How clean is your company’s bathroom?
The answer might impact how much your company appeals to prospective buyers when you feel ready to turn over the reins, according to Jim Lindenberg, owner and president of Lindy Enterprises, JML Holdings and Legends of the Field, all based in Delafield.
Lindenberg was among a lineup of speakers at BizTimes Media’s Feb. 5 Next Stage Workshop, which schooled area business owners on ways to both assess and increase their companies’ value. The event, part of a workshop series, also equipped attendees with information and insight needed by business owners as they prepare for the sale or acquisition of their companies.
“Is your company sellable – truly sellable?”should be among the first questions business owners ask themselves as they explore their sale options, according to workshop presenters Joel Nettesheim and Nancy Mehlberg, both of SVA Certified Public Accountants S.C.’s Milwaukee office.
In creating a sellable, or valuable, business, eight key performance drivers come into play – drivers that Nettesheim, principal, and Mehlberg, manager, referenced from the bestselling book “Built to Sell: Creating a Business That Can Thrive Without You.”
Those drivers include:
Financial performance, which “is probably the easiest driver for people to understand, but it’s the hardest driver for people to deliver on,” Mehlberg said.
Among the most important figures to monitor on an income statement is gross profit, which an owner should know by product line, department line and location. A company’s financial performance can be enhanced by budgeting and forecasting, Mehlberg said.
One useful way to forecast involves conducting a break-even analysis, in which a business owner gauges how many products or services she would need to sell in order to break even. From there, she can set goals for business growth and pinpoint which of her product or service lines are strongest and weakest.
Growth potential. Business owners must build capacity to grow by product or service expansion, replication of their business model and additions to their distribution channels.
An owner must be able to convince a prospective buyer that his company has growth potential in order to complete a successful sale, Nettesheim said.
He must also ensure that his staff and facility are equipped to handle rapid business growth, Mehlberg said.
Independence strength. “How easy is it to replace one of your key employees?” Nettesheim and Mehlberg asked.
They emphasized that company ownership should not be too dependent on any single employee or customer or vendor to avoid taking a big hit in the event that they lose that entity.
On the flipside, a company owner can benefit from a “proactive” effort to retain key employees.
You want to make sure you are proactive in dealing with your key employees “because they are the foundation of your business,” Nettesheim said.
Employee attitudes and relationships between key employees and a business owner are aspects buyers like Lindenberg strongly consider when looking into purchasing a company.
“It’s very, very important to have every single employee buy into the company,” Lindenberg said, adding that interested buyers can find out a lot about a company by turning to the people on the ground.
Lindenberg said he also often surveys the bathroom facilities of a company he is considering acquiring.
If you see a messy bathroom, that tells you that people do not care about the company, he said.
Management depth. “Would the company survive if you were gone for three months?” Nettesheim and Mehlberg posed to attendees.
Owners are best served by making themselves become “irrelevant,” Nettesheim said, so that a business can stay afloat without their direct involvement.
“I have a strong philosophy of making the knowledge part of the business, not part of the people,” said Daniel Eder, president of Jackson-based Reliable Door and Dock, Inc., and an additional workshop speaker.
By incorporating basic tools into a company, such as a customer database, critical knowledge can become common knowledge so that when an owner is ready to sell, he is not the sole “gatekeeper” of that knowledge, Eder said.
Instead, “it’s institutionalized into the business,” he said.
For more information on the other key attributes driving business performance and to take a business performance assessment, visit www.sva.com/performance.
