- October 16, 2012
In my last article, we talked about building value by reducing your customer concentration either through organic growth or through strategic acquisition. Reducing customer concentration is a great way to reduce risk for the buyer.
Another area where buyers perceive risk is where there is no management team or the management team is not truly entrenched in the business. When is the last time you went on vacation? If the answer is never or it has been more than a couple of years, it’s very possible that the reason you haven’t gone on a vacation is because you can’t or at least think you can’t.
If your business is too reliant on you, most of your time is spent working “In” the business instead of working “On” the business. Not only that, but you likely will be the person holding the key customer and vendor relationships. From a buyer’s point of view, when you walk out the door, so do the relationships and the ability for the company to run smoothly.
You may be able to groom current employees or you may need to Identify and recruit talent from outside the business. Start by empowering them. Empowered employees are happy employees. What can you delegate to them? As you change who does what in your organization, it also might be a good time to write down your processes. Having your procedures in writing also adds value. When it comes time to sell, consider “golden handcuffs” or stay bonuses to be sure those key employees are there with you until the end.
Buyers pay for value. Risk, even if it is only perceived risk, reduces value. These are just a couple of ideas for you to consider that should increase the value of your business now and for a future sale.
Gary Hermsen is a mergers & acquisitions advisor for Cornerstone Business Services. He has 13+ years of experience in the converting industry as an owner and former owner/operator of a paper converting company and more recently as an M&A advisor to others in the industry. Contact him at 920-436-9890; email@example.com.