Strategy Equals FOCUS

Strategy Equals Focus: How Business Owners Can Add Meaningful Equity to Their Business

The ability to concentrate efforts on high-impact areas can significantly enhance a company’s value, translating to substantial equity growth.

Reverse Engineering Equity

To effectively enhance equity, business owners should adopt a methodical approach:

1. Value the Business: Obtain a comprehensive valuation to understand the current standing and identify areas for improvement.
2. Identify Gaps: Recognize gaps between the current state and desired outcomes.
3. Fill or Remove Gaps: Implement strategies to address these gaps, whether by enhancing strengths or mitigating weaknesses.

Understanding Equity in Business

Equity in business can be broadly categorized into two types: Brand Equity and Operational Equity. Both play crucial roles in enhancing the overall value of a company.

• Brand Equity is the value derived from consumer perception, recognition, and trust in a brand. It’s often reflected in the ‘money multiple’ or the valuation multiple at which a business trades. Factors influencing brand equity include customer loyalty, market position, and the strength of brand associations.
• Operational Equity pertains to the efficiency and effectiveness of a company’s operations. It includes the risk ratio that a potential buyer might consider, assessing how transferable the business is and whether it is viewed as an asset or a liability.

The Formula for Adding Equity:

Brand Equity * Operational Equity = Wedge Equity

The concept of Wedge Equity encapsulates the synergy between brand and operational equity. By enhancing both these facets, business owners can create a ‘wedge’ that drives significant value.

Brand Equity: Enhancing the Money Multiple

To maximize brand equity, focus on the following areas:

• Customer Acquisition: Develop robust strategies to attract new customers. This can be achieved through:
  • Cold Relationships: Outreach to potential customers who have no prior engagement with your brand.
  • Warm Relationships: Nurturing leads who have shown some level of interest or engagement.
  • Earned Relationships: Building trust through organic methods such as word-of-mouth and customer testimonials.
  • Paid Relations: Investing in advertising and promotions to drive awareness and sales.
• Retention and Value: Focus on retaining customers and increasing their lifetime value. The 9-Cs of retention include:
  • Consistency: Ensure that customers have a consistent experience every time they interact with your brand. This builds trust and reliability.
  • Customization: Tailor your products, services, and interactions to meet the unique needs and preferences of each customer. Personalization enhances customer satisfaction and loyalty.
  • Communication: Maintain open, honest, and regular communication with your customers. Keep them informed, address their concerns promptly, and engage with them through various channels.
  • Care: Show genuine care and concern for your customers’ well-being. Going above and beyond in customer service can create strong emotional bonds.
  • Convenience: Make it easy for customers to do business with you. Simplify processes, remove obstacles, and ensure that your services are accessible and user-friendly.
  • Community: Foster a sense of community among your customers. Create platforms for them to connect with each other and with your brand, building a loyal customer base.
  • Commitment: Demonstrate your commitment to your customers by continuously improving your products and services and showing that you value their business.
  • Credibility: Establish and maintain credibility by delivering on your promises, being transparent, and building a reputation for reliability and integrity.
  • Customer Delight: Aim to exceed customer expectations and create delightful experiences that leave a lasting positive impression. This can lead to word-of-mouth referrals and long-term loyalty.

Diversification of Customer Portfolio: Avoid reliance on a few major customers by diversifying your customer base. This reduces risk and increases stability.