Focusing on Revenue Instead of Value

Midmarket CEOs often get asked “How big is your company?” In American business, size matters. Beyond the preoccupation with numbers and size is a much more important question that is rarely asked: “What impact does your company have in the marketplace?” Is the company a bit player, a role player, or the “leading man” in its market? Typically, business leaders describe their companies in terms of revenue, head count, or plants and equipment.  Revenue is an easy answer because that’s a scorecard everyone can understand. But when they use this measure, companies shy away from the “value discussion” because value is a much more esoteric concept.

If the average middle-market CEO were asked, “What are the five things that make your company valuable?” she wouldn’t know the answer. She knows her company has to make money, make payroll, and win more business, but she doesn’t know what really makes her company valuable in her marketplace. This results in the tendency to make seat-of-the-pants decisions that are not fiscally prudent. A company might decide to sell a particular product in a market niche, even though no other company is willing to partner with it. Or leaders might decide to keep a line of business going, though it might be smarter to shut the line down and use the resources elsewhere.   Know what makes your company valuable to the marketplace and what is core for you.

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