A Value Map
In this relatively short blog (excuse me … the sun is shining!) … I just wanted to share with you the simple concept/tool of a ‘Value Map’ in the context of a professional service business.
There are many ways of coming at the question of where value lies in a professional services business. In the previous blog, I covered the classic valuation formula. My series of guides is fixated on how to build value in your business, so I am also going to spend time discussing management focal points, strategies and the practical steps that support you in this regard. The crossover between valuation techniques, generic business-enhancing strategies and specific professional service focal points can be confusing; as such, the following schematic (a ‘Value Map’) serves to illustrate the interconnections.
* Please note … where the diagram refers to ‘this chapter’ … all these ‘tactics’ are covered in Guide 2 [see Guide 2]; the remaining ‘chapters’ are synonymous with the (same numbered) guides in my series.
My areas of focus in future blogs are the top and bottom layers of this map. The middle layer describes the high-level generic strategies open to any business. On this layer, A and B should be obvious. Point C talks to the efficiency by which you move working capital around your business (the ‘oil’ in the system). The more efficiently you chase down client invoices, for example, the less exposed you are to requiring bank loan (with interest payment implications) to cover any periods of indebtedness to your own creditors. Hence this aspect impacts your multiple (your cash handling will be a key point of market scrutiny). Whilst points A-C can be gleaned directly from your financial statements, point D is the more subjective aspect of your capability/culture/brand/ethics as externally-assessed.
By showing this all together, I hope you get a sense of the interconnectedness of the topics I cover in my guides. I also wanted to demonstrate, before we get going, that my practical focus on the bottom layer of this Value Map represents a comprehensive approach to the task of lifting overall value.