If you want to make your company more valuable, this is the article you need to read. I want to start by asking you a couple of questions.
- Do you really want to create real value in your company?
- Do you want to build something that has lasting value that transcends you?
- Do you want to create a scalable business?
- Do you want to sell your company for a lot of money?
The first thing we need to work on is how you think about your business. Because, if you change the lens through which you look at what you are building, you might build something slightly different that is going to create some exponential growth.
What Are Assets?
When I speak about assets, I do not mean assets on a balance sheet. While those are nice, these are different assets. These are the more tangible assets that you are building in your company. An asset is something you create that you can build upon and reuse repeatedly. Why is this important? Well, the great thing about this is that the more assets you have, the more scalable your businesses, and the more money that you will make. Also, the more scalable your business is, the easier it is to grow, hence the more valuable it becomes.
Here are some examples of assets:
- Your Product - So, what assets are we talking about anyway? You might say, “Ken, I already have assets in my business. I'm a product business and I think about those are assets.” Well, you are right, products are assets. But there are many types of products out there. A lot of products require customization, implementation, maybe installation, and those costs can go up and up. That is not a scalable product such as something you can build once and sell it many times without any customization or, without any installation or implementation.
- Your Email House File – This is a wonderful, reusable asset, because you can reuse it to the customers on that list repeatedly. Just think about a retail business. And every time a retailer sends out an email to their house file, boom, sales start coming in. Customers can be an asset if you can re-sell to them repeatedly. And, if they are on some sort of subscription, they can be a big asset. But if you only sell once to that customer, and they vanish, they are not a true asset.
- Followers on Social Media - Now, personally, I am not a big fan of social media, as you might know. There is no question that growing a platform on social media, where you are gaining followers and recognition is certainly an asset as well.
- Your Staff - Many times your staff can also be a valuable asset as long as you invest in their development and retention.
- Automating Processes - Fact is that more that you can automate within your business, the more this is an asset.
- Thought Leadership Materials - Every time you build a thought leadership item, which could be a video, an article, a podcast, a course a book, or whatever it might be, you can re-purpose for use over and over again. You might even be able to break it up and use it in other ways. So, one idea or one nugget of information can be broken up into a video, an article, a podcast, a course or what have you.
Build Assets and Make Your Company More Valuable
You need to shift away from doing all the work yourself to shifting towards building assets. As an example, for my business, I look at everything I am doing, evaluate based on this question, “Is this activity building assets that I can use again and again for the future or not?” And if the answer is no, then I seriously question what I am doing. If the answer is yes, I am excited about charging forward with that idea and building that asset, as I know I am building a strong foundation for my business that will one day be more valuable.
I want you to ask the same question, “Are the activities you're working on in your business right now, building assets or not?” My hope is that by asking this question you start to change your mindset and how you look at your business going forward.
The reality is if you have a highly scalable business, you will receive a higher multiple than a non-scalable business. Let us look at an example of two businesses.
In a services business, you might get a 1x to maybe 2x multiple on revenues. I’ll split it right down the middle to 1.5X. In a product company, like a highly scalable software company, you might get as much as a 10x or more multiple on revenues.
Take that same service business that does $10 million in sales, with its 1.5X multiple. That is a $15 million valuation. Take that software business, same $10 million in revenue, but let’s give it a 10X multiple because it's highly scalable for $100 million valuation. Which business would you rather run? Do you see the difference here?
Here is an example from one of my businesses. I have an eLearning publishing company where I build courses. As I build each course, I think of it as an asset that I invest in. I want to reuse them repeatedly. I also take these courses, and I redeploy them in many ways, like selling direct or selling through a channel. Sometimes I even give them away or use them as thought leadership pieces to attract customers. Again, an asset can be something reusable. and can create even more leverage.
I have about 30 courses right now and I distribute them to 10 distributors. That would be 300 little assets working for me each day; just take the 30 courses times 10 distributors. Now I grow my course library from 30 to 50 courses, and I increase my distributors from 10 to 20. The multiplier effect kicks in and now I have 1000 little assets working for me.
Building Assets Exercise
- Ask yourself the key question – “Is this activity contributing to building reusable assets for my company or not?” And, if the activity you are evaluating is not, then question whether you should be doing it.
- Identify three reusable assets that are already in your business. Get used to looking at what might be reusable and what could potentially be improved. The goal here is to see that you really do have reusable assets that exist in your business already.
- Create a list of three reusable assets that you could create in your business over the next 12 months. I want you to create an initiative and action plan for implementing these three new assets in your business.
It is your time to take action. Do this, and I guarantee, your business will be more valuable. Thank you for reading the article and I hope you received value from it.