A value driver is a deceptively simple concept applicable to every product, service and entire business: It’s the thing or things that make the product, service or business worth paying for. Value drivers can be as tangible as the metal alloy in an iPhone’s case or as ineffable as Apple’s brand, both of which drive value for the smartphone and the company because people are willing to pay more for products with those attributes — and for shares of the company that makes them.

Every business can be defined by its value drivers but, often, the first time small business owners or senior executives encounter the concept is when they’re ready to sell the business or acquire others. That’s a shame. Taking the time to develop a deeper understanding of precisely what activities create value for a business — and how they do so — arms business leaders with knowledge they can use to manage the company more effectively and efficiently. In short, proactively managing value drivers makes for a better-focused, better-run business, which means more profit today and a higher business valuation in the future, if/when the business goes up for sale.

This article examines both financial and nonfinancial value drivers, discusses how to identify drivers that are most important to a particular business and explores how business leaders can embrace and act on the value drivers that matter most to them.

What Are Value Drivers?

The more a company focuses on activities that increase its top and bottom lines, the more valuable it is likely to become. Value drivers are the activities that contribute to increasing revenue and profit, sometimes directly and right away, sometimes indirectly and over the long term. There are financial value drivers, such as revenue growth, as well as nonfinancial value drivers, such as brand reputation. But what drives value for one business may be completely different from what drives value for another. So, learning to identify the activities that truly drive value for an individual business is crucial. Identifying and understanding these value drivers can help businesses shape their culture and operations in ways that create a sustainable competitive advantage. For example, this knowledge can help business owners and other leaders better understand their customers, enabling actions that lead to higher customer satisfaction and loyalty.

But while business leaders can take advantage of value drivers at any time to help them optimize performance, value drivers are most often thought of in the context of mergers and acquisitions (M&A). If a business is looking to sell — and 55,000 businesses did in 2023, according to PwC — understanding its value drivers is important because they are the lens through which potential buyers assess what they’re willing to pay for it. Luckily, the same activities that contribute to rising revenue and profit also create value in potential buyers’ minds. Because M&A transactions come with inherent risk, buyers also consider a wide range of risk-related value drivers, such as the business’s client concentration or the state of its succession planning.

Key Takeaways

  • Value drivers are key to enhancing a business’s worth and operational efficiency.
  • Financial value drivers, such as revenue growth, directly impact a company’s bottom line.
  • Nonfinancial value drivers, such as brand reputation, indirectly support financial success.
  • Regular analysis of financials and customer feedback can reveal a business’s unique value drivers.
  • Strategic planning around value drivers can lead to a more focused and profitable business.

Value Drivers Explained

Small business owners and senior executives who wish to maximize the valuation of their company for sale need to start preparing for that transaction far in advance — years, if possible. It takes time to assess a business’s value drivers and to plan and execute activities that support them, while concurrently working to mitigate internal and external risks that could reduce the business’s inherent appeal. Not only does such preparation improve the factors that contribute directly to business value, but it also signals to potential buyers that the company is well-run.

In this regard, succession planning is a crucial but often overlooked value driver, particularly for small businesses that are still run by their original founder or founding team. If the founder is the person maintaining client relationships, for example, a buyer will be concerned about how those relationships transfer, post-sale. The answer may be as simple as the founder continues to run the business as an employee of the buyer — unless that founder envisions a different post-sale life. Depending on the circumstances, the buyer may question whether the founder has groomed a successor. For instance, a strategic buyer may have business leaders capable of running the operation, but a financial buyer, such as a private equity firm, may not. Succession planning can influence the type of potential buyer and the size of the total pool of possible buyers, which, in turn, can affect the business’s valuation and the structure of the transaction. Structure, in this context, means how much of the business value is paid to the owners up front, and how much is paid later, contingent upon achieving specified milestones after the sale.

Types of Value Drivers

There are hundreds of attributes that can impact a company’s value and many different ways to classify them. One popular way to categorize value drivers is to think of them as related to growth or efficiency — in other words, they either make or save money for the company. But many drivers don’t fit neatly into those categories. Consider succession planning, which doesn’t necessarily add to the top or bottom line. Similarly, customer concentration, business momentum and strategic value to the acquirer could all be significant value drivers for a certain kind of buyer but usually don’t influence financial results, at least not directly. In this article, we examine value drivers as either financial or nonfinancial.

Financial vs. Nonfinancial Value Drivers

Many investment bankers and M&A advisors view value drivers as either financial or nonfinancial, which is also a useful approach for small business owners and senior managers. Financial drivers are quantitative and directly affect performance. They include revenue growth, profit margin and cash flow, and most can be expressed as key performance indicators (KPIs). Nonfinancial value drivers are qualitative and relate to the softer aspects of a business, from leadership and employee engagement to customer loyalty and brand strength. These contribute to revenue and profit indirectly and, generally, over the long haul.

Financial Value Drivers

The impact of financial value drivers is simple and obvious: They all contribute to a company’s financial performance. In fact, the first three on the list below — revenue growth, profit margins and cash-flow — are often used by acquirers in their business valuation formulas. For example, many buyers value potential acquisitions based on a multiple of revenue or profit (more specifically, profit expressed as EBITDA, which stands for earnings before interest, taxes, depreciation and amortization). Depending on a business’s size, industry and revenue and profit growth, it could be valued at anywhere from one time EBITDA to 10 times or more. Common financial value drivers include:

  • Revenue growth: The top line on a company’s income statement, revenue is the starting point for calculating profit. Consistent revenue growth is a clear indicator of a business’s market demand and potential scalability. For acquirers, revenue growth not only validates a company’s business model, but it also suggests future profitability. The more years that a business can show revenue growth, the more attractive it is as an acquisition candidate.
  • Profit margins: Healthy profit margins reflect a business’s ability to manage costs and price its products or services effectively. High margins often translate to efficient operations and strong pricing power, both of which are key considerations for acquirers assessing the sustainability of profits post-acquisition.
  • Cash-flow management: Effective cash-flow management demonstrates a company’s ability to generate more cash than it spends. This is a vital sign of financial health that acquirers look to as a gauge of liquidity, operational efficiency and a company’s ability to reinvest for growth.
  • Forecasts: A credible forecast backed by solid evidence and strong assumptions is essential for potential buyers. Forecasts set financial performance expectations for a purchaser and, equally important, provide a window into management’s thinking about how to achieve that performance. This enables buyers to model potential returns and assess the risk of their investment based on their perception of the forecast’s evidence and assumptions.
  • Capital efficiency: Capital efficiency indicates how well a company uses its financial resources to generate revenue. Potential acquirers view capital efficiency as a measure of how well the current management is maximizing shareholder value and how much investment will be needed for future growth.
  • Cost control: Good cost-control mechanisms signal a company’s discipline and operational efficiency. For acquirers, effective cost management ensures profitability and provides a buffer against market volatility and competitive pressures.
  • Return on investment (ROI): A high ROI means that the growth initiatives in which a company has chosen to invest are generating favorable returns. Buyers measure ROI to assess a target company’s decision-making prowess and its potential for long-term value creation.
  • Financial statements and accounting basis: Financial statements form the backbone from which all the other factors on this list are derived. Acquirers prefer financial statements prepared using accrual-basis accounting in compliance with U.S. GAAP. Accrual-basis accounting recognizes revenue and expenses when they’re earned or incurred, regardless of when the related cash transactions occur. Its purpose is to provide a more accurate picture of a company’s financial health by matching revenue to the expenses required to generate the revenue in the same fiscal period. Statements based on cash-basis accounting — which is more typical of small businesses — raise risk and ambiguity in an acquirer’s eyes.

Nonfinancial Value Drivers

Nonfinancial drivers can’t be derived from financial statements and are harder to quantify than financial drivers. But they are nonetheless foundational elements that support a business’s financial performance and resilience. Nonfinancial value drivers are the strategic investments in a company’s culture, innovation and market presence that translate into financial gain over time, thereby increasing a company’s valuation and contributing to its competitive advantage. Common nonfinancial value drivers include:

  • Brand reputation: Brand reputation is the collective perception of a company’s image by its customers and the broader market. A strong brand reputation can command higher prices and foster customer loyalty — attractive qualities for acquirers.
  • Customer satisfaction: High customer satisfaction means that the company listens to the voice of its customers and consistently meets or exceeds their expectations, leading to repeat business and referrals. This, of course, is great for business performance. And for acquirers, excellent customer satisfaction can raise the price they’re willing to pay because it’s a sign of a company’s strong market position and potential for organic growth.
  • Product development innovation: Innovation in product development demonstrates a company’s ability to adapt and evolve with market changes. It’s a critical nonfinancial value driver that can differentiate a company from its competitors and is often a key factor in a buyer’s assessment of a company’s future growth prospects.
  • Market position: A leading market position in a sector or niche is tacit evidence that a company enjoys a competitive advantage, which, in turn, suggests market power and long-term stability.
  • Corporate governance: Corporate governance encompasses the practices and policies by which company management oversees and steers business operations. Good governance demonstrates effective leadership, reduces risk and increases transparency, all attractive qualities to potential buyers.
  • Employee engagement: A business’s employee engagement reflects the level of commitment and motivation employees have toward the company. Engaged employees often lead to higher productivity and innovation, which enhance a company’s performance.
  • Client concentration: Some small businesses are highly dependent on a small number of customers for their revenue. Such high client concentration is an obvious risk to any business — and to potential acquirers — because of the outsized revenue impact made possible from a single customer loss. Companies that diversify their customer base mitigate this risk and enhance their valuation.
  • Business momentum: There’s financial momentum, of course, which is easily visible in revenue and profit growth. Business momentum, on the other hand, refers to the pace and direction of factors that a buyer can reasonably expect will soon contribute to a company’s growth. This could include entering one or more new markets, positive market feedback on recent new-product launches, new partnerships — anything that generates excitement about the company and its prospects.
  • Strategic value to the buyer: Acquirers can be categorized as financial players, such as investment banks and private equity firms, or strategic buyers, which have business strategies and operations of their own. For strategic buyers, certain aspects of an acquisition candidate may be crucial, whereas those same aspects may not be as important to a financial player. For example, the target business might already be in a market that the buyer wants to expand into, or may have a patented technology that could enhance the buyer’s existing product line. Any element of a business that could accelerate a potential buyer toward its goals could represent strategic value for which the buyer is willing to pay a premium.
  • Succession planning: As discussed earlier, succession planning could be as simple as the business owner planning to stay on and run things for the new owner, or having already groomed someone to step into the leadership role. Effective succession planning drives value in two ways: It reassures potential acquirers that the business will remain stable and continue to perform well post-sale, and it increases the pool of possible buyers to include financial buyers that may not have someone on staff who can run business operations.

7 Ways to Identify Value Drivers

Identifying a business’s unique value drivers is the first step in tailoring strategies that enhance its competitive edge and raise its market value. Thinking beyond common financial drivers like revenue and profit, which affect all businesses, each company has its own distinct strengths and opportunities that, when leveraged effectively, can significantly increase its worth. The following seven approaches provide a structured way for businesses to uncover the value drivers that matter most to them.

1. Financial Analysis

By analyzing financial statements, scrutinizing key ratios, such as ROI and cash flow, and then comparing themselves to industry peers, companies can identify both financial and nonfinancial levers to drive growth. For example, financial analysis might show a tech startup’s management that its research and development (R&D) investments are the primary drivers of revenue growth. R&D is a financial value driver that would appeal to investors interested in cutting-edge innovation.

The same financial analysis might reveal a nonfinancial value driver, such as high customer acquisition rates, which demonstrate market acceptance and the potential to scale rapidly. While not directly tied to financial statements, customer acquisition rates are a predictor of future financial performance and can be a compelling factor in a company’s valuation, especially for acquirers looking to capture emerging market segments.

2. Customer Analysis

Examining customer behaviors, preferences and feedback can help a company identify value drivers that directly influence its strategic initiatives and market approach. A retail company might find that its loyalty program is driving repeat purchases and long-term customer retention; it can then choose to invest in enhancing and promoting that program to spur growth. Or, customer analysis could reveal that exceptional service is a significant driver of word-of-mouth referrals, so the company may decide to add staff to the customer service team and build out its training program.

3. Market and Competitive Analysis

Market and competitive analysis is a valuable approach to understanding a business’s position within its industry. By evaluating the competitive landscape, companies can identify gaps, unique value propositions, areas where they are comparatively weak and areas where they outperform rivals. For example, a company may discover that its commitment to sustainability is a brand differentiator that allows for premium pricing, which is a financial value driver in markets where consumers are willing to pay more for eco-friendly products.

4. Operational Review

Operational reviews delve into the internal workings of a business, assessing the efficiency and effectiveness of its processes. By analyzing workflows, resource allocation and business outputs, companies can pinpoint value drivers that directly affect their bottom line. For example, an operational review might reveal that a manufacturing firm’s just-in-time inventory system is a key value driver because it minimizes waste and reduces inventory carrying costs, both of which improve cash flow. Or, a company might identify a highly efficient logistics system as a value driver because it reduces cost and delivery times while enhancing customer satisfaction — an important nonfinancial value driver.

Good operational reporting — that which supports rapid decision-making by providing real-time insights into performance against operational KPIs — can itself be a nonfinancial value driver because it showcases a company’s ability to adapt and maintain efficiency.

5. Employee and Stakeholder Feedback

Feedback from employees and other stakeholders, particularly customers and business partners, provides insight into the operational and cultural health of an company. Employees who are intimately familiar with the business’s operations can identify strengths that lead to opportunities as well as weaknesses that need attention. It’s also worth noting that high employee morale and a positive company culture are themselves nonfinancial value drivers that contribute to lower turnover rates and higher productivity. Similarly, feedback from business partners and customers can reveal how the company’s practices, such as supply chain management or customer service processes, add value to the partnership or to the end customer.

6. Benchmarking

Benchmarking against industry standards and best practices helps businesses understand their performance relative to their peers. This practice can uncover financial value drivers, such as superior profit margins, or nonfinancial value drivers, like market share growth. For instance, a business that consistently outperforms industry benchmarks in customer retention rates has a clear competitive advantage and a nonfinancial value driver that can translate into financial gains. It’s important to note that many industries have their own, unique set of value drivers. Software-as-a-service (SaaS) companies, for example, are customarily benchmarked against a dozen or so SaaS-specific metrics related to factors like recurring revenue, customer churn and customer engagement.

7. Technology and Innovation Assessment

Technology and innovation assessments focus on a company’s capacity to stay ahead of technological advancements and integrate them into their business model. A company that leverages cutting-edge technology to improve the customer experience or streamline operations is harnessing a nonfinancial value driver that can lead to increased market share and revenue, ultimately enhancing the company’s valuation in a tech-driven marketplace. In fact, some financial acquirers view companies’ use of technology as a proxy for the maturity level of the business as a whole. This is because good use of technology makes companies more efficient, enables faster decision making and puts higher-quality information into stakeholders’ hands — including potential investors and acquirers.

Challenges and Solutions in Maximizing Value Drivers

To maximize a business’s performance, or its acquisition price, business leaders must figure out how to get the most out of each of their value drivers. But this is easier said than done because the process is fraught with challenges, starting with simply identifying the most important value drivers to a given business. The six steps outlined below provide a framework for businesses to identify and maximize the contribution of their value drivers. We focus on the unique challenges that each step presents and their potential solutions.

1. Identifying Relevant Value Drivers

This should be easy for most businesses, at least in theory. In practice, though, increasingly interconnected digital business processes have created dependencies that many businesses don’t even know they have. Such opaque interdependencies make it harder to see which drivers lie at the root of business value.

  • Challenge: Increasing interdependencies among business processes and a faster pace of change in terms of customer preferences and market dynamics make finding any individual business’s true value drivers more of a challenge than in years past.
  • Solution: There’s no shortcut. To identify their most important value drivers, businesses must perform one or all of the analyses outlined in the preceding section, beginning with financial analysis. For starters, simply segmenting revenue by product line or customer type can reveal the biggest contributor(s) to your bottom line. And regular customer surveys can surface what they value most about your business.

2. Measuring Nonfinancial Value Drivers

While it’s relatively straightforward to measure the impact of financial value drivers, the nonfinancial variety, such as brand reputation or employee satisfaction, is normally intangible and harder to quantify.

  • Challenge: Nonfinancial value drivers, by definition, are harder to measure than the financial ones.
  • Solution: Finding meaningful metrics for nonfinancial qualities is a matter of connecting the dots between the activity and the company’s finances. For example, an online retailer could assess its customer satisfaction rating over a given period to track the impact of its customer service operation on repeat business, referrals and returns. When it comes to brands, there are well-known valuation models that quantify a brand’s contribution to financial performance by considering factors such as market position and loyalty. Similarly, there are multiple approaches to assess employee satisfaction via surveys and engagement metrics.

3. Aligning Value Drivers with Strategy

If business managers focus on maximizing value drivers that no longer align with company strategy, they are unlikely to get the results they expect. Of course, if the business is effectively executing its strategy and has correctly identified its most important value drivers, it should naturally expect the strategy and the drivers to be aligned. In practice, however, this is not always the case.

  • Challenge: A company’s strategy and its value drivers can fall out of alignment due to changing business conditions, rapid growth, organizational silos, resource constraints, gaps between company and customer perceptions, or all of the above. When this happens, business leaders end up wasting energy on the wrong drivers.
  • Solution: Companies should perform regular strategic reviews to align value drivers with evolving business objectives and market conditions. In addition, they should foster cross-departmental collaboration, leverage data and analytics to gain a better understanding of brand drivers and adopt strategies that allow the business to adapt quickly when market conditions or customer preferences change.

4. Adapting to Market Changes

Business landscapes change. The talent market gets tighter. New regulations emerge. Customers suddenly want organic vegetables, electric cars and recycled plastic in their polyester sweaters. Then, just as suddenly, they don’t (at least when it comes to electric cars).

  • Challenge: Rapid market shifts can make current value drivers obsolete.
  • Solution: A culture of agility and continuous innovation enables businesses to adapt their value drivers to new market realities. Of course, business leaders can know what direction to go only by regularly monitoring the market for current trends, emerging customer behaviors and changes in the competitive landscape.

5. Scaling Value Drivers

Change also comes from within. A fast-growth business must decide whether to rely more on existing value drivers, adjust those drivers, add new ones — or all three.

  • Challenge: As a small business grows, its value drivers must scale with it or adapt to accommodate the new reality.
  • Solution: To get the most out of their value drivers during periods of rapid growth, companies need to plan and manage their growth strategically to ensure that scaling efforts align with the company’s core values. If product quality and delighted customers are core to the company brand, business leaders must not allow growth to interfere with the aspects of the operation that fulfill those brand promises. Investing in technology systems that can scale with the business, such as a flexible enterprise resource planning (ERP) system, is also crucial. The long-term implications of growth mean that companies must prepare to adapt their business model when necessary — an event whose ripple effects will cause much value driver change.

6. Balancing Short-Term and Long-Term Goals

Any small business founder who has struggled to decide whether to spend hours working on a deliverable for a current client or apply the time to cultivate new clients understands the powerful forces that pull businesses in often-opposing directions when it comes to achieving short- and long-term goals. Value drivers also can be classified as long-term and short-term: Raising EBITDA, for example, increases the bottom line and is factored directly into most business-valuation formulas, providing an immediate boost. But investing in new product development isn’t likely to generate bottom-line improvement for a year or more.

  • Challenge: Focusing on short-term gains can sometimes overshadow the importance of long-term sustainability.
  • Solution: The ideal solution to this challenge is to focus on balance. That may include a formal process, such as the Balanced Scorecard, which evaluates the effects of value drivers on both immediate results and future objectives. Or, it could mean an informal concentration on balancing short- and long-term goals. What’s essential in either case is to establish a clear strategic vision that articulates long-term goals and the role of value drivers in achieving them. That kind of strategic clarity allows business leaders to align their daily operations with their broader mission and gives them the tools they need to measure how short-term actions affect long-term objectives.

    To illustrate, consider a manufacturing company whose strategic vision focuses on sustainability. It wants to cut costs today, so it looks for ways to lower energy consumption and reduce waste in production processes. Both actions offer immediate cost savings that enhance the bottom line. But they also simultaneously lay the groundwork for achieving the long-term goal of industry leadership in sustainability — and compliance with future environmental regulations that the company anticipates. By keeping the long-term vision in focus, businesses can make strategic decisions that serve dual purposes, supporting both current performance and future aspirations.

Examples of Value Drivers

The following real-world examples illustrate how each type of value driver contributes to a business’s financial performance and enterprise valuation.

  • Economies of scale: Walmart is known for low prices, a position it maintains by constantly leaning into its large size to generate economies of scale in different ways. The retail giant harnesses its scale in purchasing, using its size to negotiate lower prices from suppliers in return for massive order volumes. It invests in advanced logistics and distribution technologies, yielding a sophisticated supply chain management system that minimizes warehousing and transportation costs. It standardizes operations across its stores to reduce variability and complexity, driving training costs down and operational efficiency up. And by consolidating functions, including marketing, human resources and finance, across all its locations, Walmart achieves lower overhead costs.

    Small businesses, of course, don’t have the scale of Walmart. But they can still work to consolidate orders, negotiate bulk discounts or join a buyers’ group to achieve similar economies of scale relative to their size. Small businesses also can adopt efficient inventory management and standardize operations to reduce costs and increase efficiency, but on a scale appropriate to their operations.

  • Technological advancements: Consider Oracle. The database management company leverages its technical expertise to deliver advancements in integrated business applications and autonomous cloud infrastructure to enterprise customers. Its Autonomous Database, for example, uses machine learning to automate routine management tasks, resulting in a secure, self-healing infrastructure that can offer high availability and performance. It pioneered the idea of a common data model underlying a comprehensive suite of integrated applications, offering seamless data flow across multiple business functions that helps improve decision-making and productivity. Most recently, Oracle infused generative AI into its Oracle Cloud Infrastructure (OCI), enabling OCI customers to more rapidly build their own custom artificial intelligence models(opens in a new tab) for specific business use cases.

    The biggest takeaway for a small business from Oracle’s example is the importance of automating processes to improve efficiency and reduce errors. Even on a small scale, businesses can implement cloud-based services to streamline operations, use data analytics to inform decision-making and adopt basic automation tools for routine tasks.

  • Product offerings: Although small businesses can’t hope to offer as broad and diverse a set of products as, for example, Amazon, their mix of product offerings can be a crucial value driver. Amazon’s value has been driven in part by the host of products it offers. The company, which started as a book retailer, now sells virtually everything and has become the world’s go-to ecommerce site. The lesson for a small business is that there’s risk in a limited product offering and value in diversifying, especially in the eyes of an acquirer.
  • Capital availability: Verizon has grown its position as a provider of an advanced, reliable mobile network in part by leveraging its large capital resources to drive business value. Most obviously, Verizon deploys billions of dollars to continuously expand and update its network infrastructure, including the rollout of 5G. Perhaps less obviously, it also invests in R&D to develop new materials, antenna designs, etc., that can enhance the efficiency, reliability and performance of 5G technology. And the company makes strategic acquisitions that broaden its service offerings, accelerate new market entries or bring it new technologies. Verizon’s 2021 acquisition of TracFone Wireless, for example, added so-called value brands (read: inexpensive) to the new parent’s premium offerings.

    Small businesses don’t have Verizon’s access to capital. Nonetheless, small business owners and managers can still assess their goals in light of the capital they can access, whether through bank loans personally guaranteed by the owner or selling equity to outside investors. Capital that empowers a company to grow faster than its cash flow would otherwise allow is normally available to any size company, given the right conditions and purpose.

  • Market dynamics: Businesses must continually adapt to changes in the markets and customers they serve. On a grand scale, consider how Netflix successfully evolved from DVD rentals to streaming services (and how Blockbuster didn’t). Regardless of size, the key to any business making good use of market dynamics value drivers is for management to be in tune with — and constantly monitor changes in — customer preferences and the effects of economic fluctuations on their industry. By doing so, they can use the insights they gain to inform strategic decisions.
  • Strategic vision: A powerful illustration of strategic vision comes from Tesla, whose vision focuses on sustainable energy. The company is best known for innovation in electric cars, but it also has produced an electric truck, roofing tiles that double as solar energy collectors and advanced batteries for storing power in homes. All that focused activity enabled Tesla to carve out a new market segment, enhancing its valuation and investor appeal. Strategic vision value drivers are equally available to small businesses, and they’re a must-have in the eyes of an acquirer. Too many small businesses routinely draw up annual budgets without developing or adhering to a longer-term plan. But M&A buyers are always looking for future returns. So, it’s incumbent upon management to develop strategic growth plans and orient their short-term planning around strategic long-term goals.

Track and Improve Your Value Drivers With NetSuite

Companies of all sizes and across all industries must identify and get the most out of their business’s value drivers in order to enjoy strong financial performance and maximize their business valuations. NetSuite financial management helps companies accomplish this by integrating companywide business processes and producing real-time financial and operational information to inform business leaders’ decisions. Whether it’s streamlining supply chain efficiencies, enhancing customer relationship management or optimizing cash flow, NetSuite’s ERP system supports businesses in honing the value drivers that are crucial for growth and competitive advantage.

Small business owners too often begin to think about their companies’ key value drivers only when they’re ready to sell the business. But analyzing the most important drivers of value creation for a business can lay the foundation for strong growth long before the company goes up for sale — if ever. And even if the owners do envision a sale someday, the earlier they think about and act on their key value drivers, the better prepared they and their business will be for that sale. To that end, ERP systems offer vital information for business leaders to track and comprehend their business drivers, while ERP’s “single source of truth” data model and robust reporting capabilities assure potential acquirers of the accuracy and timeliness of a business’s information.

Value Driver FAQs

What is meant by a value driver?

A value driver is any factor that can increase the worth of a product, service or business. It enhances a company’s performance, market position or attractiveness to investors.

How do value drivers vary across different industries?

Value drivers can vary significantly across industries. For example, in manufacturing, efficient production processes might be a company’s most important value driver; in technology, the main value drivers are more likely to be innovation and intellectual property.

How can small businesses identify and leverage their value drivers?

Small businesses can identify their value drivers through financial analysis, customer feedback and analyzing market trends, their operational processes and employee feedback, among other factors. Small businesses can leverage their value drivers by focusing on activities that amplify the drivers’ value creation while also aligning them with the company’s long-term strategic goals.

How should companies prioritize their value drivers?

Companies should prioritize value drivers based on their impact on revenue and profit and on long-term strategic goals. A popular analytical tool for doing so is the Balanced Scorecard.

What is a value driver example?

An example of a nonfinancial value driver is a company’s brand reputation. A strong brand can lead to customer loyalty and the ability to command premium pricing.

What are the four drivers of value?

Any business could have dozens of value drivers. There are many ways to categorize value drivers, with financial and nonfinancial being one of the most useful. When people talk about the four main drivers of value, they are typically referring to financial performance, customer satisfaction, operational efficiency and innovation.

What are the main value drivers?

A company’s main value drivers are typically those that have the most significant impact on its financial performance and market valuation. In a financial sense, this means consistent revenue growth, profit margins, cash flow and cost controls. Important nonfinancial drivers include brand reputation, customer satisfaction, employee engagement, corporate governance and product and service innovation.