Understanding the Key Drivers of Value and Profit - Chalkhill Blue

Understanding the Key Drivers of Value and Profit

- Chris Spratling

Welcome to the second blog in our series of six all about the importance of developing real entrepreneurial CLARITY.

In today’s blog we’re going to delve deeper still into the importance of CLARITY for entrepreneurs in the JUMP and FLY phases and more specifically, clarity around the key drivers of value and profit in their businesses.

As a successful entrepreneur who has already enjoyed regular growth in your business, you’re probably looking to either;

  1. Accelerate your growth and build a profitable, sustainable business that scales  year after year ( JUMP) i.e. grows consistently by more than 20% per annum or…
  1. Think about preparing your business for sale (FLY) in order to realise the full financial rewards of all your hard work over the many years. 

You’ve almost certainly already learnt to successfully navigate a number of different challenges as part of your existing entrepreneurial journey. Whilst the  JUMP and FLY phases bring more challenges again, the step change in financial rewards goes hand in hand with the increased complexity and magnitude of challenges for most businesses at this stage.  

There’s no doubt that those entrepreneurs who manage to create a business that is capable of exploiting this elusive  JUMP stage enjoy massive commercial and personal benefits that simply elude so many of their peers.

Commercially the trappings of a business that is consistently enjoying periods of rapid growth in revenues, gross and net margins are both obvious and unquestionably financially lucrative.

The inevitable cashflow improvements from the aforementioned growth only further enhance the financial rewards for the business and the successful entrepreneur alike. 

Better still market-leading growth rates are one of a number of significant factors in enhancing the asset value of the organisation when ambitious entrepreneurs work towards maximising value in the run-up to an exit.

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Consequently, those entrepreneurs who manage to successfully navigate this exciting JUMP stage and consequently set themselves up for the FLY stage invariably enjoy far greater levels of financial freedom, control and independence compared to the majority of their peers, whilst creating far more time and a far greater sense of fulfilment for themselves, their families and their team.

Despite record numbers of new businesses being launched in the UK year after year have you ever wondered why so few entrepreneurs actually achieve either of these elusive goals?

Have you ever wondered why is it that the so-called gazelles, those companies that grow turnover by 20%+ for at least three consecutive years, enjoy market-leading gross (70%+) and net profits (20%+)?

Did you realise that these same companies are responsible for most of the UK’s SME growth but only amount to approximately 4% of the total number of SMEs?

Similarly – have you ever wondered why less than 11% of businesses listed for sale in the UK are ever sold?

There’s no doubt that in order to successfully navigate the  JUMP or FLY stages entrepreneurs need to develop a distinct set of skills and attributes that will allow them to unlock their true potential and create their own high performing organisation.

They need to develop the ability to deploy their vision for the organisation whilst inspiring others in pursuit of ever increasing stretch goals. They need to learn how to combine strong commercial and strategic acumen along with exceptional decision-making skills to exploit opportunities as and when they arise.

Contrary to the many myths around successful entrepreneurs and their individual entrepreneurial journeys entrepreneurs are rarely born with these skills. They are skills that we all have the ability to learn and indeed must learn if we’re to ensure our business realises its true potential.

High-performance business coaching and mentoring is about helping ambitious entrepreneurs and their organisations reach their full potential. 

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Revenue & Margin Drivers

For the entrepreneurs with a business in the  JUMP or FLY phases the attractions of scaling both revenues and margins are hugely appealing.

Typically, businesses in this accelerated growth phase (JUMP) will enjoy consistent annual revenue growth rates well in excess of 20% allowing the company far greater resources to either re-invest in further growth initiatives e.g. enhanced sales & marketing activities, new product development, higher calibre staff, more staff, better systems etc…. or alternatively, invest in new ventures be they in the form of product diversification or possibly even acquisition.

These accelerated revenue rates are characteristically driven by focusing on some or all of the following growth strategies, namely;

Increased Market Penetration 

Developing New Markets

Developing New Products


Similarly, by focusing on the key profit drivers such as price, variable costs, fixed costs and sales volumes and developing strategies to improve each of them, organisations within the JUMP phase will, by working with us, typically improve margins so as to enjoy gross margins of up to 70% and net margins often in excess of 20%.

Again these improvements consequently provide greatly improved financial resources for both the business and the business’ owners alike. 

In the case of the latter, this invariably provides the capacity for significantly enhanced drawings/ dividends, pension contributions, and other personal investment opportunities.

Cashflow Drivers

By working alongside businesses in the  JUMP and FLY phases we would also expect to see significant, and in many cases rapid, cashflow improvements.

By developing aggressive strategies to improve the key drivers of a scale-up organisation’s cashflow we typically find ourselves focusing on key areas such as;

  • Accounts Receivable Days
  • Accounts Payable Days 
  • Work In Progress Days
  • Price Change Percentages
  • Revenue Growth Percentages
  • Cost of Goods Sold Percentages
  • Overhead Percentages
  • Payment terms and business T&C

Commercially this leads to significantly improved cash reserves and allows the business to further accelerate its growth plans by exploiting high value, high margin opportunities alongside otherwise out of reach strategic investment opportunities.

As with the increased revenues and margins that typify these JUMP  and FLY phases the significant growth in cashflow also allows entrepreneurs to take enhanced personal rewards from the business or simply benefit from the ever increasing asset value within the business itself at a later date. 

Asset Value Drivers

In addition to driving rates of growth in short term revenue, margin and working capital successful entrepreneurs within the JUMP and FLY phases will typically be concerned with increasing the overall asset value of the organisation and their shareholding as well.

Successful entrepreneurs typically see the biggest wins in this area by focusing on the key drivers of asset value, namely;

  • The organisation’s overall financial performance 
  • The organisation’s strategic plan and ability to scale-up
  • The strength of the organisation’s cashflow position
  • The organisation’s market position, USP’s, and intellectual property
  • The organisation’s contracted and/or recurring revenues
  • The organisation’s Net Promoter Score
  • The organisation’s reliance on key customers, suppliers and staff
  • The organisation’s reliance on the founder/shareholders

The net result for ambitious entrepreneurs working with us whilst in a JUMP or FLY phase is that they can expect to see operating profits increase by a multiple of 3 or 4 times over a 3-4 year period whilst it’s even more realistic with the right level of focus and commitment to see asset value rise for the organisation by well in excess of 10-fold!

Whilst many entrepreneurs develop their organisations to a point where they’re ready to exploit the JUMP  phase it’s a very small minority (less than 4%) that ever manage to really unlock that true potential and enjoy the considerable financial and personal benefits brought about by successfully scaling a business.

Similarly, as entrepreneurs enter the FLY phase with a view to exiting their business it’s worth remembering that in the UK, industry estimates suggest that less than 11% of businesses listed for sale in any given year actually sell and the percentage that is sold in line with the seller’s expectations of value is smaller still.

In summary – very few ambitious entrepreneurs achieve either of the above outcomes and even fewer still achieve it without the help of an experienced executive coach/mentor.  

Today – it’s widely accepted by successful entrepreneurs committed to scaling and exiting their businesses that there are considerable benefits (financially, emotionally and personally) from investing in help and support from an experienced third-party with a proven track record of success.

Consequently – the quickest, smartest and most practical way of unlocking your business’ scale-up potential and/or maximising your business’ asset value prior to its sale is to invest in hands-on support from an experienced executive business coaching firm with a demonstrable track record of helping its clients do exactly that! 

If you are ready to make that important decision to JUMP and scale your business then you will need the help of an experienced entrepreneur and coach so you can benefit from all of their knowledge, strategic and operational expertise along with their hands-on practical support and advice, accountability, challenge and objectivity. 

Together you’ll implement systems and processes, develop and/or hire some of the very best talents to drive your organisation’s growth even harder, whilst building your own knowledge and expertise in order to accelerate your growth from a revenue, margin and ultimately an asset value perspective.

Book A Call

Why not get in touch with the team today? We’d love to hear from you!

We’re truly passionate about supporting business owners like you overcome your challenges and unlock the true potential of your business. If you’re looking to drive your business forward, get in touch today!

This fundamental shift from a profit-first orientation to more of an asset creation approach will not only fuel your business’ current growth rates, its future trading capabilities and value but also your personal wealth, resulting in greater financial freedom, greater control over your own destiny, the ability to spend more time doing the things you enjoy and an overarching sense of fulfilment and achievement.  

As one of the UK’s scale-up organisations, you’ll join an exclusive group of businesses that continue to enjoy annual revenue increases well in excess of 20%. We will help you increase your annual operating profits at a similar rate alongside increasing your asset value by increasing scale well in excess of 50% year after year.

Equally, by successfully working together with your coach you will be able to develop the appropriate FLY strategies that in turn will maximise your organisation’s value ahead of a successful sale, thus enabling your personal wealth to be greater than it has ever been and as a result of this financial freedom, you will enjoy unparalleled opportunities.

If you are an ambitious entrepreneur who is focused on either Scaling Up or preparing to exit your business we know how challenging the road ahead can be.

We know that moving forward quickly and efficiently is crucial to you.

At the same time we know how important it is that you develop the strategy, structure and systems to allow your business to (a) scale and (b) realise its maximum value when it is sold is critical. 

Having helped 1000’s of other businesses do just that, we understand how important it is for business owners to learn how to make the right decisions in a timely manner as the magnitude and complexity of these decisions increases.

By working One to One with one of our growth experts we will help you navigate these challenges both quickly and efficiently and ensure that you reach your goals.

Experience has taught us that the most ambitious entrepreneurs invest in One to One Coaching Programme as a means of accelerating their growth and ensuring that they reap the massive rewards that they always strived for.

Time and time again we are told by ambitious business owners that are looking for significant results in ever decreasing periods of time that they really value the objectivity that working One to One brings. Alongside the access to a world-class coach with proven tools and techniques they see massive benefits in having someone help them apply them in their businesses too. Similarly, they regularly tell us that the accountability and support from a seasoned entrepreneur are critical factors in accelerating their success.

DON’T MISS our next blog in this series of 6 separate blogs. In our next blog we’re going to delve deeper still into the importance of CLARITY for entrepreneurs in the RUN phase of their entrepreneurial journey.

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