Most executives, managers and owners measure the value of their business with their balance sheet. It’s a pretty straightforward financial accounting tool. Business assets are measured against business liabilities to determine equity (or lack thereof). In other words, the balance sheet is a snapshot of business value at a particular point in time.
Accountants call this the “book value” of a company or a business. And from an accounting perspective, that’s exactly what it is. But it doesn’t necessarily demonstrate the real-world value of a company. Now this is not exactly a term that professional people would typically use to talk about a business valuation, but there can be no question that it’s a legitimate concept.
The real-world valuation of a business is based on how that business adds value back to its customers and to the world. This is not something that can be easily quantified—if at all—but this kind of “subjective value” is just as real as the assets formally listed on the balance sheet. For example in August of 2012, Apple, Inc. became the most valuable company of all time. This was based on a formal balance sheet accounting that showed a market capitalization of $619 billion dollars.
But for anyone who has ever enjoyed using an iPod, iPhone, iPad or Mac computer, the company offers much more value than what appears on its balance sheet. Steve Jobs’ obsession was to deliver a seamless and satisfying customer experience, and although some would argue that his need to control everything was over the top, not too many people would argue with his results. Apple technology has improved many different aspects of working, relaxing and communicating for a huge number of people. In short, Apple has added a significant amount of value to the world in general and to its customers in particular.
The point is that virtually every business or company has the same potential to do this. Of course it might not be on the global scale that Apple has achieved and the added value might not be as ground breaking and extensive. Nevertheless, businesses that succeed in delivering unexpected value to their customers and to society can expect to grow and thrive as a result.
Regardless of what industry you’re in and what products or services you sell, your business has value—in most cases significant value—that doesn’t appear anywhere on your balance sheet. The challenge is in identifying where this latent value is stored, and then figuring out how to distribute it.
Virtually every function and department of a business can provide value to customers outside the scope of normal daily functions. Management, strategic planning, marketing, sales, operations and administrative personnel all have valuable knowledge and skills that can provide significant external value.
Many companies use these skills as donations to local charitable causes. This is an excellent way to give back to the local community by providing value to organizations that can benefit dramatically from it. But these skill sets can also be converted into revenue as well. And this is where the real world value of a business can really be leveraged and translated to an increased book value in the process.
The easiest way to do this is by using the valuable skills present in any business to solve problems for customers. This is a non-traditional approach since many functions of a business are often considered to be strictly internal-facing, with no direct customer contact. Nevertheless, this approach can have a direct and profound impact on not only the sales process, but the overall revenue generating ability of the business.
Traditionally, sales people were primarily responsible for customer-facing activities, backed up by customer service and equipment support personnel. The sales force focused on demonstrating features and benefits to the customer who, if convinced, would buy the equipment and then rely on the vendor to service and support it. This approach is based almost entirely on singular transactions and effectively serves to limit the expansion and evolution of the customer relationship.
Features and benefits alone however may no longer be sufficient to close the transaction. Businesses need to do a lot more with much less today, and need help in many different ways. If you can help them to identify those needs, and then solve the underlying problems, the additional value that you are adding will not only sell more equipment, but it will also help to build and strengthen the customer relationship over time.
To understand how this might work, consider the challenges that an equipment buyer is facing. They are trying to streamline their operations in order to reduce costs and headcount. But there are tax changes coming down the pike that might have a material impact on how the new equipment is treated from a tax perspective. Also, technology is constantly changing, so the prospective buyer is reluctant to buy now and instead waits to see what new technologies are going to emerge. Capital is also at a premium, and even if the buyer can make a decision and wants to move forward, they don’t know how to pay for what they need. So they don’t do anything.
It was once the role of the sales person to tackle all of these concerns and to move the transaction off of the bubble. There are several problems with this approach. First, the sales person might not have the skills to address—and solve—all of these issues. Second, they might lack both the time and inclination to do so. This is where a business can really step up by converting a basic sales process into a much broader exchange of value.
In the above scenario, using a value-based relationship approach, different components of the selling organization would provide direct value to the customer. Accounting would help the customer to understand tax changes and perhaps to secure affordable financing. Marketing would help the customer to find new customers. Senior management could assist with long-term strategic planning and understanding how changes in technology will affect the equipment purchase cycle. The sales persons’ role now becomes more of a relationship coordinator than simply a deal closer.
Organizations in many different industries selling a myriad of products and services are constantly finding new and creative ways to engage with customer organizations at all levels. Social media plays a role in this enterprisewide engagement, but it’s just a part of it. Executives are conducting webinars and seminars, not to mention sales calls. Staff departments such as accounting and marketing are providing thought leadership as well as direct consulting and support. It’s a unified, company-wide effort that ultimately transforms transactions into relationships.
It’s time to look hard at how your organization interacts with customers and the value that those interactions provide. It’s no longer acceptable—or effective—to focus strictly on sales. Consider the practice of spreading your company’s wealth by adding value, and use every resource that you have at your disposal to do it.