Here’s what’s new from Prometis Partners:
Our topic for the month of January 2019 has been intellectual capital – how business owners can understand it, why it matters, and how they can increase it in the intellectual capital of their own companies.
What is Intellectual Capital?
What makes a business valuable to potential buyers? What factors increase a business’s valuation? These questions are at the core of transitional planning. Tangible assets, the physical property the business owns, is only one factor of what makes a company valuable. This is not even the most important factor. Intellectual capital is the intangible value of a business, the assets that cannot be touched or sold but directly affect how profitably the company operates. Click here to read more.
Exit Coach Radio Podcast
In this podcast, Vince highlighted how important it is for smaller businesses to have a high Net Promoter Score (NPS). A company’s NPS is calculated based on their customers’ responses to one question: “How likely is it that you would recommend our company/product/service to a friend or colleague?” This score is measured on a scale of 1 to 10. It’s easy to see how useful a tool the NPS is for understanding how loyal a company’s customer base is. More than two-thirds of Fortune 1000 companies use the NPS to measure how successfully they are meeting their customers’ expectations.
Do you know what your customers’ overall perception of your brand is? Using the NPS tool is an excellent way to evaluate social capital, a critical part of any business’s intellectual capital.
Click here for more of Vince’s tips and ideas for making the most of your company’s intellectual capital.
Why Does Intellectual Capital Matter?
No business, no matter how much financial capital it has, can succeed without talented and knowledgeable employees. This is the human capital portion of the 4Cs of Intellectual Capital. For a company to succeed long term, however, it needs to find a way to consistently transfer, through established procedures and training, that information from employee to employee.
Recently an Oxford University paper theorized that intellectual capital is built and strengthened through social relationships. It suggested that the reason that 70% of learning initiatives fail is because classroom or traditional on-the-job training sessions are not social enough. They don’t facilitate enough sharing of information between employees or emphasize collaboration and new information generation. In short, the learning isn’t social enough. It does not follow the 70:20:10 model.
Without an effective way to continuously transfer information between employees, employee turnover means that knowledge is being lost with every employee who leaves the company. Over time this attrition can cripple the success of a business. Since the employee turnover rate in 2018 was the highest it’s been since 2001 at 2.4 percent, this is a real concern.
This does not have to happen to your business! Your company can come up with strategies to build and expand its intellectual capital. If you would like to know how robust your company’s intellectual capital is and what kind of valuation this capital translates into, contact Vincent at (616) 622-3070 or by email at [email protected] for your initial consultation.