What is Business Value?

Malcolm Tatum

"Business value" is a broad term that is used to identify the many different forms or types of value that go into the overall stability of a business over the years. While economic value is accounted for, business value also includes components such as the value of long-time customers to the operation, the talents of employees, the efficiency of management, and even the value of channel partners in the overall structure of the company. From this perspective, any asset that is within the possession of the company can be assessed in terms of providing value to that business.

Businessman giving a thumbs-up
Businessman giving a thumbs-up

Along with economic profit, business value is also thought of in terms of the shareholder value that investors bring to the table, both in terms of their financial support and their influence within the business community. Employee value is included, especially in terms of making sure the right people are in the right jobs, making it possible for the business to function more efficiently. Customer loyalty is considered as well as the amount of income they contribute. Even the impact of the business on the community is assessed as part of business value.

The general concept of business value often includes a sense of connectivity or networking among the various assets utilized to make the company a success. For example, assessing the business value of employees is often directly connected with the efficiency of the management team. At the same time, the productivity of both full-time salespeople and the affiliate sales force may also be considered singly or as part of the overall sales effort. With business value, there is an understanding that each component under consideration provides benefits that allow the company to maintain and even grow over time.

An important benefit of assessing overall business value is that it prompts a company to consider the contributions made by all assets in the possession of the company, both tangible and intangible. This means that along with considering the amount of revenue generated by sales to customers, the level of goodwill that is built up with those customers will also be assessed. This approach makes it possible to expand beyond simply crunching numbers and think in terms of making the best use of various assets that ultimately ensure the company will be around for many years. While the range of assets considered as part of assessing business value will be different based on the type and size of the company, even a small business can benefit from looking closely at all the elements that bring value to the operation, and make sure they are being utilized to best effect.

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