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As An Entrepreneur,
Do I Have a
20/20 Value Vision?
SIX UNCOMMON COMMON-SENSE TIPS
TO AVOID THE VALUATION TRAP
© 2012- 2013 BUSINESS ANALYTIX, INC.
103 Carnegie Center, Suite 300, Princeton, NJ 08540
Why do I need a 20/20 Value Vision?
Value is the indicator of the future of your business!
An entrepreneur often spends overwhelming amount of time addressing the “tactical level” of business – driving Revenue growth, controlling Costs, growing/preserving Net Assets, and finalizing contractual relationships . But that secures only the present!
It is only when one pays attention to the “strategy level” of the business model, the structure, and the strategic relationships that one creates a “sustainable growing enterprise” that is valuable.
© 2012 - 2013 BUSINESS ANALYTIX 2
Value of the Enterprise
Business Model
Revenue Costs
Business Structure
and Control
Tangible, Intangible
and Human Assets
Strategic Relationships
Contractual Commercial Relationships
Value is in the eyes of the beholder … indeed!
2 MOST PREVALENT FLAWS IN
THE VALUE VISION
⧉ Perceptual Fixation creates a
Value bubble
⧉ Perceptual Shortness shrinks
the Value down
© 2012 - 2013 BUSINESS ANALYTIX 3
Perceptual Fixation
• Ignoring the hurdles in and the threats
to the growth path
• Overstating the potential
opportunities; assuming the growth as
a constant in the business equation
• Generally, influenced by the
economic climate – but, at times,
result of emotional attachments
related to the pride of ownership or a
few times … due to greed
• Commonly known, yet difficult to
overcome; magnifying the value of
the “potential”; triggers the “Synergy
Dreams” in the case of acquisitions!
© 2012 - 2013 BUSINESS ANALYTIX 4
THE ADJECTIVE
“POTENTIAL “ APPLIES TO
OPPORTUNITIES
AND THREATS
ALIKE!!!
Tip #1: How to Fix the Perceptual Fixation?
© 2012 - 2013 BUSINESS ANALYTIX 5
Whatever your end-game is:
• Recognize that the nature of the beast is “volatile and dynamic”
• Build an agile organization
• Protect valuable assets – physical, tangible, intangible, virtual, and human – Create Value Anchors and Barriers
THE PERCEPTUAL
WEAKNESS
The bigger trap, however, is in the hazardous “I don’t Know What I Don’t Know” zone …
© 2012 - 2013 BUSINESS ANALYTIX 6
Perceptual Weakness
• A failure to identify value drivers within
your enterprise
• Could be consequence of
– Being too close to the business
– Being unaware of the market trends
– Burden of the present day pressures
– Inability to view the business not just as a single
entity but as a Dynamic Bundle of Values
• Results in missed opportunities and lost
Value
© 2012 - 2013 BUSINESS ANALYTIX 7
Tip # 2: Overcoming Perceptual Weakness – Stitch together a Value Bundle and create a Value Barrier
There is much more to the
Value of your enterprise than
the assets shown on your balance sheet
Proprietary Systems and
Processes
Unique Service Concepts
Trade Secrets
Exclusive Licenses
Assembled Workforce
© 2012 - 2013 BUSINESS ANALYTIX 8
When you stitch together a bundle of value drivers, it creates a value
barrier that makes your business sustainable
Tip #3: Overcoming Perceptual Weakness
Create Value Anchors
Having a value driver that is not
firmly anchored leaves the future of
your enterprise at the mercy of the
vagaries of the high and low tides
of fate!
Ex. Negotiating a contract without
a carefully drafted exclusivity,
termination conditions, and ‘tails’
can mean that today’s boon may
well turn out to be a bane
tomorrow.
© 2012 - 2013 BUSINESS ANALYTIX 9
Tip #4: Overcoming Perceptual Weakness
Look for the Right Puzzle!!!
Some elements of your Value Bundle
might be the missing parts of someone else’s jigsaw puzzle.
Helping them complete their puzzle might create more
value than trying to finish your
puzzle!
© 2012 - 2013 BUSINESS ANALYTIX 10
Tip #5 : Overcoming Perceptual Weakness
Be Aware of the Impact of the Changing Times
© 2012 - 2013 BUSINESS ANALYTIX 11
• Value is never
static
• How will the
Value of your
Value Elements
and Bundle change with time
or the
environment?
• Is this the right
time?
The Control Value
Value also depends on how big is the portion of
pie you control … and sometimes you can control
without owning majority
© 2012 - 2013 BUSINESS ANALYTIX 12
Tip #6 : Overcoming Perceptual Weakness
Locate the Control Locus
© 2012 - 2013 BUSINESS ANALYTIX 13
Let us talk about it …
© 2012 - 2013 BUSINESS ANALYTIX 14
We will be happy
to offer a
preliminary scan
of your Value
Strategy and
offer a Growth
Strategy Outline
Report as a time-
limited
assignment …
… for the cost
that is probably
less than your
one month office
rent!