The 18 Drivers

The Market Drivers

It may be helpful to think of these drivers as ‘external’. Market drivers often relate to how your business operates compared to others in the same industry. Think of these drivers as they relate to sales, your product, your competition, and external factors. While these external forces may be out of your control, the more you are aware of them the more compelling your business will be. Feel free to click on any of these drivers for a PDF print out with additional information.

Growth

Large Potential Market

Dominant Market Share

Recurring Revenue

Barriers To Entry

Product Differentiation

Brand

Margin Advantage

Customer Diversification

The Operational Drivers

These drivers relate to all of the factors within your business. They are sometime referred to as the ‘internal’ drivers. While most business owners tend to naturally focus on these drivers when running the business, they are also some of the most elusive. These drivers rarely present themselves in obvious manners and most pose difficulties even when you have a team who is responsible. Most business owners are not surprise when one of these drivers pops up as a top Value Gap issue.

Business Overview

Financial

Sales & Marketing

Operations

Customer Satisfaction

Senior Management

Human Resources

Legal

Innovation

The Growth Driver

Growth refers to a company’s top-line revenue. Strong growth means your company has a history of consistent growth greater than its competitors, coupled with projected, future revenue growth above the market’s rate. Is your company’s top-line revenue growing consistently and does it look like it will continue? Is your top-line revenue “greater than your competitors”? This should be fairly easy to answer, and the selections are friendly: “Is the business on fire”? Or are “things not so good right now”… or where in between?

Deeper Levels: With the Unlock Assessment, the Growth Driver is broken down into three Indicators, delving deeper into the operational structure of the business: Company Growth: Your company can demonstrate quantifiable and historic growth greater than its competitors and can substantiate growth projections greater than the industry rate. Industry Growth: Your company can clearly document the growth of its industry (broad category definition) and within its niche (specific market). Customer Advantage: Your company can articulate why its products/services will continue to effectively provide for and service future growth.

Large Potential Market Driver

The larger the market (tapped and untapped) the more attractive it is because it represents more opportunities. However, being a leader in a smaller niche is also attractive. Even if you have a true competitive advantage, a growth market is almost always favored. It is important to understand what market you serve directly. With the internet, many companies now believe that their market is worldwide, or at the least, nation-wide. That is usually not the case. Another way to think about it is: Do you compete in China? If so, you have a worldwide market (rare). Here we are really asking about the customers you serve today … chances are it is a local or regional market.

Deeper Levels: With the Unlock Assessment, the Large Potential Market Driver is broken down into four (4) Indicators, delving deeper into the operational structure of the business: Market Size: There exists a large market for your products or services, and your company has complete, written documentation and up-to-date research to substantiate the size of your current market. Niche Clarity: You have research and documentation on your company’s market niche by product or service line. Competitive Monitoring: You have a system or process in place to monitor significant competitors and new entrants into your market. Future Market Growth: You can document through research or other methods, growth trends in the market, and how the company will take advantage of those trends.

Dominant Market Share

A key component of business value is the degree to which it can generate recurring, profitable revenue. Contracts or other firm commitments are the best way to guarantee future revenue, but other examples include a long-term lease on a high traffic location or a strong loyalty program. The hint is very important here, don’t get caught up in the idea that contracts are the end-all-be-all. While they are “the best way” to guarantee future revenue, there are often “other reasons,” which the selections include as a possible answer. Do you have reasons you can articulate as to how you make money regularly?

Deeper Levels: With the Unlock Assessment, Recurring Revenue Driver is broken down into three (3) Indicators, delving deeper into the operational structure of the business: Contracts: You have formal written contracts, or assurances, that provide for consistent revenue. Customer Mix: Your company’s customer base includes a mix of new, developing, and long-term customers. Customer Retention: You can articulate why customers will continue to purchase from your company.

Recurring Revenue

Barriers to Entry

Product Differentiation

Your company has greater value if it has a product/service with unique characteristics that provide a competitive advantage. A unique product or service that customers prefer will keep them coming back to you instead of your competitors and may provide higher margins. Is your product or service special? What makes it different? Why do customers buy from you as opposed to the one across the street?

Deeper Levels: With the Unlock Assessment, Product Differentiation Driver is broken down into three (3) Indicators, delving deeper into the operational structure of the business: Proof of Differentiation: You can quantify how the uniqueness of your company’s products/services gives you a competitive advantage in a significant market or customer segment. Product/Service Lifecycle: You can articulate where the products/services are within its lifecycle, and show plans to keep, replace, or upgrade the products/services as the market continues to evolve. Financial Differentiation: You have quantitative proof of differentiation, by product or service, and can show a pricing and/or cost advantage over its competition.

Brand

A strong brand name that resonates with your customers can add significant value to your company. Your company benefits from a recognizable brand that reinforces the business’ presence in the marketplace and supports the company’s objectives.

Deeper Levels: With the Unlock Assessment, the Brand Driver is broken down into three (3) Indicators, delving deeper into the operational structure of the business: Brand Awareness, Brand Advantage, Brand Protection.

As the company grows, this brand identity should be expanded upon and clarified to ensure that it is consistent with the company’s values, mission, and goals. Branding is not just a logo or tagline - it is the sum of a company's reputation, identity, and differentiating factors. Sub-drivers within DeepDive include: Brand Recognition, Brand Documentation, Brand Pricing Models, Financial Measures, Brand Name Trademark, Brand Logo Trademark, Branding Consistency

A strong brand can help a company attract and retain customers, enter new markets, and charge premium prices. Branding can make a small company appear larger and more professional, and it can make a large company seem more human and approachable.

Whether your brand is a household name or not, treat is - guard it - like it means everything to the success of your company, because in the long run, it could!

Margin Advantage

Margins are simply a measure of how efficiently you make money. The more your company enjoys gross and net margins greater than the industry your margins, the more valuable your company. Do you know your margins and the margins for your industry? Knowing where you are and where you stand with your competition as to how you are making money is important for tackling your market position.

Deeper Levels: With the Unlock Assessment, Margin Advantage Driver is broken down into four (4) Indicators, delving deeper into the operational structure of the business: Quantifiable Advantage: Your company’s gross and net margins are consistently above the industry norm. Margin Trends: You can provide history by quarter and trend analysis of both gross and net margins. Margin Improvement Process: You have a documented, rigorous process in place to constantly improve margins. Margin Advantage: You have projections of your company’s future margin advantage, and can defend these projections.

Customer Diversification

A perfect example of having a “non-diverse” customer base is a business that only serves government clients. They may serve many customers within the government, and they may believe they are diverse, but it is still functionally one client. Making sure that you have a diverse customer base, or have plans to grow one, is important.

Deeper Levels: With the Unlock Assessment, the Customer Diversification Driver is broken down into three (3) Indicators, delving deeper into the operational structure of the business: Customer Concentration: You have complete customer records and analysis that shows a well-diversified customer base where no one customer represents more than 20% of the company’s revenue. Trend Analysis: You can show historical data and trends to prove continuing diversification. Future Customer Diversification: You have documented and can defend future projections, by customer or product/ service line, of continued or growing diversification.

Company Overview

An easily understandable company is a valuable company – customers, employees, and partners can quickly “get” what the company is all about. Stakeholders should be able to easily obtain a holistic understanding of your company including your company’s performance, practices, culture, discipline, and mission. The quick way to assess your company on this Driver is: can you give a 30-second elevator pitch: “This is who we are. This is what we do?” Maybe even better, can your employees do the pitch?

Deeper Levels: With the Unlock Assessment, the Company Overview Driver is broken down into eight (8) Indicators, delving deeper into the operational structure of the business: Business Profile: You have a well-organized and documented profile of your company. Company Story: If asked, your employees could succinctly communicate (verbally and in writing), what the company does, why, and how. Web Presence: Your company has a professional web presence that supports your company’s goals and objectives and easily communicates important information about your company. Defined Market: You have a comprehensive understanding of your company’s current market niche, your company’s place in that market, and a process to keep informed of market changes. Competitive Information: You have a comprehensive understanding of the competition in your market. Strategic Direction: You have a strategic plan that supports the owner’s personal goals. Trusted Advisor: You have a trusted, high-level advisor who reviews, advises and provides feedback to the owner/ CEO. (The person who gave this document to you is probably a good person to start a relationship with). Company Culture: Your company has a positive and adaptive culture that is aligned with and supports your company’s goals.

Financial

CoreValue is a tool that measures Operational Performance, not financial performance. This is a process question. The ability to communicate financial results both internally and externally is fundamental to operating a business. if you, the owner or CEO, don’t have easy access to consistent reports then your company does not have your financial matters in order and you do not follow best practices.

Deeper Levels: With the Unlock Assessment, the Financial Driver is broken down into eight (8) Indicators, delving deeper into the operational structure of the business: Audits: You have had routine, independent inspections and assessments of your company’s financial integrity which provide quantitative proof your company has a healthy and standardized reporting structure. Financial Statements: Your chart of accounts clearly reflects the business you are in, enabling fast and effective communication both internally and externally. You also routinely generate the standard set of three statements (income, balance sheet, and cash flow). Operating Reports: Financial operating reports are routinely generated and used by management to review your company’s performance and make operational decisions. Tangible Assets: You have knowledge of and documentation that defines the ownership, control, and use of the tangible assets needed to deliver products and services. Intellectual Property: You have a thorough understanding of your company’s Intellectual Property Banking and Capital: You efficiently utilize banking services and have the ability to obtain and manage outside capital. Risk and Insurance: You have protected your company from or limited its risk.

Sales & Marketing

In Discover, this is the first time we use the term “in a proven and systematic way.” In essence, that is what best practices are all about. Here the question it is really asking: If your current sales team left, is there a system in place to replace them? If the current sales team is out there killing it, and nobody has any idea how they are doing it, that is a significant problem.

Deeper Levels: With the Unlock Assessment, the Sales & Marketing Driver is broken down into six (6) Indicators, delving deeper into the operational structure of the business: Sales Marketing & Objectives: Does your company have clear sales and marketing objectives? Marketing Plan & Process: Does your company have a clear marketing plan? Market Research: Does your company have access to, and do you regularly use, market research to make informed marketing, sales, and operational decisions? Sales Plan & Process: Does your company have a sales plan and a repeatable sales process to deliver on your company's goals? Customer Contracts: Does your company execute legally binding contracts with your customers where possible? Sales & Marketing Metrics: Does your company regularly measure how well you are meeting your sales and marketing objectives?

Operations

Your company has the ability to consistently deliver on the sales promises made to the marketplace and to do it in a systematic and process-driven manner. This is a fundamentally important question: if you make a sale, can you deliver on time and on demand “in a systematic and process-driven manner.” The Discover Assessment is asking about the operational structure of all elements of the business. Here, the question is about actual “production” and “delivery.” LEAN and Six Sigma are found here and are a good way of thinking about best practices.

Deeper Levels: With the Unlock Assessment, Operations Driver is broken down into five (5) Indicators, delving deeper into the operational structure of the business:

Delivery Objectives: You have operations objectives that are executable, measurable, and updated regularly.
Delivery Process: You have clear and documented operational processes such that an outsider could learn them quickly, easily jump in, and be effective.
Performance Metrics: You regularly measure how well your company is meeting its operational objectives, driving its processes and making good on its commitment to customers.
Industry Standards: You follow, or comply with, industry standards ranging from government regulations, best practices and independent certifications.
Suppliers and Contracts: Goal: You have written supplier contracts defining the relationships between your company and your suppliers.

Customer Satisfaction

High company value derives from deep and long term customer satisfaction. Your company benefits from setting satisfaction metrics and tracking them, using key measures to assure customer expectations are met at all levels. Are you listening to your customers? Are you keeping track of positive experiences and replicating them, and keeping track of negative experiences and working to make sure they don’t happen again?

Deeper Levels: With the Unlock Assessment, the Customer Satisfaction Driver is broken down into three (3) Indicators, delving deeper into the operational structure of the business:

Satisfaction Objectives: You have customer satisfaction goals and objectives, and you communicate them both internally and externally.
Satisfaction Plan & Process: You have developed and executed a plan to meet customer satisfaction objectives.
Customer Satisfaction Metrics: You routinely and continuously measure customer satisfaction.

Senior Management

A company’s value is higher if there is a leadership team or individual in place to carry on the company’s vision and mission while helping the owner achieve his/her objectives. You should be able to execute a plan to run the company effectively for an extended period of time if the owner was not available.

The hint here gets to the root of this Driver: Could you, the business leader, leave for an extended period of time (say go to Tahiti for a month with your toes in the sand and no phone) and the company would still run smoothly? If there is not a strong management team in place, what happens?

Deeper Levels: With the Unlock Assessment, the Senior Management Driver is broken down into five (5) Indicators, delving deeper into the operational structure of the business:

Roles & Responsibilities: Throughout your company, there are clear and understood roles and responsibilities for senior managers that support the company’s objectives.
Reporting Relationships: The company can run effectively without you.
Team Functionality: The senior management team effectively works together to deliver company goals and objectives.
Compensation: Senior management compensation is competitive and tied to individual performance against company goals and objectives.
Succession Plan: You have a personnel plan in place for each senior manager that.

Human Resources

Your company value depends on its ability to hire, develop, and retain quality individuals. The right people can strengthen culture, ethics, customer relations, production, innovation and other aspects of operations, all of which can add to company value. HR is a large part of any business with lots of moving parts. The quick way to answer this question is to ask yourself: “How is HR going?” If there are issues with retention, with finding quality hires, and with training, they will all be brought to light with further questions.

As with all Drivers, if HR is keeping you up at night, things are not going according to best practices. Another hint: The Senior Management Driver is about those who manage the business machine, and the Human Resource Driver is about those who run the machine.

Deeper Levels: With the Unlock Assessment, the Human Resources Driver is broken down into five (5) Indicators, delving deeper into the operational structure of the business:

Roles & Responsibilities: Throughout the company, there are clear and understood roles and responsibilities for each employee that supports the company’s goals and objectives.
Recruitment: You have a standardized, efficient, and effective process to staff the company including internal job postings, appropriate testing, multiple interviews with multiple staff, and reference checks.
Employee Contracts: You have written employee contracts defining the legal relationship and responsibilities between the company and its employees.
Policies and Process: You have documentation and processes to ensure effective administration and employee relations.
Compensation and Benefits: You understand and follow compensation best practices for your industry, and utilize a combination of fixed, variable, and non-wage forms of compensation.

Legal

You have all legal matters in order, documented, and your company follows best practices. There are no claims for or against your company, you have a process to handle potential liability issues, you have contracts with key customers, suppliers, advisors, contractors, and employees, and you have agreements with all investors. Whatever the legal issue, if there is one, now is the time to bring it up. Often, your advisor may shy away from asking a legal question in a first-pass conversation. However, as CoreValue takes the holistic approach to understand the operational structure of the business, all areas are covered.

Deeper Levels: With the Unlock Assessment, the Legal Driver is broken down into four (4) Indicators, delving deeper into the operational structure of the business: Litigation: There are no claims for or against your company, or its employees, resulting in formal proceedings. Process: You have a process to handle potential liability issues.

Contracts: You have well-organized and documented contracts with key customers, suppliers, advisors, contractors, and employees. Capital: You have well-organized and documented agreements with all investors/parties (both internal and external), who have provided capital to the company in any form.

Innovation

Deliberate innovation culture and processes are invaluable to create an ongoing competitive advantage, leading to increased company value. You should have proven and systematic processes to drive and capture innovation at all levels and a way to leverage collaboration for innovation. Is your company open to new ideas and change? If you are, then you should be making an effort to capture those ideas and use them in some systematic way.

Deeper Levels: With the Unlock Assessment, the Innovation Driver is broken down into four (4) Indicators, delving deeper into the operational structure of the business: Culture and Rewards: Your company’s culture encourages and rewards innovation at all levels of the organization. Process: Your company has a well-defined process to encourage, capture, and protect innovation among your employees. Collaboration: Your company has tapped multiple constituents in its professional network to keep abreast of new innovations and test your own innovations. Metrics: Your company can quantify the benefits of innovations through various means such as patents, copyrights, revenue growth, workflow efficiencies, and financial improvements.

The 18 Drivers

At ValuCompass we are able to fully view any business from every angle using the 18 Value Drivers.

Assessing Business from Every Angle

The Market Drivers

The Operational Drivers

All 18 Drivers PDF

The 18 Value Drivers in Depth

The Growth Driver

Large Potential Market Driver

Dominant Market Share

Recurring Revenue

Barriers to Entry

Product Differentiation

Brand

Margin Advantage

Customer Diversification

Company Overview

Financial

Sales & Marketing

Operations

Customer Satisfaction

Senior Management

Human Resources

Legal

Innovation