What is the value of your company? CEOs and C-level executives tend to think of their company’s value in terms of profitability and revenue. It is a simple mathematical equation. But when people are looking for opportunities to acquire, merge, or partner with a company, there are several other factors to consider. Leaders that keep a broad concept of value in mind are more likely to see opportunities to build it within their organizations.
Here are eight attributes that can boost the value of a company over the long term, beyond the immediate terms of profit and revenue.
1. Intellectual capital.
The more intellectual capital you have, in the form of patents, trademarks, copyrighted materials, proprietary processes, or other trade secrets, the more value you add to your company. Patents are particularly beneficial because they define a specific area in which you have some level of control that other companies do not. Intellectual capital is a differentiator.
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2. Your space.
You can find niche markets that are, for instance, nascent and hold the opportunity for substantial growth. If you can establish your position in that market, rather than being just one of the other players in a saturated market, you become much more attractive as a company. If another organization wanted to enter that space, they would have to develop a great deal of know-how and make significant investments of time and capital. Since you’re already there, acquiring or merging with your organization lets them enter the market swiftly, with terrific positioning.
You might have a branch in India, and another company wants to get into that market. You are their passkey. Geography can be a value indicator in the US as well. Offices in Dallas, New York, and Los Angeles might make you more valuable than a single office in Birmingham, Alabama for instance.
4. Your products and services.
If you sell salt, and there are four hundred other companies that sell salt, you have a harder time asserting your value. Now, if you are in a more specialized field, you make yourself a desirable partner or acquisition. Say you are a government contractor and you have a good base of people with high-level security clearances. That is a very specific service niche, and it is difficult for others to get into without someone who is already established.
5. Distinctive competencies.
When you do something better than everyone else, you are going to be in-demand by those who need to leverage those competencies. You have a competitive advantage that might allow you to move into new markets or sustain your position with relative ease, and that is going to increase your value significantly.
6. Knowledge management.
If you keep all of your proprietary information locked up in the heads of your employees, you are going to be less valuable than someone who has all that knowledge in 3-ring binders on a shelf. And that person will be less valuable than someone who has it on a secure, cloud-based SharePoint system. If you have a coherent system for retaining organizational learning, you ensure that it can be shared and used right out of the gate by potential partners or buyers.
This is particularly important in the government space. If you have a big contract with the State Department, you become a prized ally for someone who wants in on that work and customer base. Through you, they can access the government agency or entity they could not get into otherwise. Specific contracts with government agencies or large commercial companies can boost the appeal of your company.
8. Size of your customer base.
Cloud-computing companies have become very successful because they had a lot of customers residing on their clouds. If you have 5000 customers, you are a strategic partner for those who want access to those customers they could not reach before, connections that would take them years to cultivate.
Of course, all of this depends on what other people or organizations are looking for, which is why it is important to have several of these factors in play at once. Someone may really want to get into a specific market, and your presence there boosts your worth. Someone else may have no desire to get into your market space but would benefit from your distinctive competencies or intellectual capital as they grow in their own areas.