l management                                                              All businesses sit somewhere on this            ...
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The business of adding value


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All businesses sit somewhere on this spectrum between boutique and scale - git it right you maximise value on exit - get it wrong you lose money. by Craig West - CEO & Founder Succession Plus www.successionplus.com.au

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The business of adding value

  1. 1. l management All businesses sit somewhere on this for Qantas – but only for business class spectrum (shown right) and maximising and first class – again supporting the the value of your business depends Boutique < < No man’s land > > Scale premium positioning this restaurant and upon your ability to recognise where it its chef enjoys. currently sits and how to improve its It is important to recognise how we add position. This article focuses on this model value in these businesses. Simply put, and how to use it to maximise the value of products/markets that are not in their of stores on main roads – simply another drive further into the niche – specialise, your business! target group and therefore they move version of adding scale to an existing improve service and product. Become Let’s look at the model first – a simple their business away from either end of the operation. more premium and more exclusive – price spectrum identifying the different types model and towards no man’s land – where As a business owner no-one expects you is never an issue in these businesses. of businesses – from boutique to scale – value reduces. to have a drive thru or employ 1.5 million neither end better than the other – just people – but the lessons are obvious – if No man’s land a different model for running a business Scale businesses – the McDonald’s you have a scale business volume is the key This exactly what it says – no man and importantly different value drivers model – and not volume based on discounting, wants to be there! This happens when at each end of the spectrum. If we look McDonalds is a true scale business – firstly volume based on working out how you can you try to serve a burger in Rockpool or at some common examples it becomes it is large (though this is not the most ask “Do you want fries with that?” lobster mornay at McDonalds – a factory much clearer: important factor), it is highly systemised In real estate, asking “Do you want fries that is built for one thing is trying to and structured, its value lies in volume with that?” is fairly simple. Providing produce something else. We see this a Scale and its owners are not tied to the business customers with ancillary services lot in professional firms – accountants, This is McDonalds – a true scale business day to day. Let’s look at some basic facts related to property such as finance and lawyers, financial planners etc. They – value is based on volume. This is a highly that highlight the scale aspect; insurance, relocation services etc can build a factory based on either boutique efficient factory for churning out fast, Firstly simple size. 31,000 stores in 119 lead to increased customer satisfaction (I know an accountant in country NSW convenient take away meals (initially countries – that’s big! They serve about 47 and more importantly increased revenue that services only 100 clients total – no hamburgers but now a wider range of million customers per day and have over and ultimately additional value. We need matter what – he gives them premium meal options) – forget the ethical and 1.5 million staff internationally. to look at each customer and analyse service and answers their calls from health arguments for a while and just look Some of the more interesting details in what we can do to offer them fries with overseas or in the middle of the night) at the business. The typical McDonalds terms of adding value to your business their burger! or scale (H&R Block or ITP – highly franchise in Australia sells for about $1 are that the average age of a McDonalds I had a recent conversation with an LJ efficient factories for churning out tax million - $1M FOR A HAMBURGER store manager is just 21 years old – how Hooker agent I have known for some time returns as quickly as possible – in many SHOP! Why? – They make money and does this work? Because they have policy about selling one of my properties. The cases you can get a refund transferred to are easy to run. This is Michael Gerber’s and procedures manuals for everything, sale never proceeded, however, I’m just your account the same day!). Both have e-myth on steroids – highly systemised they have a training program second to about to finalise some additional finance profitable successful businesses. They and efficient factories where volume is key none and staff are constantly monitored with his financial services referral so even shouldn’t cross over, but often do. Often a – we will look at some of the specifics of and measured. The P&P manual includes though I am not actually a client of his financial planner who services only high the McDonalds business in the next post details on every aspect of store operation. business he will be earning revenue as a net wealth individuals will get asked to and you’ll see some amazing factors that If the thick shake machine is not working result of our conversation and his ability do a favour for big client – “Can you look contribute to its unique value and explain there will be a page on how to fix it to identify fries even though I didn’t even after my mother/friend/mate?” – who why they sell for $1 million. and if that doesn’t work a page on what buy a burger. doesn’t fit the profile and isn’t a high net wealth client. They of course say Volume These are speciality businesses servicing Providing customers with ancillary services related to yes to keep their large client happy and therefore get a client that doesn’t suit a niche market or clientele – like Mrs property such as finance and insurance, or relocation their factory! Do this a few times they Topps in Neutral Bay – a premium end services can lead to increased customer satisfaction end up in no man’s land!The business offering where bookings this year are What’s the solution? GET OUT OF IT. hard to come by or Rockpool – a boutique and more importantly increased revenue. Sell a parcel of clients that don’t match, seafood restaurant in The Rocks built open a new office that handles just thatof adding around a celebrity chef in Neil Perry – signs to put up explaining the issue to Boutique – niche niche niche type of client, refer the ‘mismatched’ high end premium price, premium service. customers – does your business have this Boutique businesses are quite a different product or client to another business and Rockpool only does seafood but very, very level of systemisation? McDonalds has prospect to scale – they are not focused enter into an agreement that they refer you well – it is expensive and exclusive – a true done this by necessity, they have a young on volume – but on the opposite – typical back only clients that are a perfect matchvalue boutique business. inexperienced workforce and they rotate words to describe boutique businesses for your business. l staff often. are ‘premium’ and ‘exclusive’. These No man’s land In terms of scale and adding value these businesses service a niche and the very Craig West, M.Tax Law, M.Bus (Acct/Fin), In the middle sits no man’s land – not a guys are the best! As anyone who has ever best ones drive themselves further and B.Bus (Mgmt), CPA, is a strategic accountant great place to be – simply put this is when eaten in a McDonalds store will know, further into that niche, specialising their who has built a specialist advisory practiceThe key to business success may be asking “Would you try to serve a hamburger in Rockpool they always ask you “Do you want fries service offering and their product focus focused on small business owners. Craig has or try to cook lobster mornay in a kitchen with that?” This question alone makes until it is boutique. written three booksyou like fries with that?” Either find the fries in at McDonalds – many get caught trying them US$22 million per day. Amazing Some typical examples are Rockpool educating SMEs onyour business or find an exclusive niche in the to produce and serve a product that the factory is not designed for. number firstly – also amazing that they know that! restaurant in The Rocks in Sydney – expensive, great food, premium wine list, employee incentives, succession planning andmarketplace. At either end of the Value Spectrum Due to the cash flow pressures of start- McCafés (actually an Australian idea) really strong service – this restaurant is asset protection and has up or ignorance of real value drivers in are known to add up to 60% turnover built around a celebrity chef in Neil Perry recently been invited tosits profit and success. Story by Craig West. business, many businesses get caught in to stores they are added to. Drive thrus and is well known to the niche market undertake a PHD in Business this trap and end up taking on clients/ when added nearly doubled the turnover it is targeting. Neil Perry is the chef Succession Planning.44 | List more! Sell more! Be more efficient! It’s in sold• sold-magazine.com.au | 45
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