How to increase the value of your business by 35 percent

By Mark Varder

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Imagine you’re going to sell your business ten years from now. How much is it going to be worth? What are you going to do between now and then to increase its value steadily and substantially?

In answer to those questions, the management consultant Peter Drucker is a good place to start. He famously said, “Marketing and innovation are investments in your business; everything else is a cost.”

I’ll leave the innovation to people better qualified. This article is about marketing. Specifically, it’s about the heart of marketing – developing a brand.

‘Your brand can account for 35 to 65 percent of your business’s shareholder value.’

Solving problems for your customers.

Just as a product makes a difference in people’s lives physically, so a brand can make a difference emotionally. Is that a slightly odd statement? It is an important one, so let me give you an example of what I mean.

Nike makes a physical difference in our lives with its innovative sports gear. But it also makes an emotional difference in our lives. Its brand – its commercials and posters – inspire us. They get us off the couch and out the front door: Just Do It.

In other words, Nike solves two problems for us. It matters in two different ways: innovation and inspiration. And you could argue that the intangible, emotional difference – inspiration – matters more. If Nike were to shut its doors in six months’ time, it’s the Just Do It we would miss most.

Does the same principle apply to B2B companies?

Let’s take a local example. Semane Engineering Solutions designs mining and public infrastructure. They solve large-scale civil engineering problems for mining companies.

But these large-scale engineering projects can run into potentially disastrous time- and cost-overruns. That anxiety can wake CEOs and procurement officers up in the middle of the night. It’s a powerful emotional problem they could do without.

Because Semane has a risk-averse design culture, it can market itself by addressing their anxieties. The brand we developed together has this statement at its heart: Designed for Peace of Mind.

With a clear, consistent investment, Semane not only differentiates itself from its competitors, it makes a difference to its customers and potential customers. It becomes more valuable to them.

Think of it as building a second business.

Many CEOs ask how on earth they go about “building their brand.” It is not their area of expertise. Compared to the very real, tangible world of civil engineering, for instance, it all seems pretty intangible. How do they begin?

Perhaps because of my own engineering background, I like to be pragmatic. It’s about identifying a problem your customer would like solved – and then solving it. There is no magic involved, nothing out of the ordinary. Just common sense.

Think of it as developing a second business. You start by doing your homework thoroughly. When you are ready to go into the media, you start modestly. You try this and that. You look for results. You build your confidence.

Given sustained, consistent investment, not only do more customers get to hear of you, you become more valuable to them.

Your business matters. Now it starts to matter more.

Putting a value to a brand is not an easy matter. Jan Lindemann has detailed different methodologies in his book, The Economy of Brands.

What results can you expect?

Over time, your brand can account for 35 to 45 percent of your shareholder value if you’re a B2B company like Semane. When you’re a B2C company like Nike the returns are even better. Your brand can become up to 65 percent of your shareholder value.

And when it comes to selling your business a decade from now? I leave you with this thought from a gentleman who not only built a fine business, but a fine brand.

“If this business were to split up, I would be glad to take the brands and trademarks and the goodwill, and you could have all the bricks and mortar – and I would fare better than you.” John Stuart, Quaker Oats, 1940

Mark Varder enjoys identifying and solving problems for businesses. He has worked with companies of all shapes and sizes from a small outfit like his brother-in-law’s Miller’s Company to large corporates like SABMiller. He is the co-founder of the brand consultancy Varder Hulsbosch.

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