5 ways culture increases company valuation

This post presents an infographic, explaining 5 ways culture increases company valuation.

Especially relevant to potential high growth businesses, it outlines several ways you can look to increase your valuation, while making your company a more enjoyable and future proof place to work.

This should be of interest to owner founders of early stage and start-up businesses, who:

• Recognise the indelible connection between good people, great cultures and growth.
• Want to build-up the ultimate source of competitive advantage.

It might also be of interest to investors who are either:

• In due diligence and looking to see that their potential investment will have a greater likelihood to succeed and grow and give them excellent returns in the future.
• Already invested and looking to help the owner-founders to build-up value.

Check out 5 ways culture increases company valuation below.

More about the infographic

Growth

One of the culture building blocks is called a Vivid Vision. This is a detailed vision, ideally over the next three years, that defines what your business will become. This is not just a single paragraph describing your aspirations. It should be built along a series of meaningful dimensions. Download our free eBook to learn how to develop your Vivid Vision.

Talent

While the infographic highlights the downside of negative cultures leading to employee churn, there is also a strong case that great cultures attract the very best talent. In talent matching it is important to see a degree of values “fit” between candidate and company, while being careful that culture matching does not lead to unconscious bias, a lack of diversity, and too much hiring of people “just like me”.

Scalability

Culture is an outcome of many factors. It could be described as “the way we do things around here.” Certainly the owner-founder(s) mentality, leadership, and approach will have a strong influence on culture. This can be a problem when a company grows (and culture is diluted), or the owner-founder earns their exit and their influence disappears.

In the HBR study cited above, companies that manage to retain the owner-founder thrust for fervent customer focus, constantly keeping frontline performance front of mind, being bureaucracy-phobic and steering innovations that will serve customers even better, are 4 to 5 times more likely to be top-performers. Conversely they said “most major reversals of highly successful companies began because the company lost the very culture responsible for its original success.”

Engagement

Perhaps the best known and highly respected research on employee engagement has been conducted by Gallup. The graph in the table above shows the incredible benefits to engaged teams, from both a growth but also a reduction perspective. Growth in positive metrics and reduction in negative ones.

Innovation

The link between culture and innovation has been studied quite extensively. In the quoted study culture is shown to be the single biggest determinant of successful innovation. All businesses exist on an innovation spectrum. Some in low innovation environments, others at the absolute leading edge of innovation. Low innovation environments might be considered to more incrementally adaptive. Where as high innovation environments might be more radically innovative. But regardless of where on this spectrum, the success (or otherwise) of innovation will be mainlined by culture – and how well it nurtures the appropriate levels of innovation.