Value enhancement - Ways to increase value - how to increase business value

Ways to increase business value

Business owners, shareholders, directors and management are interested in increasing business value. There are certain commercial aspects that tend to drive the value of a business.

Some of the main value drivers of business value include: -

Growth
Strategy
Vision
Customer focus
Protected brands

Growth

The ability of a business to achieve substantial and consistent growth is a key driver of the value of a business. Maintaining growth in a business is often a challenge, especially if the business is in a sector where growth rates have slowed. In some sectors, growth rates may only be in line with the economic growth in the country involved. One of the ways to beat this is through acquisitions. However, acquisitions are not easy to achieve.

Some quoted companies have their values measured in terms of PE ratios (i.e. based price/earnings ratio per share). PE ratios tend to be quite static measures, and may overvalue or undervalue a business at any given time.

PEG ratios can be used where the PE ratio is assessed in a growth context.

Strategy/Vision

In recent times, it has become more evident that business strategy can help to drive the value of a business. For example, this is evident from the success of airlines that have focussed on the needs of certain customers, and delivered a customised service that offers low cost, no frills, fast turnaround to a market that has grown significanly in volume and value terms. Indeed, the strategic approach has been so successful that it has forced other incumbants to change their pricing and competitve position.

Customer and Service Focus

It is often believed that first to market with innovation on a competitively priced scale can result in a dominant position.

An example of this is the case of Microsoft. It got to a stage of mass production quite quickly, and obtained a very large customer base through its user friendly interfaced software. The extent of its customer focus and dominant position is evident from the challenges for the EU and the US anti-thrust and competition authorities.

Another example of a business that has expanded its business through development of strong service for a large customer base is Google.

"A good name is a pot of gold - if it is registered"

A good name, brand, logo or trade mark can be a pot of gold, especially if it is well protected. By protecting a logo or brand, you can get wider exclusive monopoly rights across a much wider territory than your business or organization's property.

The way to do this is by registering the brand or logo as a registered trade mark for the country involved. This is quite a low cost way to increase value. Go to our site map to see our trade mark agent services and for more information about registered trade marks.