There are many ways to build business value; some are quantifiable while others significantly increase its attractiveness.

Key Points

• The multiple factors in the Market Value calculation is influenced by many variables. Some of these variables are not controllable, but many can be improved.
• The Entrepreneurial Operating System (EOS) gets your entire company on the same page, ensures you have the right people in the right seats on the bus, gives you a scorecard and problem-solving methodology, and a cadence to keep things on track.
• Companies that have EOS in place are significantly more sought after than those without.
• The Value Builder System database has statistical data that shows companies with a Value Builder Score of 80 receive multiples 70% higher than those who score around 60.
• The Value Builder System score uses eight actionable characteristics to calculate the multiple, and thus the value of a business.

Download the workbook for Module 4

You can use the workbook to take notes, and it also includes some assignments.

How can you build value?

Watch this video for an overview of EOS and the eight characteristics for building business value.

Key Takeaways

• The Market Value equation applies a multiple to the earnings. This multiple can be increased to drive up the value of businesses.
• The six components of the Entrepreneurial Operating System (EOS) are Vision, People, Data, Issues, Process, and Traction. Business owners often find a new love for their business once this system is implemented.
• Businesses with EOS in place are clear winners when buyers search for turn-key companies.
• Businesses can increase their multiple and hence their market value by 70%, by increasing their Value Builder Score from 60 to 80.
• The eight value drivers in the Value Builder System make it easy to know what to do because they are specific and actionable.

Next Steps

• If you haven't yet, please download the workbook for Module 4.
• Complete the assignment in your workbook for lesson 1.
• After this opening lesson, you've probably thought of many improvements you can implement right away. Be sure to capture those so you don't lose sight of them when you get back to the pressures of your day.
• Move to the next lesson to see how you can decrease your business's dependence on you, the owner (hint: it also addresses the process component of EOS!).

Expertise is not a tangible asset unless it's available when you're not there.

Key Points

• When expertise is held only in the mind of the owner, it creates virtual handcuffs that tie you to your business because it can't function without you.
• Oftentimes, there are also key people in your company who carry expertise in their head that isn't documented anywhere else.
• Intellectual capital is not just proprietary information. It includes all knowledge needed for day-to-day operational activities such as:
  • Industry knowledge
  • Anticipating what can go wrong
  • How to avoid and fix problems
  • Troubleshooting
  • Building relationships
• This critical information is vulnerable and often difficult to pass on to others. Brilliance Extraction™ captures expertise in a system where everyone who needs it has permanent access to it.
• Once the intellectual capital, or expertise, is systematized, the risks of losing it are reduced, thereby creating more opportunities for the future of the business, and for a higher value to buyers.

How can your business be less dependent on you, the owner?

Watch this video to see how you can turn your expertise into tangible assets.

Key Takeaways

• If you don't want to be handcuffed to your business, you need to extract your expertise and make it available even when you're not there. Watch for your key leaders who are also handcuffed because the expertise trapped in their heads isn't available to others.
• The critical knowledge that makes your business tick is much more than the things you consider as being brilliant. It includes all the aspects of how you operate and grow your business.
• In order for your business to survive without you, employees need to understand the nuts and bolts of the industry, know how to solve problems, and build key relationships.
• Expertise is systematized when it's captured in a way that's easy for employees to access it and use it for training. A Brilliance Extraction™ detective is skilled at drawing this out of the minds of the experts.
• The value of your business increases when expertise isn't limited to a few people in the business.

Next Steps

• Stop for a moment and digest the emotions associated with this lesson. It feels great to be needed! It takes courage to accept that your expertise isn't valuable to your business when you're not around. Both of these sentiments are legitimate.
• Start the next lesson for an introduction to recurring revenue, the advantages of having predictable income streams, and a few common ways you can reap the benefits (not just for the eyes of the acquirer!).

Predictable revenue is one of the greatest value drivers for potential owners, and it can make your life a lot easier too!

Key Points

• Recurring revenue represents customer commitments to purchase and thus is a very reliable estimate of future income.
• There are many additional benefits to the business from recurring streams of income:
  • The lifetime value of customers.
  • Smooths out demand.
  • Ensures you get paid automatically, and on time.
  • Makes your customers sticky.
  • Subscribers buy more.
• The Trojan Horse Model generates a base income and influences customers to buy more!
• There are a variety of subscription models and hybrids; every business can incorporate at least one.

How can you create predictable revenue?

Watch this video and find out how you might reap the benefits of recurring revenue in your business.

Key Takeaways

• Customer commitments to buy goods and services into the future is the closest to guaranteed income you can offer a potential buyer.
• Besides the nearly-guaranteed income, recurring revenue smooths out demand, often improves your services, automates payments, increases the lifetime value of your customers, and generates loyalty that keeps them buying from your business longer.
• Some subscription models change customer behavior. In other words, customers will prioritize buying from you, and thus buy more!
• Given the variety of subscription models available, every business can convert some of their total revenue to recurring.

Next Steps

• Complete the assignment for lesson 3 in your workbook.
• You've likely thought of at least one or two things that will create predictable revenue in your business. Congratulations! It's not easy to think outside our traditional ways of working.
• Move to the next lesson to identify ways you can grow your business.

Growing your business occurs by selling more of what you have to your current customers, or by adding customers, products, and services.

Key Points

• Your business's past performance is no guarantee of the future. Without increasing something, your revenue will remain flat.
• Simply put, the primary opportunities to grow business revenue are to:
  • Sell more of your current products and services to current customers.
  • Add more customers.
  • Add more products and services.
  • Add both!
• Selling more of your current products and services to your current customers is the lowest risk opportunity. Selling new products and services to new customers is the highest risk.
• Depending on your transition horizon, you may want to identify and validate growth potential, but not exploit it.
• It's very possible to increase revenue and profits if you stop selling certain products or services, or selling to certain customers. Look for those that aren't profitable, that limit your capacity to provide, or that dilute your sales of other products and services.

How can you create more future than past?

Watch this video to discover how easily you can create growth opportunities for your business.

Key Takeaways

• Without some new ideas on the horizon, buyers are likely to assume your sales will be consistently flat.
• Businesses can grow their revenue by selling more to existing customers, adding new customers, new products and services, or a combination of both.
• The lowest risk growth opportunities are selling existing products and services to existing customers. Hold off on the highest risk opportunities, namely, new products and services to new customers, until all other ideas are exercised.
• If you squeeze out all the growth, there is no potential. Think strategically about how much you want to glean if you're considering an exit in the near future.
• Sometimes the easiest growth opportunities occur by creating space for the more bountiful. To accomplish this, eliminate slow-moving, low-margin, resource-intensive products, services, and customers from your offerings.

Next Steps

• Use your workbook to complete the assignment for lesson 4.
• Your dedication to your business is paying off! You probably have a solid list of things you want to add to your action item list as soon as possible.
• Move to the next lesson for a brief recap of this module and a reminder that you can be intentional about building the value of your business!

This business has the potential to provide your income for life, and more. Depending on your financial needs and existing resources, you can intentionally build the value of this asset to make your dreams a reality.

Key Points

• The Entrepreneurial Operating System (EOS) is well-known for increasing the likelihood that a business will sell. Those who implement its six components often find they can cut back on work without having to transition out.
• The Value Builder System Score estimates the value of your business based on your score. Businesses that score over 80 receive offers 70% greater than average-scoring businesses (~60).
• Expertise that's not readily available for the business is virtually non-existent. It becomes a tangible asset only when it's extracted from the minds of you, the owner, and your key employees, and stored it in a system. Then the expertise is available for the day-to-day operations of the company. The Brilliance Extraction™ system has many benefits including scalability, flexibility, sustainability, and profitability!
• Recurring streams of revenue yield ample benefits to the business and provide a predictable flow of income into the future. Most businesses can find opportunities with one of the many types of recurring revenue models. Examples are access to expertise, maintenance programs, product subscriptions, and member-only benefits.
• Potential growth can be established by identifying new customers, products, and services. Sometimes you can create space for opportunities by dropping products, services, or customers that hog resources with little return.

Be intentional!

Watch this summary of Module 4.

Key Takeaways

• The six components of Entrepreneurial Operating System (EOS) will make any business more attractive because it's easier to manage. The system provides the mechanics for the right people to work on the right things that will get the business to its desired vision.
• Businesses that score over 80 on the Value Builder Questionnaire receive offers 70% higher than businesses that score the average of 60. The questionnaire is free and only takes 15 minutes to complete.
• The Brilliance Extraction System™ captures intellectual capital from the brains of the owner and key employees and makes it usable for the entire company. Buyers understand the value of that expertise and will pay more for it.
• Recurring revenue is future commitments of income. Buyers love that. And there are many other benefits that bring about business improvement, such as better service, consistent demand, on-time payments, and potentially increased sales.
• Growth occurs by selling more. This can be more of the same or by adding new. The lowest risk opportunities are selling existing products to existing customers. If you're close to exiting your business, you may identify these opportunities without implementing them, thus leaving the potential in growth potential.

Next Steps

• Complete the assignment in your workbook for lesson 5.
• Your progress is amazing! You're intentionally choosing to work on your business, not just in your business. The payoff won't be far behind!
• Meet with the advisor/expert who recommended this series and/or your roundtable. Please bring your questions and ideas for discussion.
• Look forward to our next module where you'll become familiar with various transition options, how they work, and the pros and cons of each.