Part 3 – The Ultimate Guide to the Value of Your Business: Employee Value

employee value

So many meetings…

Walking out of the conference room, Jean was stopped by one of her senior managers. He wanted to discuss their latest product marketing designs.

As interested as she was, Jean was thinking maybe it was time for these managers to take on more responsibility. Was it time for her to transition the business?

Business owners often find it difficult to recognize when it’s time to prepare the company for transfer. It’s best to start the process with an examination of the six value drivers of any company.

Jean was working on improving her Strategic and Organizational value. Now it was time to look at Employee Value.

What Is Employee Value?

Employee Value reflects on the strength of the employees, particularly the management team. This value driver is particularly concerned with the depth and the breadth of the management team’s experience in the industry and the tenure with your company.

A well-seasoned management team and long-term employees are an asset in any company. They know the products and their role in the success of the organization. Many times, certain employees have special relationships with their customers.

Jean knew that her top salesperson was one of the best in his field, and his numbers proved it. He was doing a great job mentoring his staff, but Jean felt she was still getting dragged into too many demos and closings.

Maybe she needed to back off a bit?

Why Is Employee Value Important?

Within a small organization, it is not uncommon to find a disproportionate amount of revenue generated by a few individuals. Client relationships can also be personality dependent, rather than company dependent.

If a customer only deals with one or two specific individuals within your organization, to the exclusion of anyone else, that’s a red flag. When a buyer looks at a company, they want to know that the loss of certain “key” individuals will not affect the overall revenue of the organization.

How Is Employee Value Calculated?

To gauge Employee value, buyers are interested in companies with seasoned employees, long-term management, and limited dependency on one or two specific individuals.

Your company’s score is higher if:

  • You have long-term employees with low turnover
  • You have little “key” man risk – revenue generation is spread out among different individuals and the leadership team has several strong individuals
  • Your management to staff ratio is appropriate for your industry

Improving Employee Value

Improve this value driver by working with the management team and their employees.

Get better at finding and keeping great employees

In today’s market, finding great employees is challenging. When you find them, offer them a stable, pleasant place to work. Use their skills appropriately and help them grow in their jobs with your company.

If your organization is plagued with high turnover, it’s time to find out why and try to fix it.

Keeping employees long term implies satisfaction.

Diversify your leadership

If the company is dependent upon the owner or a few key individuals to run the organization or sell your product, it’s important to distribute the workload a little more evenly among the leadership team.

A company whose continued success depends on a few “key” individuals is less desirable to buyers.

Spread around the knowledge base and management of customer and supplier relationships between more employees. It improves the long term viability of the organization.

Your Employee Value score is higher with a more diverse team.

Work to improve management tenure and skills

A management team that has been with the company a long time is far preferable to a buyer. Your team’s experience and comfort in their jobs positions the company very well for a transition.

Experienced leaders are also well aware of the best manager to employee ratios. These numbers are very important in the overall management of the work to be done. The correct ratios help the company provide that stable and productive environment for the employees.

Studies have shown that employees usually leave managers, not companies. Work on getting your managers the training and resources they need.

If the company is struggling with managing employees well, your Employee Value score will be lower.

Get An Exact Roadmap

Jean is continuing her journey to determine the value of her business. A great option for her is Forward Insights™. This evaluation gives her the data she needs to improve the value of her company through an Action Plan that includes increasing Employee Value.

Does your company have high turnover or a younger, less experienced leadership team? Are you concerned you may have a “key” man issue at your company? Would your Employee Value score be high?

If not, the Action Plan provided through Forward Insights™ gives you the path to greater Employee Value and a business that is worth much more.

If your company is a leader in Employee Value for your industry, check out your strengths within the remaining Value Drivers with Forward Insights™.

Don’t forget to read Part 1 of this series: Part 1 of the Ultimate Guide to the Value of Your Business: Strategic Value. Part 2 of the series is also available: Part 2 – Ultimate Guide Of How To Value Your Company: Organizational Value.

Want to know more about the value of your company? Rest assured 35 years of experience is behind Management Insights™Forward Insights™, and Expert Insights™ – the tools you can use to increase the value of your company.

Quist Valuation

Quist Valuation was founded in 1984 and is a leading independent business valuation and securities analysis firm.


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