Legends and Leaders,

Achieving a legendary exit starts with building a best-in-class business. But what does best-in-class performance truly mean for your industry? And how can you measure it effectively to ensure you’re on the right path?

In this edition, we explore the singular metric that matters most—Profit Percentage—and share four practical ways to set benchmarks that guide your journey toward operational excellence and maximum value creation.

What Defines Best-in-Class Performance?

Best-in-class performance means operating at the highest standard within your industry. It signifies that your business is not only competitive but also positioned as a leader, making it highly attractive to potential buyers when the time comes to exit.

But defining this performance isn’t always straightforward. That’s where metrics come in.

A Singular Metric: Profit Percentage

When it comes to measuring business performance, simplicity is key. Profit Percentage stands out as the singular metric that encapsulates multiple dimensions of your business’s health.

Why Profit Percentage?

• Captures Pricing Strategy: Are you pricing your products or services effectively?
• Reflects Operational Efficiency: How well are you managing costs and maximizing resources?
• Indicates Acquisition Success: Are your customer acquisition strategies driving profitability?

Profit Percentage acts as a mirror, revealing where you excel and where gaps exist. And it’s within those gaps that opportunities for improvement lie.

Mind the Profit Gap

A Profit Gap is the difference between your current profit percentage and the industry standard for best-in-class performance. Identifying and addressing this gap is essential for:

• Improving Valuation: A higher profit percentage translates to a more valuable business.
• Enhancing Competitiveness: Outperforming peers in profitability sets you apart.
• Preparing for Exit: A strong profit profile makes your business irresistible to buyers.

4 Ways to Set Benchmarks for Best-in-Class Performance

1. Third-Party Data Vendors Leverage industry-specific data from reputable vendors to understand performance metrics, trends, and competitive positioning.
2. Industry and Trade Groups Join associations and trade groups to access industry reports, benchmarks, and networking opportunities that provide insight into best practices.
3. Public Companies in Your Industry Analyze financial reports of publicly traded companies in your sector. Their performance metrics offer valuable benchmarks for profitability and efficiency.
4. Industry Relationships Build relationships with peers, advisors, and industry leaders. Sharing insights and experiences can help you gauge where you stand and identify areas for growth.

Next Steps: Elevate Your Business Performance

To achieve a legendary exit, focus on continuous improvement. Assess your Profit Percentage, identify gaps, and leverage industry benchmarks to drive growth. Remember, best-in-class performance is not a destination but an ongoing journey.

Let’s Connect if you’re ready to refine your exit strategy and build a best-in-class business.