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Outliers: Escaping Average and Becoming Great

by on January 23, 2015

outliers1In the book Discovering The Happiness Advantage by Shawn Achor there is a section titled Escaping the Cult of Average. The section depicts a scatter-plot diagram with each dot representing an individual, and each axis represents some variable.  The diagram could be anything, like funding in relation to revenues, employees, in relation to revenues, or time in relation to revenues, and so on.

These scatter-plot diagrams can reveal trends.  And in the interest of observing trends you ignore the outliers, the few dots that are far above or far below the curve.  This is not cheating, it is a statistically valid procedure – if, that is, all you’re interested in is the average.

“If we study merely what is average, we will remain merely average.” – Shawn Achor

Like Mr. Achor, I believe there is a lot to be learned from the outliers.  Malcom Gladwell wrote a book on it titled Outliers: The Story of Success.  A good book and worth reading.

Both Achor and Gladwell are focused on the individual, however.

I’m more interested in the corporate entity.  Bill Gates, Steve Jobs, Mark Zuckerberg are examples of outlier individuals that have build outlier companies.

Why build a company to be average?  It takes a lot of work to grow your company, why not focus on making it great?

A lot of work is done to help companies that fall below the curve, those outliers that are on or below the trend.  Of course, these companies are in the need of the most help – they’re running out of funding, revenues are declining, or product development has stalled.  Valuable as such work is it only addresses half the picture.

You can spend a great deal of time “fixing” your company and bringing it up to “average”.  Financially speaking, that can be worth a lot of money in a sale.  Moving from a valuation of 2x revenues to the industry average of 4x revenues on $10 MM in annual revenue can be worth $20 MM.

If all you strive for is diminishing the bad, you’ll only attain the average and miss out entirely on the opportunity to exceed the average.

What if that same $10 MM company was able to increase it’s multiple to 6x?  That would be an additional $20 MM.

How do you make that happen?  What makes a company valued higher than the average?

Strategic assets that set you apart from the competition and can be transferred to an acquirer.

How do you get those strategic assets?  With a plan well implemented.

The strategic plan for every company is unique.  The blueprint for how to grow into a great company, an outlier, involves building blocks. Ultimately, each block builds upon the other until it is demonstrable that those blocks are transferable to another company.  That acquirer, while not typically willing to pay for synergies, will pay a premium for specific strategic assets that can be leveraged in its organization.

So why build a company just to be average?  Build a great company.  Build a company that sells for a premium.  Build an Outlier.

If you’re wondering how you build a company that you can sell for a premium in a few years, contact me to discuss the Valuation Amplification Process.

I also invite you to download the white paper and learn the 5 step process on How to Quickly Increase Your Valuation: a Proven 5 Step Process.

From → Strategy, Valuation

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