The importance of value creation for business owners (& where to start)

What do we mean by value creation? And what are some effective strategies for creating value in growing businesses? In this guide for founders and business leaders, we explore the importance of value creation for startups and scaleups, and how to develop an effective value creation plan for your business.

What is value creation in business?

Value creation is the process of enhancing the overall worth of a business, with the aim of increasing its valuation, ahead of a potential exit. This involves a combination of financial, operational, and strategic improvements, to boost profitability and overall market appeal.

How is value creation different from business growth?

While traditional growth strategies might emphasise business expansion — think revenue growth, headcount, physical footprint or market share — value creation strategies focus on areas like profitability, efficiency and innovation. In other words, value creation is about maximising stakeholder value (including shareholder value), not just the size of your operations.

What are some key value drivers for growing businesses?

Put simply, your value drivers are the mechanisms for increasing the value of your business. What these look like exactly will be unique to each business, but some of the most important value drivers for scaling businesses include:

• Financial performance: building a scalable financial model, efficient cost structures, strong profit margins, and healthy cash flow
• Operational efficiency: optimising or streamlining business processes, minimising waste, and managing your supply chains effectively
• People and leadership: sourcing, training and retaining top talent, developing your board, succession planning, and building a strong culture that scales with your business
• Go-to-market (GTM) strategy: how you’ll develop and position your product/service, incorporating your value proposition, pricing strategy, and marketing and sales tactics
• Innovation: adopting new technologies or leveraging your existing tech stack for new product development, for instance, to optimise your business operations, decision-making, and customer experience
• ESG: developing strong internal controls, risk mitigation strategies, sustainability initiatives, and other environmental, social and governance (ESG) best practices

Using these levers effectively, as part of your growth strategy, can have a number of benefits for founders and business owners — all helping to unlock short-term and long-term value in your business.

Why is value creation important for business owners?

For growing businesses, the advantages of having a well-defined value creation plan can include:

• Optimising operational costs or reducing inefficiencies
• Increasing competitive advantage
• Building a loyal customer base and stronger customer relationships
• Accelerating innovation
• Encouraging strategic thinking and smarter capital allocation
• Reducing employee churn
• Building resilience and adaptability
• Increasing profitability and return on investment
• Improving access to capital and attracting future buyers
• Strengthening valuation multiples

Taken together, understanding how your growth tactics align with your value creation plan can help drive focus, better stakeholder engagement, and ultimately, improved exit outcomes for you and your shareholders.

What are some real-life examples of successful value creation?

Many of the businesses we’ve backed have achieved success working in partnership with us on their value creation plans. Some good examples include:

Amdaris

Amdaris is an award-winning software developer and digital transformation specialist, headquartered in Bristol. Working with our team, Amdaris was able to create significant value by:

• Hiring a COO, who built an internal recruitment function, to help scale headcount from 250 to 800 employees over three years
• Onboarding a bespoke, multi-territory CRM system from a new technology provider, to support its international expansion
• Implementing a new approach to managing sales team performance, to maximise new business opportunities — as well as cross-selling to fellow BGF portfolio companies via targeted introductions from our team
• Bringing in an experienced non-executive chair, and introducing operational board meetings, equity incentivisation for its senior team, and C-suite coaching, to improve management performance
• Using internal development capability to build a system for improving resource management and customer retention
• Engaging with advisors early on, to develop an effective exit strategy for the business

The result? Significant expansion, 4x revenue growth, and a highly successful exit for Amdaris’ shareholders, when it was acquired by Insight Enterprises Inc (a Fortune 500 Solutions Integrator).

Hydrock

Hydrock is a leading engineering, design, energy and sustainability consultancy. Over the course of our six-year partnership with the business, we achieved significant value creation with Hydrock through:

• Developing and delivering an ambitious M&A strategy, which saw it complete seven business acquisitions
• Bringing in a non-executive chair with experience of scaling private equity-backed companies, as well as a CMO and COO, to support the evolution of the business
• Taking part in our annual ESG survey, which provided valuable benchmarks for similar-sized businesses in their sector, to help drive their ESG strategy

The result? Profit growth from £1.8 million to £8.3 million, and a successful sale to Stantec (a global leader in sustainable design and engineering), which generated substantial returns for all shareholders.

HeleCloud

With growth capital and support from our Value Creation team, HeleCloud, a leading IT consultancy and managed services provider, was also able to unlock significant value in just three years:

• Carrying out two strategic acquisitions, in the Netherlands and Bulgaria, to bolster its expertise and increase its geographic reach
• Achieving Premier Consulting Partner Status in the AWS Partner Network (recognition that’s reserved for top-tier partners), which further strengthened its position as a trusted AWS partner in Europe
• Investing in its talent, technology and infrastructure, to develop its product capabilities, scale its services portfolio, and support its European expansion

The result? The business achieved rapid expansion, before being acquired by Swiss multinational SoftwareONE (a leading provider of end-to-end software and cloud technology solutions), providing significant returns to HeleCloud’s shareholders.

How to develop a value creation plan for your business

The value creation process will look different for every company, but from our experience of supporting UK SMEs, an effective value creation plan will typically include these steps:

1. Defining what ‘value’ looks like for your business and its stakeholders
2. Identifying your company’s key value drivers
3. Deciding how you’ll measure success against these value drivers
4. Setting clear, measurable goals for value creation
5. Outlining initiatives to help you achieve these goals (including timelines, budget, responsibilities, and KPIs)
6. Considering how your growth strategies align with your value creation initiatives
7. Communicating your plans and ensuring alignment with key stakeholders
8. Seeking and implementing guidance from trusted advisors or growth partners

As an example, if you were to focus first on customer value, you might prioritise initiatives that aim to improve customer satisfaction scores by 15% over the next six months, or that increase customer retention by 5% during this time frame. That could involve making operational improvements, for instance, to speed up customer service response times — and investing in new technologies to improve your product offering, in response to customer feedback or evolving customer needs.

The value created by improving customer satisfaction and retention might then lead to higher profits and other forms of value creation, like greater shareholder value upon exit.

Value beyond investment

Our dedicated Portfolio and Value Creation teams provide a full programme of support to the businesses we back, throughout the life cycle of our investments.

Non-Executive & Executive talent

Throughout our investment, we can provide you with talent advisory, search and recruitment support across our extensive board-level talent pools – having spent over a decade building one of the UK and Ireland’s most active networks of business leaders dedicated to entrepreneurial growth.

Business growth specialists

Our in-house team of operating specialists offer support across a range of growth areas, from mapping out digital transformation projects to executing targeted sustainability strategies. We can also connect you to pre-qualified consultants and fractional talent, quickly getting to the heart of your growth objectives

Community

Our online platform, Scale, supports our active portfolio community of 300+ companies. It’s been designed to foster collaboration, drive revenue opportunities, and unlock further value for founders and management teams. Alongside access to an engaged network of SME leaders, Scale offers invaluable resources for connecting, learning, and scaling-up your business.

From digital transformation projects to ESG initiatives, we’ve helped entrepreneurs across the country to unlock long-term value in their companies. See if you meet our investment criteria and introduce yourself to our team here to learn more.

Or hear from Michele Dematteis, CEO of BGF-backed Joloda Hydraroll, below — on how we helped him unlock value and accelerate the company’s growth:

The information contained in this article is for general information and use. It does not constitute any form of advice and is not intended to be relied upon in making any investment decision. Independent advice should always be sought as to whether a particular transaction is suitable having regard to your personal and financial circumstances.