Why did you start your business? Business owners start their businesses for a whole host of reasons. I have come across people who have started their business when:
- they thought they could do better on their own, rather than stay with their employer;
- they were made redundant and rather than go back into employment they took a risk and went on their own;
- they had an idea to make or do something new and different. A new niche or market encouraged them to take a risk.
For many business owners, that initial reason for starting up is wrapped up with a sense of having more freedom. That could be freedom to make their own decisions, take their own risks. Equally it could be the freedom to work where and when it suits their lifestyles.
Typical Business Owners
Unfortunately, for far too many business owners, that freedom doesn’t come in big measures. That work / life balance is always round the next corner. There’s never enough money to buy free time. The business demands more time and effort than expected. That freedom to make decisions turns out to be regularly reacting to problems that seem to get in the way of growing the business.
And that probably describes the world for many business owners, call them ‘typical owners’. Especially with COVID and a recession, they are aspiring just to survive.
Value Builder Owners
But there are some business owners who aspire for more. The research done by the folk at The Value Builder System, shows there are owners, let’s call them ‘value builders’, who apply 9 principles of business that build solid companies and personal wealth. Over my next few blogs I’m looking at those principles in greater detail.
Principle 2: Prioritise value over revenue
Value Builder owners commit to their product or service and do it very well. It starts as a core strength and develops into that “secret sauce” that competitors are envious of and customers flock to buy more of.
That commitment to a product drives a focus deep into the business, its people and processes. When customers value your offer then you aren’t a commodity that’s always compared on price. You have more control of your margins. Hence, leading to the virtuous circle of more marketing to maintain your differentiation, which in turn protects your margins.
Another benefit of differentiation is that it is harder for competitors to copy you. This benefit is very attractive to would-be buyers of your business.
Typical owners tend to do the opposite from Value Builder owners. They have an urge to grow sales or hire staff, almost a chase for recognition of success. To drive that growth they look for cross-selling opportunities, exploiting the relationships with their customers. Those good cross-sales products water down the core great product and threaten the “secret sauce”!
Two consequences of moving from focusing on one thing to selling many things are:
- you risk being over-reliant on too few customers who are buying your range of products;
- you have to work harder and spend more on maintaining your market differentiation.
Finally, wandering too far afield with your offering may increase sales, but will make you less attractive to prospective buyers.
Value Builder owners focus their limited resources on becoming great at one thing. Something a buyer will find too hard to copy and will pay a premium for that “secret sauce”.
Let’s face it. Most small businesses with limited cash can only afford to get that good at solving one problem for their owners.
One Cross-Selling Error
I know of one business that was really good at product packing and fulfilment. It was their strength. Unfortunately the owner thought that they could also sell packaging products – as they bought large amounts at discount. Chasing the extra sales missed the point that they had no strength in buying and selling packaging products. They diverted time and money to the new offer. It failed and dragged the original business down with it. The business no longer exists.
Contrast that sad story with Matt Driver’s story. His business, Mint Support, focuses on IT support for primary schools. That’s all. He doesn’t work for secondary schools or commercial organisations or other parts of the public sector. Just primary schools. It’s what he knows best. His team are the same. His customers love him, refer him to other primary schools. That’s why his business is growing steadily and is already attracting buyers.
Another Successful Story Of Focus
Stephanie Breedlove is a true Value Builder owner. She started her payroll business focusing on parents who needed to pay their nannies. In just over 20 years she had grown the business to about £7 million revenue. She sold it for £42 million. Yes, six times her annual sales. She did not cross sell. Instead she stuck to solving one problem: helping parents pay nannies.
You can hear Stephanie’s full story in her interview from John Warrillow’s Built to Sell Radio, a regular podcast revealing the stories and advice of business owners who have sold their businesses. To hear the full interview click here
So, are you building value in your business?
Now you have had time to think about the stories above, are you building value in your business or chasing sales? If you want to be a value builder, consider these 3 questions:
- Do you have a competitive advantage?
- How durable is that point of difference?
- Does your competitive advantage grow or become diluted as you grow?
Commit to focus on the products or services that make you unique.
You can also take the value builder assessment to see where you are in your business now and identify where you need to make improvements.
In the meantime, please get your free copy of the eBook, Famous Or Rich: 9 Ways Value Builders Prioritise Wealth Over Recognition.