Would adopting a 4-day working week impact business value?
Would adopting a 4-day working week impact business value?
By Alex Dodgshon

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Would adopting a 4-day working week impact business value?

TAGS:  Maximising a Business Sale Price, Selling a Business, Value Builder Methodology

Between June and December 2022, 61 UK companies employing approx. 2,900 workers signed up to trial a reduced working week. The results of the biggest ever trial of the four-day working week* were published at the end of February and the signs are overwhelmingly positive.

Which led us to thinking, what impact could adopting a four-day working week have on the value of a business?

It’s a cliché, but staff really are the most valuable resource. Without them a business cannot deliver on product or service. As a resource, lack of short term scheduling and long term growth planning is a structural weakness that impacts business value. Dependency on employees is something we assess as part of our valuation process .

So if you are considering selling your business, now or in the future, is transitioning to a shorter working week likely to boost or reduce what your business is worth? Let’s take a look some of the highlights.

Key findings from the 4-day working week trial

  • Revenue increased by an average of 1.4%
  • Productivity and business performance both scored well
  • Absenteeism, resignations and sick leave all decreased
  • 73% of people said they were satisfied with work and life
  • 71% of employees reported reduced rates of burnout
  • 92% of participating companies said they will continue to operate a 4-day week

What does a 4-day working week mean for business value?

Revenue and productivity

Business owners might well be concerned about the impact of a shorter working week on their capacity to generate revenue. After all, fewer man hours means less work gets done, right?

The findings don’t support this theory at all. Revenue increased marginally for the duration of the trial. It seems it’s not the number of hours you work but what you spend those hours doing that impacts business performance, and therefore business value. This is a genuine lesson for business owners who tend to focus on the task over leading on strategic direction.

Culture

Employees taking part in the trial reported feeling heard, being able to work effectively and competently, and relating well to co-workers. Adopting a four-day working week suggests a business that’s open to innovation and flexible in its approach – an attractive proposition for job seekers. Add to the mix more free time to achieve personal as well as professional goals and you have an engaged, motivated team that’s both fit for the future and a valuable investment.

Cost of recruitment

A common four-day week myth is the assumption that everyone takes the same day off. In reality, it’s not about closing on a Friday for a long weekend or increased recruitment and staffing costs to fill vacant hours. It’s more about planning and staggering days off to ensure your team covers the workload.

The trial paid workers 100% of the pay, for 80% of the time, in exchange for a commitment to delivering 100% of the output. Companies continued to service their customers. Organised staff rotas and systems to manage them are a sign of good operational management. Properly documented procedures can add value to a business, as we’ve talked about in the IT sector .

Another kick on benefit is there will be no more hiring on a handshake. The four-day week needs owners to step up and issue formal contracts of employment (which should already happen, but is surprisingly lacking in many businesses). At the point of sale, these contracts are scrutinised during due diligence.

Interestingly, staff retention rates improved during the trial. A stable culture where knowledge and expertise are maintained within the business can also impact positively on business value – provided those people are willing to adapt and grow alongside a new owner. And in the interim, if you improve staff retention you reduce the overheads associated with constant staff turnover, which will positively affect your bottom line profits. As once was said;

“Train people well enough so they can leave, treat them well enough, so they don’t want to”

Richard Branson

Customer service

We’ve already touched on the fact that a four-day working week does not mean you cannot deliver for your customers. On the contrary, teams involved in the trial continued to deliver in a happier, more relaxed, more engaging way. It’s well known that service with a smile builds trust and customer loyalty – both highly valued by prospective buyers.

Improved health and wellbeing

43% of employees involved in the trial said it had improved their mental health. Lower stress levels, increased ability to sleep and more time to exercise were some of the main health benefits experienced. Interestingly, those in construction/manufacturing had the biggest increases in mental health and job satisfaction, and enjoyed the largest reductions in burnout and sleep problems.

Surely this is a win-win for everyone involved; healthier staff are more able to do their jobs effectively. The freshness that comes from working reduced hours means people are more alert to spot errors, solve problems, and service customers to the best of their ability.

While the trial only lasted six months, companies that continue with the four-day week are likely to see these health and wellbeing benefits increase over time.

Is it possible to put a value on a caring business culture?

The answer to this question lies firmly in the hands of the prospective buyer and what they are looking for from a business. Some buyers value work/life balance over financial reward. Others focus purely on the numbers.

One thing is clear…

If your business can translate the clear human benefits of a four-day week into profit on the bottom line you will satisfy both types of buyer and add value in several key areas.

If you’d like to discuss any of the points raised or want to explore ways to increase the value of your business with an exit strategy consultant, book a discovery call here .

*The trial was organised and run by 4 Day Week Global in partnership with the UK’s 4 Day Week Campaign and think-tank, Autonomy. Download the findings here (https://www.4dayweek.com/uk-pilot-results).

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