How to Build Strategic Value In Your Business & Maximize Your Exit Valuation

Written by: Mac Lackey • June 21, 2023

Image Source: https://unsplash.com/@sigmund

Imagine this scenario: you've spent years building a business, pouring sweat, tears, and an obscene amount of coffee into its growth. 

Then one day, you decide it's time to step back, to sell, to exchange the entrepreneurial roller-coaster for a calmer carousel ride. 

This is when you realize that the valuation of your business extends beyond just its financial performance. It's also about your business's strategic value.

So, you need to ensure you are building strategic value in your business. 

It's not just a fancy business term that gets thrown around at cocktail parties to sound smart - it's the real deal.
But how do you actually build strategic  value? Let’s take a deeper dive and find out…

Breaking it Down: Identify, Build, Optimize, and Sell 🛠️

When building strategic value in your business, four stages serve as the cornerstones of this value-creation journey. We’ll look at each of these stages: Identify, Build, Optimize, and Sell.

1. Identify: The Art of Discovering Value 💎

The first step in our journey is the identification phase. This is where you look at your business through the lens of “potential” strategic value. Think of your company as a gold mine waiting to be explored, full of hidden treasures that are yet to be discovered.

What could be these treasures? They could be the innovative products you have developed, the reputable brands under your banner, the strong relationships you have built with your customers or the lucrative contracts you have secured. 

The goal is to create an exhaustive list of every conceivable area in your business that could potentially hold strategic value. It's time to put on your explorer's hat and start the treasure hunt!

2. Build: The Science of Constructing Value 🏗️

Once you've created a long list of potential strategic value opportunities, it's time to put your builder's hat on and construct value. This stage is about prioritizing and acting upon the most promising and executable value propositions from your list.

Building strategic value is not a sprint but a marathon. It requires a long-term commitment, strategic planning, and consistent effort. It involves nurturing your ideas, products, and relationships, transforming them from potential value into tangible assets. 

Each brick you lay down contributes to the fortress of strategic value you're building.

3. Optimize: The Craft of Enhancing Value 🔧

Having built the foundation and structure of strategic value, the next step is to optimize it. This is where your craftsmanship comes into play. It's about refining, polishing, and enhancing your strategic value to its maximum potential.

Optimization involves taking the strategic value areas that have shown promise and turning up the dial. It's about packaging your strategic value professionally and articulating it in a way that resonates with the market. 

The goal is to make your strategic value so obvious and attractive that it becomes irresistible to your customers, peers, potential buyers, and even your competitors.

4. Sell: The Skill of Demonstrating Value 🎁

The final stage in our journey is to sell the strategic value you've created. This is where your skills as a salesperson are put to the test. 

Selling is not just about transactions; it's about convincing others of the value you have to offer.

In this stage, your task is to effectively communicate and demonstrate your strategic value to the market. This includes packaging your strategic value in a digestible format, presenting it in an enticing manner, and articulating its importance convincingly. 

You're not just selling a product or service; you're selling the strategic value embedded within it.

The success of the selling phase depends on your ability to convince potential buyers that your strategic value is not just a theoretical concept, but a tangible asset that can deliver real benefits. 

This involves demonstrating how your strategic value differentiates your business from competitors, solves customer problems, and offers unique opportunities that are hard to replicate.

Remember, the beauty of strategic value lies in its perception. Even if you've identified, built, and optimized your strategic value, it won't contribute to your exit valuation if you can't sell it effectively. 

The true value of your strategic value is determined by the market's willingness to pay for it.

So, how do you sell your business’ strategic value effectively? Here are a few tips:

• Tell a compelling story: People love stories. Narrate the story of your strategic value, how it was created, nurtured, and optimized. Highlight the challenges you overcame and the benefits your strategic value brings to the table FOR THEM. The most important thing is for them to see how that value benefits their business and enhances their future

• Use evidence to support your claims: Back up your strategic value claims with solid evidence. This can be in the form of testimonials, case studies, or data demonstrating the effectiveness of your strategic value.

• Articulate the benefits clearly: Don't just list the features of your strategic value; explain how these features translate into benefits. Make it easy for potential buyers to understand how your strategic value can benefit their business. If they see a brighter future in their business if/when they have your products, services or offers, you WIN.

• Create a sense of urgency: Make your strategic value a must-have by creating a sense of urgency. Highlight the potential loss of not acquiring your strategic value and the unique opportunities it presents.

With a well-crafted selling strategy, you can ensure that your strategic value is not just recognized but also desired by potential buyers. 

This will not only increase your exit valuation but also make your business a hot commodity in the market.

Detailed Questions: Examining Your Strategic Value 🔍

Now that you've got the dance steps down, let's look at some of the detailed questions you might want to ask during this process.

For example, consider a product you've started to see strategic value in. Ask yourself:

• Is it proprietary? Do you own it, and are you the only one that has access to it?

• Does it give you market differentiation?

• Does it create an unfair advantage? We're all for fair play, but a little business advantage never hurt anyone 😏

• Is it protected or could it be protected with intellectual property? And no, a moat with crocodiles doesn't count

• Is it easy for you to market, explain, and sell it to the market?

If you're not shouting, "Oh yes, this is an absolute no-brainer advantage!" then you've got room to optimize.

Mindset Shift: Creating, Optimizing, and Cashing In 💰

Here's the thing: if you're stuck thinking about the performance of your company purely from a financial perspective, you're going to miss the larger picture. You have to make a mindset shift. This is like going from black-and-white TV to 4K Ultra HD. 📺

Think of it this way: your company is not just a money-making machine (although that part is pretty cool), but it's also a strategic value creator. You're creating something that's not only attractive to potential buyers but also difficult for them to reproduce or live without. It's like being the only ice cream shop in a desert. 🍦

The Biggest Wins: Driving Exit Value 🚀

When it comes to business, your exit value represents the culmination of all your hard work. This is where your strategic value-building pays off. Let's look into the key areas that can enhance your exit value.

1. Competitive Differentiation: Unleashing Your Inner Purple Cow 🐄💜

To stand out from the crowd, your business needs to be the proverbial purple cow - distinctive and valuable. You need to offer unique products, services, or a business model that truly differentiates you from your competitors. Remember, differentiation isn't about being different for the sake of it; it's about delivering exceptional value to your customers in a unique way.

2. Unfair Advantage: Your Business's Superpower 🦸‍♀️🦸‍♂️

An 'unfair' advantage is your business's secret weapon - a unique attribute that gives you a significant edge over your competitors. This could be a patented technology, a team of experts, or exclusive contracts. It's about having wings while everyone else is learning to walk.

3. Intellectual Property: Safeguarding Your Creations 🛡️

Intellectual property (IP) includes patents, trademarks, copyrights, and trade secrets. These legally protect your unique creations, preventing competitors from using them. Robust IP can significantly increase your company's value, making it more attractive to investors and buyers.

4. Customer Lock-In Strategies: Building Strong Customer Bonds

Customer lock-in strategies aim to make customers so dependent on your product or service that they continue to use it despite potential issues or price increases. It's about delivering so much value that your business becomes the obvious best choice.

5. Recurring Revenue: The Business Gift that Keeps on Giving

Recurring revenue is predictable, stable, and significantly increases the value of your company. This could be in the form of subscriptions, renewals, or repeat business. It's the gift that keeps on giving, providing a steady cash flow and making your business more attractive to potential buyers.

To wrap up, remember that building strategic value is not a one-time event, but a continuous process that requires commitment and strategic thinking. It's like a marathon, not a sprint. But crossing that finish line and seeing the maximized value of your business will make all those sweat and tears (and cups of coffee) worth it. 🏆

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