Many books, seminars and speeches have been written about business. Many encourage business owners to jump through hoops but miss the two fundamental reasons for starting and running a business. The fundamental reasons are:
All business owners should continually work to make a profit and prepare their companies for the ultimate success in an exit strategy. According to statistics, only 3 percent of businesses exist for 3 generations. Even size and reputation are no guarantee for business survival as many of the Fortune 500 vanish from the list each decade. With that backdrop, preparation, focus and always being open to an exit are critically important to maximize your investment in time, energy and money.
I have been asked many times by business owners, CPAs, attorneys, and consultants if I can help them or their clients achieve higher valuations. Obviously, if there is an engaged ownership / executive team and a market for the company’s products and services, the answer is Yes. But where do you start?
While owners have many reasons for starting a business, they soon realize, it is not easy and takes a lot of effort, money, smarts and consistent action. They learn, hopefully sooner than later, the only reason that a business exists is to earn money that results in a profit. Everything else may be important but is secondary. Only delusional souls think the businesses primary reason to exist is to keep families together, preserve a legacy, develop people, serve a community, etc. These are all good reasons but are secondary. If your business makes a profit first, you can “make the happy business cake”, and benefit those you serve it to. But without profit, you have no prosperity, just broken dreams, wasted energy and disheartened souls.
Typically, if there is some time before the actual exit events and sales closing, there are a number of things that can be done to evaluate, consider and take actions that will increase profits and the company’s valuation.
The first recommendation is to conduct an overall assessment of the business. It should include all areas of the business and technical operations. This assessment should help you discover the strengths and weaknesses to build an action plan for improving those areas found deficient and targeted for specific improvement. This is an area where an outside objective observer may be required to help you eliminate your company’s blind spots. They may also help you build your action plan and steps required for the improved value and results.
Here are some areas typically needing improvement:
In Summary, your ongoing and number one goal should be focusing on an achieving the highest profit and the highest valuation with your exit strategy in mind. This is the best way to run a company that will deliver for your family, employees, customers and the community.