Value Creation Planning
What is a value creation plan?
A value creation plan (VCP) outlines how a company will achieve growth in enterprise value over a specified period (typically an investor’s hold period). Put together by management, it sets out the priorities for the coming years.
It usually includes an analysis of a company’s current position, target markets and competitors. It clearly articulates the strategy and shows how a company intends to win in its markets. A company’s strategy drives the VCP.
Why is a value creation plan important?
The VCP should drive what a company does day-to-day. It shows how strategic goals will be met and is used by the board to review progress. This is the red line from strategy to board reporting.
An effective value creation plan ensures alignment from the board downwards. Everyone knows where they’re going and what they need to do to get there.
What are the challenges?
Forged on aspiration. Finessed in isolation. Forgotten in a moment.
Below are the top five challenges we have experienced or seen when putting together an effective VCP:
1. Lack of expertise – companies don’t build VCPs every day. While people may know what they are in theory, creating an effective, working plan is difficult, especially when you don’t have previous examples or templates to help. Most venture capital and private equity firms can only provide limited support.
2. Confusion – strategy is commonly confused with goals. A goal is your dream – what you want to achieve. A strategy shows how you’re going to achieve that dream. Stating ‘We want to be number one’ or ‘We will double sales by hiring twice as many reps’ are goals. They are not a strategy. A dream without a plan can quickly turn into a nightmare.
3. The process is not valued – VCPs should be living documents, constantly referred to, revised when necessary, and used by the board to assess progress. Too often, they are seen as a job that needs to be ticked off the list. Once done they are quickly forgotten, left to gather dust on a proverbial or literal shelf.
4. Working at speed and achieving alignment – success requires two things that push against each other: speed and alignment. VCPs often need to be put together quickly. It’s easier to reach a consensus if the work is done in small teams. But that can mean that others get left behind.
5. Exhaustion – VCPs are often crafted when management teams (especially the CEO and CFO) are on their knees. The months leading up to a deal are exhausting – writing investment memorandums, pitching, negotiating. You collect the cheque, have the dinner and roll straight into writing the plan. Doing this alone, with messy PowerPoint slides and while trying to run a business you’ve likely neglected during the investment process, is painful. We know. We’ve done it. It’s like running a marathon to base camp and then being told to continue to the summit in your running shoes.
What is the solution?
Our method is designed with built-in guardrails. Our approach using set, customisable documents allows you to create your VCP at pace while having the space to do the most important thing: think. After securing funding, it’s vital to sit back, relax and ask questions. Consider different pathways and solutions. Debate. Iterate. Use our range of techniques that help you achieve alignment. And then commit as a team.
We believe a VCP is a living, breathing document. Always live, it should be integrated into your business’s day-to-day actions. It should illuminate the red line from strategy to planning to execution and form the basis of your board reporting.
How do we help you achieve this? We show you how to ask the right questions and make documenting the answers effortless and quick.
Our goal is for you to feel calm and in control. We want you to feel excited about climbing the mountain. We’ll equip you with what you need to get to the top. And then help you to stay there.