Discover the eight factors that impact your company value — from recurring revenue to process documentation.
There’s a single KPI that every company owner or founder should always prioritize and track. Any guesses as to what it is?
The answer: company value.
This KPI provides clear insight into your company’s long-term health and success. It’s a holistic indicator that incorporates several aspects of business performance, from customer satisfaction to investment attraction.
According to Mark Fenner, the mastermind behind Rise Performance Group, there are eight factors that can impact your company’s value. He covered these drivers in a recent blog, and we also wanted to share them here.
1. Whether Daily Operations Can Run without Owner Oversight
Operational autonomy is key to business success. Employees should be able to keep daily operations going without constant oversight from ownership. This means your leaders should be good at delegating tasks, and your employees should be empowered and trusted to make decisions on their own.
As an owner, this frees you up to focus on strategic initiatives while your team drives operational excellence.
So … how well do your daily operations run without you in the driver’s seat? To find out, Fenner recommends asking yourself these three questions:
- Is there an accountable leader in place for each function of your business?
- Can you leave for three months without disrupting the business?
- Could one or more of your executives run the business in your absence?
2. Whether You Make Time for Strategic Planning with Leadership
Regular strategic planning sessions with your leadership team are a critical driver of company value for many reasons. For starters, investors like to focus on the presence of strategies and how well they’re carried out.
Strategic planning also helps with:
- Charting a course for long-term success and adapting to evolving market dynamics
- Bringing everyone together regarding company vision, mission, and goals
- Keeping teams engaged and focused on the most important priorities
- Identifying how to allocate resources to achieve high returns
- Pinpointing potential risks and developing tactics to mitigate them
- Fostering a culture of innovation where new ideas and brainstorming can be explored
- Setting clear KPIs and milestones to track progress and accountability
By dedicating time to assessing market trends, identifying growth opportunities, and aligning organizational objectives, you can make informed decisions that propel your businesses forward.
So … are you prioritizing strategic planning with your leaders? To find out, Fenner recommends asking yourself these three questions:
- Have you spent at least three years creating and executing a strategic plan?
- Does your strategy drive definitive “yes” and “no” decisions?
- Do your story, financials, and KPIs back up the strategy you’ve set?
3. Whether Your Customer Base Is Diverse Enough
When just a few key clients account for most of your revenue, or your revenue comes primarily from one market or niche industry, your company faces financial risk.
Diversifying your customer base reduces dependency on individual clients and safeguards against market fluctuations. Your company can mitigate risk and enhance resilience by expanding into new markets and targeting diverse industry verticals.
So … is your customer base as diverse as it needs to be to guard against risk? To find out, Fenner recommends asking yourself these three questions:
- Does each of your customers make up 15% of your annual revenue at most?
- Do you have an industry mix that maximizes revenues and manages risk?
- Has your company weathered economic cycles profitably?
4. Whether Consistent Recurring and Predictable Revenue Are Present
Predictable revenue streams, such as subscriptions or service contracts that offer recurring revenue, offer stability and security and drive company value.
The more you can demonstrate that your company brings in annual recurring revenue—not just project-based revenue—the more valuable your company is. Establishing long-term customer relationships that result in ongoing repeat business minimizes revenue volatility and increases investor confidence.
So … does your company have enough predictable and regular sources of recurring revenue? To find out, Fenner recommends asking yourself these three questions:
- Does your business model incorporate a subscription or multi-year agreement that locks in 80% of your revenue?
- Have clients purchased from you repeatedly over many years?
- Do customer purchasing trends show minimal impact from economic and geopolitical events?
5. Whether You Document Systems and Processes
Businesses that prioritize workflow documentation and optimization are better equipped to scale and grow. If your business is a well-oiled machine, then it’s easier to command a premium valuation.
Standardizing processes takes things to the next level, automating repetitive tasks to streamline operations. This helps your company improve efficiency, reduce errors, and enhance the customer experience.
So … how well does your company document systems and processes? To find out, Fenner recommends asking yourself these three questions:
- Has your company developed unique workflows for at least 80% of its processes?
- Do operational emergencies occur frequently?
- Can new employees quickly learn their jobs by using your company’s documentation?
6. Whether You Track and Make KPIs or OKRs Visible
Key performance indicators (KPIs) and objectives and key results (OKRs) provide valuable insights into company performance and progress toward goals. It also demonstrates that your company makes decisions driven by data, not guesses. If investors can glance at your business and see how it’s doing without having to dig deep, they’ll have more confidence in its value.
Your company should identify key metrics to track and make them visible so others can easily see and analyze them.
So … how well does your company track and make indicators and results visible? To find out, Fenner recommends asking yourself these three questions:
- Does every department have leading and lagging KPIs?
- Does each leader know their accountable measures and understand how leading measures drive performance?
- If a stranger walked into your operations, could they quickly understand how well each department performs?
7. Whether Profit and Gross Margin Growth Follow a Progressive Path
Profitability and gross margins are fundamental metrics that directly impact company financial health and sustainability. But remember: Profitability isn’t just about making money—it’s about building a resilient and thriving business that can weather any storm.
Consistency is key. It’s better to grow 15% year-over-year compared to erratic growth patterns, such as 25% growth one year, then a loss the next, followed by a spike to 35% the year after that, and then a drop by 10% in the fourth year.
Optimizing pricing strategies, controlling costs, and maximizing operational efficiencies influence profit and gross margin growth.
So … is your company experiencing continued growth in profits and gross margin? To find out, Fenner recommends asking yourself these three questions:
- Are revenues growing year over year?
- Are you maintaining and expanding gross margins?
- Is your growth rate consistent?
8. Whether Your Company Has Growth Potential
Anticipating future trends and growth opportunities is essential to stay ahead of the competition and position your company for long-term success. What is your company doing to find new ways to grow and develop?
By identifying emerging trends, exploring new market segments, and capitalizing on untapped opportunities, your company can unlock new avenues for growth and maximize its potential in the marketplace. Growth isn’t always about following the trends—it’s also about shaping the future and carving out a competitive advantage.
So … how high is your company’s growth potential? To find out, Fenner recommends asking yourself these three questions:
- Do you understand the size of your total addressable market?
- Are you aware of how your company stacks up against the competition in other markets?
- Are you aware of the trends that will positively and negatively impact your industry’s growth rate?
Maximize the Value of Your Business
If you’re ready to find out how well you’re maximizing the value of your business, start by taking this survey offered by Rise Performance Group. It will help you determine where your company stands today and what you need to focus on to improve companhy value.
