As an executive leader, you plan to create a highly valued company that is well positioned to provide value to the customer, create a culture of success, deliver strong cash flows, raise capital, acquire businesses, and grow at scale in the long run.
But what about the journey to reach this point?
In this blog post, we outline six keys to help your technology services business earn the highest possible valuation as a catalyst for long-term company growth. By dedicating these resources for your product, team, and client base, you can position your business to meet and exceed ambitious goals.
KEY 1 – CREATE A METRICS-BASED ORGANIZATION
How do you define success? And are these definitions measurable?
Each department of your business should take a metrics-based approach for assessing progress on core projects and bottom line results. By tying every aspect of your key initiatives to quantifiable outcomes, you can better understand strengths and quickly address areas where improvement is needed.
For Sales and Marketing teams, this approach is standard as leads and opportunities progress through the pipeline. But Key Performance Indicators (KPIs) can and should still play a critical role for other departments in your organization.
Here are examples of KPIs that you may also choose to actively monitor:
Onboarding: Ratings for Capacity, Duration, Quality, and Client Satisfaction
Client Success: Ticket Response Time, Ticket Resolution Time, Client Satisfaction, and Churn
Ultimately, KPIs will help your organization become more proactive in pursuit of your goals.
KEY 2 – MONITOR THE RULE OF 40
This key may be new to you if you have only recently adapted to a recurring revenue model in your business. SaaSholic defines the Rule of 40 as “a rule of thumb to analyze the health of a technology business.” Simply put, the sum of the year over year recurring revenue growth or run rate, plus operating margin (or EBITDA), should equal 40. This is a difficult metric to attain but a great indicator of a well run and valuable business. By holding your business to this standard, you can maintain a positive valuation trajectory.
KEY 3 – UNDERSTAND YOUR TAM (Total Addressable Market)
Corporate Finance Institute defines TAM (Total Addressable Market) as “overall revenue opportunity that is available to a product or service if 100% market share is achieved.” In other words, what is the maximum upside of the specific marketplace(s) you are targeting with your services?
By having a good grasp on the opportunities that a particular market segment offers, you will be better equipped to assess the advantages and risks of pursuing it. If the opportunity is large and achievable, you can begin planning and allocating resources to execute against it. But if the opportunity doesn’t meet your expectations, then you can move on to assess other intriguing alternatives.
KEY 4 – DIFFERENTIATE YOUR PRODUCT(S) AND PRICING STRATEGIES
In a fast-evolving technology marketplace, taking high quality, cutting-edge products to market should always remain top of mind. Ask yourself:
- How do these products better serve your customers over competing solutions in the space?
- What weaknesses in the solutions do you need to address?
- How can you modernize your product catalog to keep up with evolving needs in the marketplace?
- Can you create a pricing strategy around transactional or usage-based pricing models to launch additional revenue streams?
By continuing to offer unique products and pricing strategies that deliver difference-making results for your evolving clients and their end users, many of the key go-to-market pieces for achieving a strong business valuation will naturally fall into place.
KEY 5 – RECRUIT AND DEVELOP A STRONG LEADERSHIP TEAM
To find the right leadership fits for your organization, devote thoughtful resources to your hiring process. Hire based on your business’s mission, vision, and values. Carefully assess the company culture fit of candidates in the leadership hiring pool. Consider how they can help you do things differently and use creativity and critical thinking skills to solve complex issues.
Even after you fill a new leadership role, this development theme should remain a constant. With continuous coaching opportunities for your executives, you can enable your C-Suite to lead effectively and pursue ambitious valuation goals confidently.
KEY 6 – BUILD A GROWTH-ORIENTED CULTURE
Change can be intimidating, but the best organizations can manage it flawlessly. To prepare your employees for the inevitable evolution of your company, establish an expectation to embrace change and the new challenges that accompany it. Actively promote this positive message during your 1:1 time with employees and during company-wide speaking engagements. Encourage employees to take appropriate risks and find creative solutions to new issues that changes create. Keep the team aligned and empowered to embrace change. Always maintain transparency and explain the “why” behind your business’s evolution.
If every member of your team is open to change and evolving to meet the business’s potential, then you have unlocked a true formula for success. And long term, that formula will translate into an attractive valuation for your business in prospective M&A opportunities.
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