Value Engineering: Selling Your Company at a Premium. Part 13: Strategizing Like an MBA Graduate

The articles presented here are adapted from my recent book, Value Engineering: Strategies to 10X the Value of Your Clinic & Dominate the Market. Even though these articles focus on healthcare company owners, the principles apply to all types of businesses looking to increase value and have a premium exit.

In this article, I would like to share some of the most common—and my favorite—business tools to ask my clients and students to evaluate their business and create strategies for their growth. Regardless of your business's size, professional investors use the same tools for managing billions of dollars in assets.

Business Plan

A business plan is a road map for a business to achieve its objectives. Most people think of a business plan as something lengthy and formal, and thus they are discouraged when someone asks them for a business plan. Others think of a business plan as only a tool when presenting to investors or banks.

Nothing is further from the truth. Business plans are dynamic in nature, as the conditions of our businesses change all the time.

I recommend updating a business plan at least every quarter

One of my favorite business plan models is the lean canvas model . It is a one-page canvas created by Ash Maurya . On this canvas, there are the following blocks that make founders think about their business model and have a quick snapshot of all the essential elements of a business without writing a lengthy business plan that typically is skipped over by a reader.

Block No. 1 - Customer Segment

In this block, you define your customers as whom the ideal and early adopter targeted patients are for your practice.

Block No. 2 - Problem

In this block, you define the problem you are trying to solve and the alternative solution to problems that are currently in the market.

Block No.3 - Revenue Stream

In this block, you think about all of the methods to generate revenue for your business.

Block No.4 - Solution

In this block, you list all of the solutions to solve the problems in block no. 2.

Block No.5 - Unique Value Proposition

In this block, you focus on the message of what sets your business apart and why a customer should consider seeking your services over a competitor.?

Block No.6 - Channels

In this block, you list all of the channels you would employ in attracting new clients to your business.

Block No. 7 - Key Metrics

In this block, you determine how you would measure the success of your business. You make a list of key indicators and the targets to make sure your business model is responding and is on the right path.

Block No. 8 - Cost Structure

In this block, you list your fixed and variable costs to get your project up and running.

Block No. 9 - Unfair Advantage

In this block, you specify the competitive advantage that your business would have over a competitor that cannot easily be copied. An example of this would be a patent, specific licensing or a partnership agreement.

I have spent over $50,000 in creating professional business plans that never end up being read in its entirety. The canvas business model is a quick and inexpensive way for any business owner or management team to assess every decision on their business and quickly change what may not be working for them, and I highly recommend it.

SWOT Analysis

SWOT is an acronym for Strengths, Weaknesses, Opportunities, and Threat. Using this framework allows the management teams to analyze the internal factors (Strength & Weaknesses) and the external factors (Threats & Opportunities) and come up with strategies to become more competitive in the marketplace.

? Strengths explain how your company has a competitive advantage over other similar businesses in the area. For example, it could be that it may have been long established, it has a large, loyal, active customer base, healthy cash flow and balance sheet, and it has a unique alliance with other strategic partners. The list of strengths allows an organization to leverage its further growth.

? Weaknesses identify the barriers to improvement and remaining competitive. It helps founders and managers focus on areas of improvement and transforming them into strengths. Examples of this could be a lack of skilled workers, low lead conversions, higher employee turnovers, limited working hours, outdated decor and equipment.

? Opportunities indicate external factors a company can exploit in growing a business. Examples could be reaching out to different markets, carrying out more educational based marketings, vertical or horizontal integration, creating customer loyalty program, or a strategic partnership.

? Threats are factors that can disrupt and cause a business to lose market share. These could be macroeconomic factors such as new government regulations, political instability, economic conditions, or social trends changes. The knowledge of these trends will help you create defensive strategies to protect your business. Examples could be new laws affecting licensing, OSHA, currency fluctuations, or recession.

VRIO Framework

The VRIO framework is a business tool to assess the capabilities of available resources of a business by answering four questions. It allows management teams to figure out their competitive advantage over their rivals and use the information to better position themselves in the market.

The questions that need answering are as follows:?

V = Is it Valuable? Is what I think is a competitive advantage valuable?

R = Is it Rare? Is what I think is a competitive advantage rare? In other words, is it exclusive to my business only?

I = Is it Imitable? Is what I think is a competitive advantage imitable by competition? Can it easily be copied?

O = Has my Organization exploited the resource? Has my company utilized the resources to the full extent?

Answers to the above questions will unlock your company's potential in the marketplace and allow you to formulate a market strategy based on the differentiators, giving you a competing advantage. For example, if you run a clinic which is open 24-hours, and that is something rare among your rivals, this differentiation can become your marketing focus. The VRIO framework evaluates a company's internal resources related to the Strengths and Weaknesses listed on SWOT analysis.

PEST Analysis

This is a business tool used to evaluate the Opportunities and Threats further on SWOT analysis. It helps to consider the macroeconomic factors before mapping out a corporate strategy. The PEST is an acronym for Political, Economic, Social, and Technological factors. There are other variations referred to as PESTEL, which considers additional factors such as Environmental & Legal.

PEST analysis is especially useful in evaluating new market entries. The more negative the factors, the more challenging it is to enter a market, and thus to make a profit.

I encourage all my clients to Apply these MBA tools before any strategic planning. They will help make management teams more focused and aware of potential risks and areas requiring improvement?

Dr. Nazeri has over 30 years of experience as a healthcare entrepreneur worldwide. He has been actively consulting leadership teams of some of the largest privately held and publicly listed companies on strategic growth and preparing them for an eventual successful exit. Dr. Allen has a Dental Degree from Creighton University and earned his MBA in M&A and Investment Banking from the University of Bedfordshire. He is the author of Value Engineering: Strategies to 10X the Value of Your Clinic and Dominate the Market!?Dr. Allen offers a Free Valuation to company owners who are ready for a partial or a complete exit.?You may contact him via [email protected]

This article is based on the author's professional opinion. American Healthcare Capital team of M&A advisors and management team may or may not share the same opinion as the author.