggle For Balance The relentless exertion of control can inadvertently take a toll on their own well-being. The pressure of being the linchpin in every aspect of the business often leads to stress, burnout, and a deteriorating quality of life. The boundaries between work and personal time blur, leaving little room for fun, relaxation and rejuvenation. It is just as important for the leader to invest in themselves as it is for them to invest in the business. Prioritizing the Future In the pursuit of long-term success, founders must prioritize their focus to nurture the future of the business. While day-to-day operations demand attention, the majority of a founder’s time should be dedicated to strategic planning, innovation, and cultivating a sustainable growth trajectory. Delegating operational responsibilities allows founders to steer their companies towards scalability, efficiency, and Conclusion While the founder’s dedication and hands-on approach are indispensable for a business’s initial success, an over-dependence on this model can stifle growth, limit employee development, compromise customer satisfaction and, ultimately, negatively impact enterprise value. By embracing a more strategic role, founders can navigate the complexities of growth and sustainability while safeguarding their own well-being. As the business journey unfolds, it is the founder’s ability to strike a balance between the present and the future that ultimately shapes the narrative of their venture’s success.

Effective senior managers recognize the paramount importance of robust systems and processes in driving the long-term health, growth, and value of our company. The success of any organization largely lies in its ability to streamline operations and ensure a structured approach to its activities. By providing clear processes and structures, you enable your teams to operate with precision and efficiency, resulting in increased productivity and better outcomes.  You also take a BIG step towards reducing the company’s dependence on you, or any other key individual for that matter. Consider this scenario: imagine being at the helm of a thriving sausage manufacturing plant with a devoted following. Your products are renowned for their unique quality, the result of a highly proprietary process for blending the ingredients, which only you know. This dependence can be perilous, making you the sole keeper of the company’s success. You may be able to identify with the challenges of being confined within your own companies due to the lack of well-documented processes. To ensure the sustainability and growth of your organization, you must prioritize the documentation of crucial processes. Starting with the top 1-2 processes in each functional department, challenge your managers to engage in a simple reverse engineering exercise to meticulously document each step. Though the task may seem overwhelming, initiating the process today will pave the way for future freedom. It is especially essential to capture the steps of each training process, ensuring seamless replication as you expand your team. Encouraging innovation and fresh ideas is vital, but you must not lose sight of the essence that brought you success in the first place, your underlying value proposition. By teaching, training, and holding your team accountable for adhering to these processes, you safeguard the integrity of the core business practices. Centralizing the storage of processes documentation further strengthens your organizational backbone. Whether in a shared drive or a departmental resource portal, accessibility is key. User-friendly software facilitates smooth navigation, empowering employees to follow the right procedures effortlessly. Embracing these straightforward actions today will significantly enhance the overall health of your systems and processes. Slow but steady Incremental progress is acceptable, as long as you commit to consistently taking steps towards a healthier, simpler, and more valuable company. This focus on process development and documentation not only elevates the satisfaction of running the businesses but also bolsters profitability and gives you the invaluable gift of time freedom. In conclusion, well-documented processes are the bedrock upon which successful businesses are built. As you take strides towards systematization, you pave the path for growth, efficiency, and ultimately, a more valuable enterprise. If you seek further guidance on this journey, I encourage you to explore the possibilities of “The Definitive Guide to Standard Operating Procedures” and remain open to seeking support and advice to drive your organization to new heights.

In order for a you to create a business that is growing/dynamic and, at the same time provides the freedom that you have earned, it is critical for you to be able to extricate yourself from the constant involvement in “day to day” issues. However, it also remains very important to maintain a visible presence as the founder and leading force.  In many cases, the clients established their relationship with the company through you and the relationship endured because of the confidence and trust with you.  So, maintaining enough visibility is important to preserve the goodwill that you have built without being prisoner to it. Here are a few simple suggestions for staying visible even after you have stepped back. Establishing a Visible Founder Presence: Balancing delegation with a visible founder presence contributes to the continued success and growth of your business, especially when you focus on areas where you excel.

Let’s begin with a little exercise in imagination. Picture yourself as a child, completely reliant on adults for your survival. As an infant, you couldn’t communicate through words, yet you were a master at getting what you needed. Your go-to strategy was crying, and it worked like a charm. The adults understood your message, and you received food, attention, and even a nap. The louder you cried, the better your chances! Now fast forward to your adolescent years. You still have the same basic needs, but crying every time you require something would be pretty embarrassing, wouldn’t it? Instead, you’ve learned to express your needs through conversation and active listening with your parents. Communication becomes key to obtaining what you want and require in life. Now, imagine yourself as a fully grown, middle-aged adult. Do you still depend on your parents to provide for you? Probably (hopefully) not. Hopefully, the lesson here is clear: what worked for you in one stage of life may not work in another. In other words, what got you to where you are today won’t necessarily get you to where you want to be in the future. This same principle applies to businesses. Just as individuals progress through predictable life stages, businesses also go through their own lifecycle stages. Dr. Ichak Adizes, a renowned business consultant, outlines these stages in his book, “Managing Corporate Lifecycles.” The stages include Courtship, Infancy, Go-Go, Adolescence, Prime, Stability, Aristocracy, Recrimination, Bureaucracy, and Death. As a business owner, it’s crucial to grasp the concept of “business life cycles.” Many entrepreneurs I work with fail to realize that as their businesses evolve through these stages, their management style and structure must also adapt accordingly. The result is usually frustration and stagnation. Let’s look at an example: during the Go-Go stage, characterized by high growth.  In this stage, business owners need to be proactive, doing whatever it takes to propel their businesses forward. On the other hand, in the Prime or Stability stage, where the business is established, stable, and profitable, a different leadership style is required for successful management. Business owners must recognize the stage their business is currently in and adjust their leadership and management accordingly. Dr. Adizes writes, “Whenever an organization transitions from one lifecycle stage to the next, difficulties arise. In order to adopt new patterns of behavior, organizations must abandon their old patterns.” I frequently encounter leaders in organizations who hinder their own progress by persisting with outdated approaches. Unbeknownst to them, they become bottlenecks, impeding their organization’s growth. Different stages of a business may also require that different personalities to take the lead. While the initial stages demand strong entrepreneurial leaders to carry the business forward, later stages necessitate stepping back and allowing others to assume key positions. The best leaders don’t feel threatened by this.  They embrace it.

When it comes to financing the growth of your business, you may find yourself facing a difficult choice between the lesser of two evils. Selling shares in your business can provide an immediate cash injection, but it means giving up some of your valuable equity stake. Borrowing money from a lender, on the other hand, can be costly to repay, can limit your growth, and often requires that you provide a personal guarantee.  However, there is another option: customer financing. This approach involves incenting your customers to prepay for some or all of your product or service, providing you with the necessary working capital to drive growth. This method can be a great alternative to selling equity or taking on debt as it gives you access to cash without having to sacrifice ownership or pay interest.  How Premonition Got Its Customers to Fund the Growth of His Business  In 2015 Brad Lorge founded Premonition, a technology company that provides logistics software to streamline delivery operations for large enterprises. While working with big businesses brought in good revenue, large enterprise customers were slow to make purchasing decisions, and when they did decide to buy, getting them up and running was slow and costly.   Rather than the traditional approach of financing a software start-up (rounds of dilutive funding), Lorge asked his customers to prepay. Having customers pay in advance allowed Premonition to utilize the cash from their customers to fund its growth.   By March 2022 Premonition had grown to $3 million in Annual Contract Value (ACV) when Shippit acquired it for $20.5 million—an implied valuation of just under seven times ACV. Better yet, because they used customer financing, Lorge and his partners still owned 80% of the equity in the company when they sold it.  Customer financing can be a powerful tool for business owners looking to raise money without giving up equity in their businesses. If you’re considering asking your customers to prepay, like Lorge, start by thinking about what type of incentives might be valuable to them.  Here are a few ideas:  Productize Your Service  If you offer a service, another strategy for getting customer prepayments is to consider productizing it. Your services can be productized by standardizing and packaging them as a product with a defined scope, price, and deliverables. It is essentially a predefined service that is delivered repeatedly to multiple clients in a similar fashion, with a fixed set of deliverables, processes, and pricing. Examples of productized services include website design packages, social media management plans, and content creation bundles.  The goal of productizing a service is to simplify the sales process, increase efficiency, and provide a predictable customer experience.  It also makes the service more tangible and by creating a standardized offering, you can reduce the amount of time and effort required to close a sale as well as minimize the need for customization.  Best of all, when it comes to products, we are accustomed to paying in advance (e.g., you expect to pay for that box of cereal at the grocery store before going home to dig in). Therefore, if you package your service offering into a product, your customers will be more inclined to pay up front for some or all of your offering.   Productizing your services or asking customers to prepay can be effective ways to obtain the cash your business needs to grow while keeping a tight grip on your equity and avoiding the obligations of a hefty loan. 

When it comes time to sell your business, will it command a value that is at the high end of the multiple range or closer to the low end. Often times, the answer will be determined based on how well you addressed the other value drivers that savvy buyers/investors look at when valuing a business. Most small and medium sized businesses operators focus the majority of their attention on improving financial performance. This is entirely understandable as profitability and cash flow are the primary KPI’s for many businesses. However, if you are looking to build maximum value in the business, you must broaden the focus to address a wider range of value drivers.  In recent years, undertaking a “sell side” Quality of Earnings study has become a popular exercise to help companies prepare for an effective sales process. While this is helpful, it really does not go far enough if you want to optimize the results. That requires a more comprehensive exercise that takes a deep look at all of the key value drivers. At Value Acceleration Partners, we call it a Quality of Value Audit. So, what are these value drivers. In my experience, there are at least eight: Let’s take a look at each one of the drivers individually. Driver #1 – Company Culture Let’s start with perhaps the most basic issue of all, your company’s culture.  This refers to the values, beliefs and behaviors that determine how your company’s employees and management interact, perform and handle business transactions. This area is often grossly under-appreciated or ignored. Even the companies that profess to focus on it often just go through a highly visible exercise to define it and then basically put it in a drawer and it is soon forgotten. Building a durable company culture that significantly impacts performance requires a day in and day out commitment. It is hard, but worth it! Objective An easily explained set of core values that are used to govern decision-making and behavior, as well as defined themes that are easily explained, understood and embodied by management. Key Questions Where The Answer Should Be “Yes” Driver #2 – Management Breadth In the eyes of a potential buyer, one of the biggest risk factors and potential value killers is the degree to which the business in dependent on the principal. In extreme cases, this factor alone can make an otherwise profitable and successful business virtually unsellable. Often a business owner/operator takes great pride in the fact that he/she knows every customer personally and they turn to him/her on issues. In reality, this means that the company is deeply dependent on you as the Rainmaker for the business and that creates significant risk. Objective A management team that is clearly demonstrating the ability to effectively direct all key areas of the business without deep involvement of the principal(s). In addition, it important to have an appropriate long term incentive plan designed to retain the key managers for the long term.  Key Questions Where the Answer Should Be “Yes” Driver #3 – Value Proposition Durability Creating true differentiation in the products and benefits your company delivers to its customers is a critical component of building value in your business. This is especially important in the eyes of your prospective buyer. Warren Buffet, arguably one of the great buyers of businesses of all time, points to the presence of a true “competitive moat” as a key issue that he looks at when evaluating a company. While not easy to achieve in many industries, it is possible, and figuring it out offers great benefits: Even companies that sell commoditized products have the ability to build a moat by wrapping valuable services around it. Your product does not just have to be the physical unit. Objective You want/need a value proposition that provides a strong “moat”, barriers to entry, a recurring revenue stream and long term sustainability. Key Questions Where The Answer Should Be “Yes” Driver #4 – Recurring Revenue Model Perhaps the biggest driver of positive value on a business is the degree to which the business model provides recurring revenue. In fact, a strong recurring revenue model can mitigate the many of the other risk factors. A recurring revenue model offers several important benefits: The type of recurring revenue also makes a difference. For instance, recurring revenue that comes from selling a consumable is not as valuable as selling a subscription. Having guaranteed contracts is even better. The bottom line…companies with recurring revenue business models are valued at a meaningfully higher multiple than those without such models. Objective A business model that provides for meaningful recurring revenue that can sustain above average growth that can be accurately projected. Key Questions Where The Answer Should Be “Yes” Driver #5 – Operational Scalability Operational scalability is your business’s ability to scale its organization, business model or system to cope with significantly increased demand for your products and services.   While your brand’s strength, value proposition, management depth, etc. are important in assessing a business, ultimately, a buyer is investing in future cash flow. And that is largely driven by the growth potential of the revenue stream and the margins that will be generated from it. Bigger revenue streams generally command higher earnings multiples in a sale. So, it is important to think deeply about the real growth opportunities in your business. Often times this means taking a step back in order to take multiple steps forward. It is hard to give up the revenue from a product or service line but sometimes that is exactly what is needed to accelerate growth. The ability to operationally scale, and to do so at improving margins, is a critical part of the equation. Your company has to be ready to scale and this can be challenging. The landscape is littered with companies that outgrew their capability to absorb the growth, usually due to poor planning. Strong top line growth, combined with strong processes, combined with improving margins is the holy grail of maximizing value in your business. Objective Your business should offer a demonstrably scalable operating environment that includes well defined and well documented processes that can be relatively easily scaled as well as effective processes for onboarding/training the personnel required to scale