Increasing shareholder value needs strategic planning. The aim of the company should be to:
1) Reduce cost base while maintaining revenue.
2) Increase revenue share and reduce cost.
Any strategy that aims for these two goals will increase the shareholder value. This article discusses how this can be achieved to increase shareholder value.
Why Companies fail to Increase Shareholder Value;
Many companies fail to increase shareholder value due to faulty strategies. Let us discuss some common mistakes they make.
1) Exposing Capital Base to Risks Many companies try to increase shareholder value by risking their capital base. This is not successful since the company stands to lose the value of its shares.
2) Bad Strategy A bad strategy puts the company at more risk. An incomplete strategy can increase risks while lowering the shareholder value.
3) Greater Risk Assumption Greater risk assumption may be too hard for companies to absorb. This can lower the shareholder value.
How to Increase Shareholder Value: Intellectual Property;
Intellectual property is one of the keys to increasing shareholder value. Enhancing the value of intellectual property is one way to increase shareholder value. Intellectual property strategies for increasing shareholder value are of the following kinds:
1) Defensive Stage If your company is at this stage, you are probably looking for a patent strategy that will protect your assets from a reactive lawsuit. You will probably try to get as many patents as you can and negotiate with competitors for mutual use of the products patented.
2) Cost Control Stage Companies at the cost control stage look for cost effective ways to enhance their patent portfolios. This can be done by choosing patents carefully, and taking out patents in different regions depending on the cost factor.
3) Profit Center Level Apart from taking cost cutting measures, profit center level companies also develop strategies to increase profits by selling patents. One of their strategies is to bring up lawsuits against those who violate patent norms.
4) Integration Level The integration level companies not just deal with strategies relating to patents for their own company, but also other companies that hire their services. They increase shareholder value through mergers, acquisitions or by using intellectual property as security for loans.
5) Visionary Stage At this stage, companies have begun to forecast future trends. They know how the consumer is likely to behave, and try to build technologies in that direction.
Once your company’s shareholder value has reached its maximum potential, you stand to gain much. The above guidelines will help you reach the target. If you need to know more on increasing shareholder value, you can approach a small business guide for help.
Alexander Gordon is a writer for www.smallbusinessconsulting.com - The Small Business Consulting Community. Sign-up for the free success steps newsletter and get our booklet valued at $24.95 for free as a special bonus. The newsletter provides daily strategies on starting and significantly growing a business.
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