Key Takeaway: While most people focus on their tangible capital, the key driver of your business value and your multiple is your intangible capital – the teams, customers, systems, processes, culture, etc., that make up your business.
When it comes to the value of our businesses, it’s easy to focus on the tangible capital we can see as the core of that valuation – the buildings, equipment, vehicles, inventory, real estate, etc.
Don’t get me wrong, those things do contribute to the value of the company.
But for too many business owners, that’s where the business value starts and stops. They miss out on the value of the intangible capital of their business.
On this week’s podcast, we’re diving into the four different types of intangible capital: human, customer,structural, and cultural. To learn more, check out Episode 12 of the Scale to Sell podcast HERE.
For this BBT we’re focusing on WHY you should develop those 4 areas of business.
#1 – The Intangible Capitals Are the Key Drivers of Your Business Value
As Christopher Snyder points out in his book, Walking to Destiny, “The stronger your intangible capital, the stronger your multiple.”
What business owner doesn’t want to get MORE out of their investment when they exit?
We intuitively know our teams, customer base, systems, culture, etc. are important, but that rarely seems to translate into intentional cultivation of these areas.
That’s where strategic planning and goal achievement come into play!
#2 – The Intangible Capitals Can Help with Employee Engagement and Retention
In our world of worker shortages, we are well aware of the challenges to hire and retain our team members. It’s a challenge experienced by different-sized business across industries.
But some businesses are better equipped to attract, engage, and retain employees than others.
Why is that?
Teams that have defined missions, meaningful work connected to that mission, and a company culture that is positive and rewarding can make all the difference.
While money is often cited as the reason for leaving a job, it is often the intangibles that make a few dollars more elsewhere look attractive.
In an age of “quiet quitting” (doing the least amount possible), your intangible capital can strengthen employee relationships and give you the boost you need to continue scaling your company.
#3 – The Intangible Capitals Allow You to Pivot When Necessary
Remember when COVID disrupted every aspect of our lives?
Many businesses struggled to adapt, while others got scrappy and pivoted to make it happen.
Live events went virtual, restaurants added more takeout and DoorDash options, and even big stores like Target and Walmart adapted with more pick-up order opportunities.
The businesses that had the teams, processes, and customer loyalty in place were able to adjust to the guidelines and realities of life quicker, putting them in a better position to navigate the uncertainty.
Those businesses with weak intangible capital struggled even more as they tried to overcome supply chain and other challenges.
The strength of your intangible capital is related to the adapt over time to unforeseen pandemics, changing economies, and more.
#4 – The Intangible Capitals Are the Foundation for Long-term Growth
Imagine trying to scale a company with a constantly changing or unengaged team, no clear processes, little vision and planning for future opportunities or potential challenges…
Many business owners are too focused on working IN the business that they miss out on the opportunities to work ON the business.
Your intangible capital is what allows you to grow based on the strength of your teams, customer base, systems, and culture. Intentionally working on growing these aspects of the company opens opportunities you wouldn’t be able to handle otherwise.
What could your intangible capital do for you and your business?
Follow the Scale to Sell podcast and listen to Episode 12 on the 4 types of intangible capital.
Which of the four areas is your weakest? How could you improve that area to strengthen your intangible capital.
Our team of Certified Exit Planners and business coaches are here to help you improve your business and increase your transferable value.
Book Your Free Discovery Call at www.scaletosell.com/discovery
Keep Scaling!
Steve and Adam
(The father/son duo behind the Scale to Sell podcast)
Commenti