What is a Value Catalyst?
Do Business Owners Really Need One?
Last week I updated my LinkedIn profile and changed my title to Value Catalyst. What does that mean anyway and why would anyone need one?
The short answer is that a Value Catalyst uses the Value Acceleration Methodology to help business owners create value with their businesses.
In chemistry, a catalyst is a substance that accelerates a reaction without being consumed in the reaction. In other words, the catalyst is outside of the actual work being done in the reaction, but makes it happen better and faster. That’s what a Value Catalyst does for a business. The Catalyst is an outside element that accelerates the creation of value within the business.
The Value Acceleration Methodology has been developed by the Exit Planning Institute (EPI) and is at the core of the Certified Exit Planning Advisor (CEPA) certification that I have recently earned.
Exit Planning has traditionally been focused on the end transaction — when a business owner transfers ownership in his business and steps aside for the new owner to take the business forward. When Chris Snider took over EPI he knew, from his experience working with business owners, that this approach to exit planning was missing the mark.
The day that a business owner starts or buys a business his or her focus is entirely on building and growing the business. They begin creating value for their customers, their employees, and their families. But they are also inexorably moving towards exiting the business. As the business matures, and often as the owner similarly “matures”, business owners begin to form a long-term vision of what they want for themselves and their business when the day finally arrives for them to step aside.
Chris developed the Value Acceleration Methodology to work with business owners to strategically plan and relentlessly execute towards that vision. It starts with an established business and helps identify the ways that the business could operate better — creating more value for customers and employees, and generating more cash for the owners.
The approach also focuses on how to work over time to increase what the business will be worth (its value) to new owners at the time of exit. In the final stage of the methodology, it helps the business owner through the transaction and the transition — choosing and pursuing the right exit options, and making the transition with grace and confidence that both the business and the owner will thrive beyond the transaction.
The Value Catalyst works hard to guide and accelerate the process, but the real value is created by those actively working inside the business. The Catalyst cannot create value independent of those actually doing the work of the business.
In addition to the Value Catalyst and the business owner, others also have to be involved in the process of value acceleration — the broader management team, the owner’s family, and key advisors including the business’ CPA, the owner’s financial advisor, and his estate planning attorney. As the time to exit approaches, other specialists appropriate for the kind of transaction being pursued also typically get involved. Optimally all of these advisors have also been trained in the Value Acceleration Methodology so that they are speaking the same language and working in-concert towards the common goal of creating value.
In future articles, I will talk about how to understand different kinds of value — business value, product/service value, employment value, civic value, eternal value. The Value Acceleration Methodology uses a simple formula for business value that I think is extensible to all the other forms of value:
Value = Performance x Multiplier
The Performance depends on the kind of value we are talking about, but for business value is a cleaned-up version of Sales or EBITDA (profitability). The Multiplier reflects the Attractiveness and Transferability of that Performance. Does the receiver of the value find it attractive and can they fully enjoy the value?
The Value Catalyst’s job is to work with the business owner and his team to improve both of the operands — the Performance of the business and the Multiplier. It can’t all be done at once — it needs to be planned, sequenced, and relentlessly executed.
This is an exciting new role for me! Value Acceleration takes my strategy and planning expertise, combines it with my appreciation for the relentless execution focus of being an entrepreneur and small business owner, and leverages the project management skills I’ve been putting to work since my earliest days as a software engineer. I’ve been blessed to be working with one business owner on his exit plan for a couple of years and look forward to helping many more create value in their businesses.
If you are a business owner, you probably need a Value Catalyst. Do you have one yet? Let’s chat!
