Core Asset: What is it, Why you need it and How to build a more valuable one

There are many reasons people start their own business. Working for themselves, leaving the corporate rat-race behind, creating a business that fits in around their family and a better work-life balance, fulfilling their own entrepreneurial desire or perhaps they’ve come up with a fantastic product or service that fills a need in the marketplace like no other.

It’s rare for people to start a business with the goal to sell it for a great return down the track, yet when many business owners are some years into their own entrepreneurial journey, this is exactly where their mindset starts to head.

They’ve worked hard, put in the hard yards and are ready to kick back and reap the rewards. So what do they do?

When we work with clients focused on this goal, we begin by focussing on defining and building the most valuable ‘Core Asset’ possible.

What is a Core Asset?

  • Something a business owns or controls that is at the very heart of how that business makes a financial return.
  • The Core Asset’s quality is determined by factors such as its distinctiveness, the company’s ability to prevent others from copying it, the level of excitement it generates in the company’s customers and the profit margins that it can produce for the company.

So why is the Core Asset important to a business owner?

It’s the basis for creating a business with massive enterprise value. A business you can sell for a great return when you’re ready to hang up the business-owner boots.

When we work with clients focusing on this business goal, the first thing we do is determine the current quality of the Core Asset.

Let’s look at some big brands and look at what their Core Asset is. As we do this, put yourself in the mindset of a potential buyer and think about what you would pay to get your hands on their Core Asset.

  1. Coca Cola

Globally recognised brand and secret formula

  1. Apple

Brand recognition, the code to build iPhones, iPads and the like, as well as a culture and system of innovation that continues to create blockbuster new products

  1. KFC

Brand recognition and that secret herbs and spices recipe!

These are very broad but you can get the feel for what a Core Asset is. To appreciate the value of a strong core asset, ask yourself “what would happen to the value of each of those companies if they lost any of those core assets?”  What would happen to the value of Coke if Pepsi could use the same brand on their products?  What would happen to the value of Apple if they were unable to come up with any other innovations into the future?  What would happen to the value of KFC if their recipe was available to all of their competitors to use?

The quality of the Core Asset is directly proportional with what you can sell your business for.

So, sit back and take a long lens view of your business. What is the Core Asset of your business? What do you perceive it to be? What do your customers perceive it to be? And what is it worth?

And if you would like it to be worth more, how do you improve it?

One of the key outcomes from the ActionCOACH 6 Steps to Building a Better Business Workshop is a more valuable Core Asset defined for your business through our proprietary strategy tools.

Focusing on your Core Asset is a way to get smart and strategic about your business so you’re building a company with massive enterprise value and a future of financial freedom.