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What Are Value Drivers?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 01 December 2016
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Value drivers are the characteristics or attributes of a company that make the operation attractive to consumers and also to potential corporate buyers. The range of drivers found with any given company will vary, based on the structure of the company, the products produced, and the reputation of the business within the wider community. Value drivers may be tangible assets held by the business, or be intangible assets that help to increase the overall desirability of the company.

Consumers are interested in value drivers because they want to know what benefits will be derived by purchasing the company’s products. Investors want to evaluate the drivers to determine if the company has potential to grow. Both consumers and investors would want to identify value drivers that indicate the company is stable and is likely to be around for a number of years, allowing them to continue enjoying the benefits of doing business with the company.

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In terms of tangible assets, value drivers often relate to the quality of the facilities owned by the business. This would include manufacturing plants that are up-to-date and producing at a high rate of efficiency. High sales volume of the goods and services offered by the business would also be considered an important driver, especially to investors or any group of buyer who would like to acquire the company. Assets held by the business, like land or copyrights to various products, add to the value of the business, making it more attractive to others in the business community.

Other factors that are less tangible may also fall into the broad category of value drivers. Companies with low turnover of employees and a solid corporate culture that promotes teamwork would likely be valued over a similar enterprise with a high employee turnover rate. Brand recognition among consumers is another example of a value driver that would add worth to the company. Even something a simple as a client base that is diversified, allowing the company to be relatively immune from shifts in the economy that adversely affect one or more business sectors would be considered a major plus and add value to the business.

Understanding value drivers is important when a company is attempting to attract investors or is considering the possibility of offering the company for sale. Since the drivers can include just about any attribute that is likely to stand the company in good stead with the target audience, the goal is to identify which of the company’s operations, holdings, and other assets is likely to connect with that audience, and call attention to those particular benefits. This is particularly true when in negotiations with potential buyers, since the presence of more value drivers means the opportunity to obtain a higher sale price for the business operation.

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