Driving value creation

Value creation is a word that’s used a lot, but what does it mean? Creating value - customer, consumer and financial. When a company buys a business, they focus on value creation. The business case assumes that there is value to create.

Value can be created by pulling either strategic or operational levers:

Mergers and Acquisitions: Buy-and-build deals are where a Private Equity firm buys a company and aims to enhances that platform through add-on acquisitions.

Strategic Pricing: Strategic pricing incorporates best pricing practices and ensures that your pricing strategies, analytics and processes complement your business strategy. A product’s price is based on the value to the customer, or on competitive strategy, rather than on the cost of production. By creating strategic pricing policies, analytics, and processes, you can directly capture customer value and translate to shareholder value.

Distribution Strategy: Distribution strategy is a plan to make a product or a service available to the target customers through its supply chain - to make sure the it can reach the maximum potential customers at minimal or optimal distribution costs. A good distribution strategy can maximise your revenue and profits.

Geographic Expansion: With access to new markets, a business has the potential to build a new customer base.

Product Strategy: A product strategy outlines the desired outcomes to be achieved by the product including the end-to-end vision, and how it supports the company’s strategic objectives. The product strategy is brought to life through the product road map and can be used to support any tactical decisions that the company needs to make.

Product Innovation: Product innovation represents a new way of solving a problem a high number of consumers have:

1. There are no products on the market that address the problem statement - unexplored market spaces could potentially generate high profits or;

2. There may be other products on the market that address the problem but in a different way to your innovative solution

Digital Transformation: Digital transformation is the use of technology — software enabled, connected, transactions, and interactions, across all areas of a business. The goal of digital transformation is disrupting existing business models, improving customer experience, and creating operational efficiency to drive economic value creation.

Customer Segmentation: the benefits of customer segmentation include focus, competitiveness, expansion, retention, communications effectiveness and profitability.

Aftermarket Service Strategy: The concept of aftermarket service is as important as sales, the saying “it takes years to build a reputation but just moments to ruin it” addresses the importance of keeping a customer happy and satisfied. Aftermarket service does not generate any revenue for the company, but it increases the goodwill in the market and amongst the customers.

Data Strategy: Data strategy is a central, integrated concept that articulates how data will enable and inspire business strategy.

Pricing Optimisation: Price optimisation is the practice of using data from customers and the market to find the most effective price point for a product or service that maximizes value for customers and sales or profit for the company. 

Sales Force Effectiveness: Sales force effectiveness is driven by the decisions, processes, systems and programmes that sales leaders are accountable. By managing sales force effectiveness drivers, companies can build high-quality sales teams that better meet customer needs, increase productivity and successful conversion, and consequently result in improved turnover and EBITDA margins.

Procurement & Managing Suppliers: Smart procurement practices are fundamental for companies across all industries to optimise operational efficiencies and improving EBITDA margin.

Product Portfolio Optimisation: Product portfolio optimisation helps managers assess their products’ current level of success - it provides a centralized view of an entire suite of products against the prevailing marketplace for those products. Effective product portfolio optimisation highlights future opportunities for improved resource allocation, greater returns, growth and profit, and reveals products that are generating a negative contribution.

Operational Efficiencies: Operational efficiency refers to a company’s ability to reduce waste in time, effort and materials as much as possible, while still producing a high-quality service or product. Financially, operational efficiency is the ratio between the input required to keep the company going and the output it provides. When improving operational efficiency, the output to input ratio improves. The greater the operational efficiency, the more profitable a company becomes as it can generate greater income or returns for the same or lower cost.

Cost to Serve: Cost to Serve focuses on aggregate analyses around a blend of cost drivers. The analysis exposes the variation in customer demands for different activities and has a different cost profile. Without understanding the cost to serve a customer, a company is unable to determine the value that customer is contributing to their business.

The value levers are a great way of prioritising what's important.

The levers that drive the biggest value result in an improved performance that leads to greater valuation. 

If you are:

1. Getting your business ready for sale 

Executing initiatives that drive value and can be in the run rate results will result in a higher sale price 

2. Buying a business.

Your investment case is critical to drive the appropriate acquisition price. This will also drive what transformation program looks like once the business has been bought to ensure the business case is achieved/exceeded 

3. Running your own business.

Driving value is what you do everyday but sometimes it's easy to miss the levers to pull to achieve the greatest success. 

At any point of a business lifecycle it's imperative that driving value is something you focus on to drive consistent and stable earnings with a positive trend. 

Article by Jo Hands, Co-Founder Whiteark

Looking for more support? Download our Private Equity Playbook for the ultimate guide to value creation.

---

Looking to create value in your organisation? Let us help.

Whiteark is not your average consulting firm, we have first-hand experience in delivering transformation programs for private equity and other organisations with a focus on people just as much as financial outcomes. We understand that execution is the hardest part, and so we roll our sleeves up and work with you to ensure we can deliver the required outcomes for the business. 

Our co-founders have a combined experience of over 50 years’ working as Executives in organisations delivering outcomes for shareholders. Reach out for a no obligation conversation on how we can help you. Contact us on whiteark@whiteark.com.au

The Ultimate Private Equity Playbook

Private Equity firms must have a clearly defined playbook containing value creation initiatives in order to succeed. This 40+ page playbook by Whiteark is the ultimate guide to realising value in your Private Equity transaction.

An asset’s full potential is realised through a holistic approach, that focuses on optimising operational performance, enhancing strategic capabilities and effective capital management.

Playbook Inclusions:

---

✔️Overview
✔️Strategic Levers
✔️Operational Levers
✔️Identify Value Creation Initiatives
✔️Types of Value Creation Initiatives
✔️The M&A Benefits
✔️Strategic Pricing
✔️A Sharp Focus - where to target your efforts
✔️Distribution Strategy
✔️Types of Distribution Strategy
✔️Geographic Expansion
✔️Geographic Considerations: Entry to new markets, New sales, Access to local talent, Increased business growth, Competitive advantage, Operational efficiencies
✔️Product Strategy: Product Vision, Goals, Product Initiatives
✔️Product Innovation

✔️Digital Transformation Approach
✔️Digital Transformation
✔️Digital Strategy
✔️Customer Segmentation
✔️Aftermarket Service Strategy
✔️Data Strategy
✔️Data Strategy Principles
✔️Pricing Optimisation
✔️Approach to Pricing Optimisation
✔️Sales Force Effectiveness
✔️Procurement & Managing Suppliers
✔️Successful Procurement Management
✔️Pricing Optimisation
✔️Benefits of Product Portfolio
✔️Operational Efficiencies Focus Areas
✔️Cost to Serve

And more…

---

Get your hands on the PE playbook

Want your copy of our 40-page Private Equity playbook? Click the button below to proceed.

Private Equity is our thing. Qualified, experienced, and connected, our team is on hand to help you exceed all expectations.

With extensive experience working with private equity firms, we have the ability to drive true value in portfolio investments. Globally, and locally, our team’s combined experience bridges the gap and fills in the blanks, so we’re ready to help - exactly when you need it.

Our approach is rooted in data, ensuring the right decisions are made – based on accurate information. Hands-on, we get into the trenches with you, working directly with the management team to realise outcomes expected by shareholders. We offer a range of transformation services which can be tailored to suit standard private equity options; always accompanied by a laser focus on profit optimisation of the business.

Preparing Your Business for Sale

The Guide to Getting Your Business Ready for Sale

To maximise the value of your business on exit it’s imperative that you commence strategic planning work at least 18 months to 2 years out from sale.

Key elements that need to be considered in your strategic plan include:

Key Business Drivers

• Understand the key drivers of the business. 

• Identify which of the drivers will have the greatest impact on the business valuation.

Competitive Environment

• How are your products or services positioned in the market?

• Who are your direct and indirect competitors?

• How does your pricing structure compare to the competition?

Global Mergers & Acquisitions

• Review global activity within your industry and understand the trends and key information.

Potential Buyers

• Understand potential companies that could acquire your business.

• What would they consider the most important value drivers?

Our 6-step guide to maximising value…

Key activities to undertake when preparing your exit plan.

Revenue & Margin Analysis

Understand which customers, products and markets generate the most revenue and the have the most attractive margins. This will drive improvements in performance, making your business more profitable and appeal more attractive to buyers.

Growth Plan & Scenario Assessment

Build a financial model that considers multiple scenarios to demonstrate how further profitable growth can be achieved to maximise your future sale value.

Overheads & Profitability

Analyse overheads and reduce fixed costs to enhance profit margins and increase the value of your business.

People

Create incentives for critical employees to remain in the business post the sale, to minimise risk for the buyer and to ensure the business valuation is defensible.

Financial Governance and Reference Books & Controls

Make sure that the business’ financial statements and accounting information is accurate. This will elicit compliance, assurance in numbers and transparency. Buyers like it when business operations run smoothly and efficiently so it is important to document business processes, review controls and update systems to improve the value and desirability of your business.

Data & Documentation

Ensure documentation required for the sale process is readily accessible to allow buyers to complete the due diligence quickly and efficiently. This will reduce risk for the buyer and maximising value for you.

Additional Funding

Top 3 key considerations for requesting additional funding for your business:

1. You have a guaranteed return on investment (ROI): You know if you have more money to invest you will be able to make an appropriate return.

2. Improve Financial Results: Additional investment will increase the revenue and gross margin of the business to cover the fixed costs and generate positive cashflow.

3. Overheads & Profitability: Additional investment / partnership will give the business a competitive advantage through new capability and linkage to the market.

---

How Whiteark can help?

With extensive experience working across a range of services, we embed ourselves within companies to drive value, and deliver on key metrics.

Maximise Revenue

o Develop future strategies for way forward
o Understand market opportunities
o Build flexible workforce planning models
o Develop strategy and plans around a Buy and Build model to generate revenue growth
o Data, analytics and diagnostic tools
o Build comprehensive strategies across the business
o Customer experience & optimisation
o Marketing optimisation
o Go-to-market approach
o Pricing and packaging
o Account based marketing model
o Develop key metric reporting, aligning incentives to drive the right outcomes

Optimise Cost Base

o Utilise data, analytics & diagnostics to fully understand opportunities
o Develop strategy and plans around a Buy and Build model to realise operational efficiencies
o Organisational re-design, including outsource options
o Sales resource optimisation, aligned with GTM strategy
o Process review and redesign
o Benchmarking of costs against other industries and similar organisations
o Marketing spend optimisation
o Contract review to drive an improvement in costs
o Activity based costing model developed to understand financial drivers
o Cost optimisation strategies around activity based costing, specific to the business

In addition to the above services, Whiteark can help you secure funding (seed, investment or debt) through our network so reach out to see how we can help you.

Reach out to us today for a no obligation conversation today.

How to prepare for sale?

To maximise the value of your business on exit it’s imperative that you commence strategic planning work at least 18 months to 2 years out from sale.

Key elements that need to be considered in your strategic plan include:

Key Business Drivers

Understand the key drivers of the business. 

Identify which of the drivers will have the greatest impact on the business valuation.

Competitive Environment

How are your products or services positioned in the market?

Who are your direct and indirect competitors?

How does your pricing structure compare to the competition?

Potential Buyers

Understand potential companies that could acquire your business.

What would they consider the most important value drivers?

Global Mergers & Acquisitions

Review global activity within your industry and understand the trends and key information.

Our 6-step guide to maximising value…

Key activities to undertake when preparing your exit plan.

Revenue & Margin Analysis

Understand which customers, products and markets generate the most revenue and the have the most attractive margins. This will drive improvements in performance, making your business more profitable and appeal more attractive to buyers.

Growth Plan & Scenario Assessment

Build a financial model that considers multiple scenarios to demonstrate how further profitable growth can be achieved to maximise your future sale value.

Overheads & Profitability

Analyse overheads and reduce fixed costs to enhance profit margins and increase the value of your business.

People

Create incentives for critical employees to remain in the business post the sale, to minimise risk for the buyer and to ensure the business valuation is defensible.

Financial Governance and Reference Books & Controls

Make sure that the business’ financial statements and accounting information is accurate. This will elicit compliance, assurance in numbers and transparency. Buyers like it when business operations run smoothly and efficiently so it is important to document business processes, review controls and update systems to improve the value and desirability of your business.

Data & Documentation

Ensure documentation required for the sale process is readily accessible to allow buyers to complete the due diligence quickly and efficiently. This will reduce risk for the buyer and maximising value for you.