Value Triggers
What is a value trigger? These are the items in the business that contribute the most to the company’s success. These triggers may not be obvious items. As an example, an obvious item of value is revenue. Revenue shortages create difficulties so one could argue that revenue is a value trigger. Think of it a little differently. The value triggers are the steps that lead to increased revenue.
Let’s add some clarity. The value triggers could be the quality or price of the product or service or the differentiating features of the product or service. Other triggers might be the detailed training you provide your staff. Perhaps the cost of the materials that are used to make the product or the processes used to deliver a service.
How do you compete? Are you the volume-driven, lower-priced solution that creates profits by amassing larger amounts of commodity priced sales? Are you the specialist who is paid a premium to solve a problem or add your consultative insight? The value triggers for the commodity approach are likely speed, cost control and mass distribution. The value triggers for the specialist are in-depth knowledge of a specific niche combined with the ability to solve problems and develop streamlined processes. Value triggers are not the same for every business.
Now, let’s twist the value trigger concept. This is a more direct value trigger. You sell 100 different items. 10 of these items have a 50% profit contribution. The other 90 contribute 20%. On the surface, the strategy might be to focus on the 50% contribution items because they add more margin. Below the surface, those 10 items might be harder to sell because their mass appeal is not widespread. The 20% items might be easier to sell. The questions might be, do we focus on the high margin items or utilize a strategy to increase the volume on the lower contributors?
Other value triggers. These can include the cost of borrowing, labor costs, process refinement, cash flow techniques, innovation investments, etc. Identifying your value triggers will impact your business. Do not be confused between value triggers and key performance indicators (KPIs). The triggers are your items to work on. The KPIs monitor your progress on the trigger. As an example, if cash flow is vital to your business then one KPI should be to measure the days sales outstanding on your accounts receivable. The longer an invoice sits unpaid the more that impact that specific value trigger.
Let us help you. We can work with you to help identify the triggers and KPIs in your business. Call us to discuss how this could impact your company.