4C’s of Capital – A look at Human Capital

This blog in my series on the 4C's of Business Capital tackles Human Capital. Of course, this is all about your employees. HOWEVER, I want you to think beyond the title and what might have come to your mind first when you read it. This is more than just “having the right people on the bus and in the right seats.”
 
Human capital boils down to what YOU– as a business owner and member of the leadership team –are investing into your business culture.
 
So we've been talking about how to drive value in the business, and that it’s measured in two ways:
 
• EBITDA= Earnings Before Interest, Tax, Depreciation, and Amortization.
 
• The Multiple= a “number” used along with EBITDA to determine business attractiveness based on intangible assets of the business (this is where the 4C's come in!)
 
Human Capital is part of that magical multiplier. It is a factor in whether your multiplier falls at the low or high end of the multiple range associated with your industry. It’s really difficult to drive unique growth (and in turn value) in the business when you are always struggling around the people piece. So, what should a business owner do?
 
Let’s start with what you should STOP doing. Stop treating your people like numbers on a spreadsheet and START treating them like human beings. Start by cultivating a culture that will elevate Human Capital through building trust and igniting teamwork. Here are 3 steps to getting started:
 
1) IDENTIFY your core values as business
2) DETERMINE the behaviors that exhibit those core values
3) HIRE to those core values and the behaviors you want as part of your culture
 
Because when you do all this right, your people are going to deliver the kind of experience that makes customers repeat their purchases and tell other people about you.
 
I recently finished reading a great book for the Compass Point Biz Book & Breakfast Club that ties in perfectly with this blog. It’s called Trust Factor by Paul Zak. It is a thought-provoking book if you are looking to dive deeper into how trust drives performance and business value (I see a theme – do you?) and he really nails it with the following quote:
 
“You must continually manage culture.If you do not, it will evolve on its own as the people in the organization change...”,   – Paul Zak.
 
Human Capital is a vital factor in the business value equation – one that will set your business up for success or failure.
 
Check out my video here on Human Capital.
 
To learn more about Compass Point Biz Book & Breakfast Club, which meets 3 times a year to discuss books that can make a difference in any business, join our mailing list today. We will be announcing the next book in a few days.