How much value did you add today? – Mark MacLeod

June 14, 2022 - Mark MacLeod

How much value did you add today?

I work with a CEO whose company has daily targets for enterprise value created.

I love this for two reasons:

1. I believe that speed is both the primary strategy and primary tactic for a high growth company. All else being equal, getting somewhere faster tends to be more valuable. Every day counts! Especially when you are burning capital.

2. In order to synthesize your entire business down to a daily EV formula you need a clear understanding of how your business works and how value is created. You must understand how investors will value your business. Again – a great perspective to have if you are burning money and will need to raise more in the future.

Perhaps most importantly, a truly effective daily EV added measure will help you instrument the business so you can identify which functions (and people) are and are not adding value. This is how you run a business in a systematic and scalable way: with a full understanding of how to create enterprise value and plenty of measures so you know if you are on track or not.

While l believe this is a great way to run a business at all times, it is particularly useful in a downturn for two reasons:

1. It creates greater executional discipline and accountability. You can do more with less. You will waste less of your precious funding.

2. In a world of changing/declining valuations, you can simply plug the new valuation multiples into your EV model and know what targets you need to hit to be able to raise more money. You then can plot a daily path to achieve those targets.

Questions to consider:

Am I clear on exactly how enterprise value is created in my company? What do investors value? Strategic buyers?

Do our management systems & KPIs reflect these drivers of value?

Can we brake down HOW enterprise value is created and reflect that in daily targets?

If we had daily targets that directly impact how we create value, what impact will this have on our business?

Photo by Stephen Dawson on Unsplash

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