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Mark Twain once said: “The two most important days in your life are the day you are born and the day you find out why.”

For some lucky people, “the day you find out why” arrives at an early age. But for many of us, finding our passion takes longer.

Vera Wang was 40 when she launched her beautiful line of bridal wear.

Pat Brown was almost 60 when he decided to find a way to produce delicious, affordable meat and dairy products directly from plants. Soon after, he founded Impossible Foods.

And then there’s Grandma Moses. She didn’t start painting until she was in her late 70s.

No matter where we are in life, each of us needs a purpose, a reason to get up in the morning.

Not long ago, I suggested five ways to “find your why” in a guest talk given to Hear Me Roar Toastmasters (HeR), which focuses on leadership issues of importance to women. I’m sharing the suggestions below with the hope that they’ll help others.

1) Get to know yourself better. This starts with knowing your core values. Do they include authenticity, a strong work ethic or kindness? Or maybe spirituality, community service, justice? When you have a clear set of core values, you can find a purpose that aligns with them.  

2) Scratch the Itch. Think about an unmet need in your life. Is there a pressing concern or issue that isn’t being addressed? Or a product or service that doesn’t exist? This could become your why. Many organizations and inventions came about because someone who had an itch uttered these seven words: There has to be a better way.

3) Try New Things. Thousands of nonprofits, with all kinds of missions, need help with data entry, marketing, translating, teaching – you name it. Choose a volunteer opportunity that lets you explore interests. It’s a great way to discover what you like – and what isn’t the right fit before you make a long-term commitment.

4) Be willing to make mistakes. On December 26, 2010, I launched this blog. Having never written one before, I had no idea what I was doing. I made lots of mistakes — but I kept going. More than a decade later, I’m still here. I would never have gotten this far if I had let a fear of mistakes get in the way.

5) Join Toastmasters. The mission of this terrific organization is to help its members improve their communication and leadership skills. It’s also helped many people find their calling. Some become professional speakers and leadership coaches. Others transition into advocates, mentors and teachers. Joining Toastmasters lets you find your voice.  

One more suggestion:  As you explore your life purpose, don’t forget to enjoy the journey. That, by itself, can be very gratifying.

About Lynne Strang
I’m a freelance writer who helps organizations and individuals meet their marketing and communications goals. I am also the author of “Late-Blooming Entrepreneurs: Eight Principles for Starting a Business After Age 40.” To learn more, please visit my website: lynnebeverlystrang.com.

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A few weeks ago, I was a guest speaker at a meeting held by the Dallas Chapter of Women of Visionary Influence (WOVI), whose mission is “to empower women to lead and mentor.” Each member has access to a mentor to help her achieve, succeed and prosper in her chosen path in life.

For me, the WOVI meeting was a reminder of the power and importance of mentoring. That’s especially the case when it comes to starting a business, launching new products and services, and achieving other major goals.

Here are a few groups in addition to WOVI that offer opportunities to connect with mentors.

SCORE – This nonprofit organization has the largest network of free volunteer small business mentors in the nation. Visit SCORE’s homepage and click on “Find a mentor.” This link takes you to a page with three options to find a SCORE mentor who fits your goals and needs.

Inventors networks – These groups can be highly valuable for new and would-be inventors who need support and advice to bring their products to market. The Washington, D.C., area, for example, has the Inventors Network of the Capital Area (INCA). To find an inventor association in your geographic region, click on this U.S. map provided by the United Inventors Association.

Meetup – Use this service to find business mentoring groups and other events focused on entrepreneurship (or just about any other topic). If you can’t find an existing group that meets your needs, Meetup lets you organize and host your own group.

Toastmasters International – This public speaking and leadership development organization offers a way to build supportive relationships with goal-oriented people as well as a place to practice business pitches in a safe, supportive environment. Toastmasters has clubs all over the world, including some that are especially for small business owners and entrepreneurs.

LinkedIn – Here’s a post from Rising Innovator with tips for using LI to find a business mentor.

If you don’t have mentors to support you, it’s time to cultivate them. Last year, fellow freelance writer Kristen Edens and I co-authored this article about the value of business mentoring for people of all ages, including older entrepreneurs. As we mention in the article, finding a mentor may not happen overnight — but it’s well worth the time and effort.

The search itself is beneficial because you meet new people and gain different insights. When a good connection happens, it can launch a relationship that’s valuable and fun for both the mentee and the mentor.

A mentor sometimes sees something in you that you don’t see in yourself. It could be a talent, an attribute, a special gift  you didn’t know you possessed. Once you and your mentor unearth that hidden talent – and you become aware of its existence — it might turn into something big.

In short, mentoring can change your life. What are you waiting for?

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For entrepreneurs, there’s nothing like the excitement that comes with creating a new company, a new service or a new product. Or maybe a new process that’s better than an existing one.

But here’s the problem: People fall in love with their ideas. Eager to get started, they rush forward with the idea without taking the time to vet its viability.

In many business circles, this vetting process is known as “proof of concept.” Although definitions vary, I especially like this one from TechTarget: “A proof of concept (POC) is an exercise in which work is focused on determining whether an idea can be turned into a reality. A proof of concept is meant to determine the feasibility of the idea or to verify that the idea will function as envisioned.”

For 40-and-older entrepreneurs, testing in advance can be especially important for at least one reason: If the idea isn’t sound, you don’t have as much time as a younger entrepreneur to recover and regroup afterwards. And for all entrepreneurs, “An ounce of prevention is worth a pound of cure,” as Benjamin Franklin once said.

When you’re ready to test your proof of concept, here are a few ideas to consider:

Start small – If your idea is to open a restaurant, for example, start with a food truck before opening a full-scale eatery. Starting small lets you create demand and grow the business before you sign a lease or make other longer-term commitments.

Work for someone else first. Before Savvy Rest founder Michael Penny launched an organic mattress company at age 51, he worked at a futon company for seven years. This gave him an opportunity to learn the mattress industry and better understand how its products are made, marketed and sold. It also enabled him to identify where voids existed before he went out on his own.

Create a prototype – This lets you to envision what your invention might look like, correct problems and refine your design as needed before production.

Leverage social media – Use these platforms to conduct polls, ask questions and monitor discussions about similar products or services.

Start in your own backyard – Do a pilot program with a local organization with customer or member demographics that match the target users for your offering.

Hold focus groups – Meredith and Lee Hedrick used this technique before launching Doha Designs, a souvenir company, in 2013 (the Hedricks, then in their early 40s, have since sold their business). Feedback from focus groups comprised of local residents suggested strong potential for their business idea.

A final thought: The proof of concept process may reveal that your idea isn’t viable. If that happens, it isn’t the end of the world. Get up and dust yourself off. Then use your newfound knowledge to create something that will work.

Value drivers are the different factors that increase the worth of a product or service to consumers.

Focusing on the entrepreneurial aspect of value drivers, and from perspectives such as that of a finance professional, we can think of value drivers as aspects of one’s business that provide value in relation to shareholder value specifically.

For the vast majority of businesses, especially those that operate with multiple stakeholders, value is primarily estimated in relation to its shareholder value. But what metrics and factors play a part in increasing this? The answer? Value Drivers.

Increasing shareholder value is of course one of the primary objectives for any entrepreneur; yet figuring out how you can maximise the value of your business is the key to understanding value drivers as a whole. Let us explore a little deeper as to what value drivers are, as well as how entrepreneurs can better take advantage of them. 

Defining value drivers

There are micro and macro levels to value drivers. At the macro level, you are looking at the levers you can pull to achieve the increase in value of the business (getting the right team together, organising processes, and managing broad-picture cash flow). On a micro level, we are looking at the internal aspects of the business and the product itself – how you can differentiate it, how you can raise brand awareness, how you can be cost-efficient in both your operations and marketing. 

The primary metric for a larger company that is listed on the stock market will be its share price and what people think the company is worth.

Looking through the lens of strategy and finance gives you a view of total company value. The challenge is understanding how that can be enhanced, and it is the job of CEOs and senior managers to garner this understanding.

Determining value: shifting through stages

The ‘idea’ stage

SMEs, startups, and entrepreneurs need to be thinking about how they can increase and optimise the value of their business, so a working knowledge of determining value is useful in this case.

It is common when one is starting out to have aspirations to raise money but often there is little knowledge of how to put a price on the company.

At the ‘idea stage’ of a new business, what investors are interested in is the calibre, experience, and record of the top-level management team.

For example, you can have an average idea and an excellent management team that makes it work. Or you can have a great idea and a mediocre team, but you might find the business fails to succeed. 

It is important to be aware, then, of just how critical the management team is within a startup, and how much of a difference it makes in the eyes of potential investors. 

Another factor to consider at this stage involves the board of a company. Having high-calibre, relevant individuals on your board of directors signals to investors and the marketplace that the prospects are potentially encouraging for this company.

The ‘evolution’ stage

Once you have a product or service, and you start to find customers – strengthened with recurring or contracted revenues – you enter the evolution stage where ‘de-risking’ is a huge priority.

If customers, for example, are well-established entities, the risk to revenue begins to be mitigated, because they are less likely to default on payment. Well-established entities are often more likely to have well-established revenues themselves, making your revenue stream less volatile in turn.

Shifting from a volatile revenue stream that could collapse at any minute to a stable one is crucial at this point and eventually when you want to sell up.

In preparation for a sale (which can take months or even years), you should consider the ways in which you can demonstrate how your revenues have evolved. Displaying a stable and increasing revenue stream operating with a ‘ratchet effect’ hikes up the valuation multiple. 

With smaller businesses with revenues of a few hundred thousand pounds, value is not determined based on discounted cash flows – which is what finance professionals tend to do for bigger companies. 

For most companies that are sub-10 million in value, this value is calculated based on earnings multiple. When looking at the operating profit pre- or post-tax and then applying a multiple, the number increases based on the size of the business.

If you can steer the business through those rocky first few years to a point where investors can see an increasingly stable performance, you are benefiting from higher earnings and also a higher multiple to get a good valuation.

A strategy for enhancing value drivers specific to your business and industry, therefore, makes a difference.

Utilising value drivers effectively – and what to avoid

Naturally, your tendency will be to get on with developing the product and making it the best-performing of its kind, being mindful of the cost of delivering that product and of its margins, and the competition. That is going to be your overall focus.

But when you start to move further up the ladder in terms of the growth of the business, you have to look at raising capital and what access to it means for the business.

Who you have on your team

At this point, it is important to assess how you can strengthen the management team and whether the team you had early on are still the best set of people to lead it forward. At the end of the day, growth is going to depend on this team and the perception that investors have of the quality of the management.

You may need to upgrade this team as you scale; strengthen the board and bring in the right people at the right time according to business growth and needs. That does not have to be the focus on day 1 but you should be aware of it from day 1.

Securing your revenues

The importance of securing your revenues – and having recurring ones – translates across all sizes of business.

If a business is preparing for sale and the founder is looking to exit in the next few years, one of the things they would be advised to do is assess which of the revenue splits can be contracted.

When looking at memorandums within businesses for sale, one of the things that are often highlighted is contracted revenue as a percentage of overall revenue. Investors analyse the split in terms of the customer base, ensuring you are not heavily dependent on one or two customers that make up 80% of your revenues. It begs the question: what happens if you lose those one or two customers?

Making sure that no particular customer is making up 10-20% of your revenue, diversifying your revenue mix, and being able to demonstrate your diverse clientele factors significantly into valuations.

For example, in healthcare business valuations, one of the things that really transforms the valuation is long-term contracts with the NHS – these contracts are unlikely to fail. Similarly, home-care businesses with services provided through local authorities and the NHS will be valued at a drastically different level to a similar company that provides the same service on a private basis. The latter is uncertain and has a higher risk involved. 

In sum, if you are shifting with a view to selling, you need to be able to both strengthen your revenue stream while ensuring it is also diversified.

Cash flow as a value driver

Cash injections and cash gaps

You cannot overstate the importance of cash flow for small businesses. 

In fact, when a finance professional looks at what value actually means, it translates to future cash flows from the business. You arrive at a value by trying to estimate the future cash flows that this business will be generating.

The main source of a business’s struggle in terms of cash flow would be working capital concerns. 

Nowadays, a select few business models might be able to get up and running with little or no capital – for example, with online delivery, and no fixed or upfront costs. 

But for the majority of businesses, there needs to be an upfront cash injection for buying equipment, manufacturing a prototype, etc. 

Even if you manage to estimate that upfront and think there is enough available, once you start operations and want to scale up, it will become evident that you need more inputs.

Being short of cash injections at that point brings your business under stress and you might find yourself unable to pay out for your obligations and employees at this time, which can significantly drain morale from the company. 

If you have not yet completed your operating cycle or finished the products and reached a place where customers are paying you, this cash ‘gap’ can be difficult to bridge.

Managing cash flow

Making sure you are on top of cash flow – when money comes in and is expected to go out – is key for entrepreneurs, and not just on an annual or bi-annual basis. You might find you need to keep an eye on this on a weekly basis or an even shorter period. 

As well as this, predicting what you will do in the case of a delay and considering the knock-on effects is a good idea.

At this early stage, not being able to access alternative sources of capital, and not having relationships with banks or other means of finding capital quickly can create quite the conundrum.

This is precisely why managing and optimising cash flow and working capital is so vital for small businesses. 

Avoid deprioritising cash flow

Cash flow can get neglected as managing teams become preoccupied with perfecting the product and start focusing less on cash positioning.

A related pitfall that we often see within startups – and namely within tech startups – results from the mantra “grow at all costs”. The desire here is to grow (leads, subscribers, customers) as quickly as possible. And yes, while the metrics are based on the number of subscribers, this can translate to high valuation.

But tunnel vision when looking to achieve that growth is where the pitfall lies: if you have not adequately addressed working capital, you could be in for some trouble.

Many traditional businesses with high fixed costs can succumb to that temptation to grow but should keep in mind that it can in fact have precisely the opposite result.

Value gaps

When considering value drivers, one should also be aware of value gaps. These relate to what the company is worth now and what the company would be worth if it were, for example, better run. This becomes a target for takeover and acquisition – for someone to step in and say “we can do a better job.” 

To put it simply, if that gap is present, it indicates that something is not working well. 

It might require shifting people and responsibilities around, and often, investors will come in and do this for you if you do not anticipate that need. It is in a founder’s best interest to do what they can to increase the business value – and sometimes this may mean handing over a portion of their duties to someone better-equipped. But there is often a reluctance to ‘let go’. Being prepared for this possibility is arguably vital.

Having the ability to narrow down and ultimately eliminate these value gaps should be a part of your strategy for maximising the value of the business.

In short, determining your value drivers early on enables you to harness and integrate them into your business growth strategy – and learning what does drive value to your specific business puts you a step ahead.

About Othman Cole

Othman Cole is a Senior Faculty in Management Practice (Finance) and deputy director of the Executive MBA programme at Cambridge Judge Business School.

Othman teaches Entrepreneurial Finance in the MSt in Entrepreneurship programme.

Othman’s previous experiences were in investment banking during his roles at Barclays Capital and DNA Project Finance. He has also consulted for a number of companies in risk management, real estate, and energy.

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