Building Business Value in Your Organization

Your business may be worth more if you can develop it to the point where you aren't needed there every day!

We've heard it said many times that we should be "Working ON the business, rather than working IN the business!" Building effective systems into your business can help you achieve that objective.

That's one of the key things we try to cultivate as we work with entrepreneurs and business owners. And in this post, our friends from Sunbelt Business Brokers some great insights that we'd encourage our readers to carefully consider.

Building Value In Your Business: Top Organizational Factors

Can a potential buyer of your business see himself in your business or are you blocking the way? When preparing to sell or build value in a business, you need to step back and become dispensable so your business works without you. A good business coach can provide an objective view of your business organization and help you get on track to improve your business’ future value.

Many businesses are dependent on the contribution of the owner for success. If you want to add value, be sure you have systems running the business and a great team running those systems. A business that lacks systems and relies on you has less value.

Working ON the business, not IN the business can be especially hard for those whose business has been their means of self-employment. The greater value comes when the business is making money without the owner’s day-to-day involvement, giving the owner the option of "retiring on the job" with income and flexibility.

Make yourself dispensable

An owner’s role is to focus on the future—expanding operations, improving revenues and profits—while bringing in the money today. If you’re still working IN the business, make yourself unnecessary. Pay for the help you need. Hire someone else for administrative duties. Learn to delegate and empower your employees. Challenge them to improve their skills.

Set goals and expectations then let them follow through. Hold them accountable for their actions and specific jobs. Ensure you have an organizational chart with defined positions, reporting lines and duties and the right people for the right positions (financial, management, sales). Groom a competent management team. If people are in the wrong jobs, move them now—a buyer won’t know your people like you do. Settle them in their new jobs before the buyer takes over. Document duties, responsibilities and expectations.

Ensure you have:

• a current business plan with reasonable future projections
• an honest analysis of your business’s strengths, weaknesses, opportunities and threats (SWOT).

Show prospective buyers the earning capacity of your business. Keep up your business plan as a living guide. Base it on your existing records, market and technology and document the steps that will take you there. Invite staff to contribute and keep it current.

Lack of full disclosure destroys trust. People must trust you to do business with you. Never try to hide deficiencies. Buyers need to understand what they can do with the business. Profits are being generated with weaknesses present; fixing them will increase the profits.

Retain key employees

Buyers count on taking over a business with experienced and knowledgeable staff. Losing key employees can affect the sale and value of your business. Find ways of retaining your key personnel such as an incentive program with bonuses paid after the seller leaves or a special payment giving "consideration" for signing a non-compete agreement that extends two or three years beyond the planned sale. Some businesses are more prone to staff turnover than others. There is always a concern that key employees will leave to set up their own business in direct competition. 

Sellers are advised to secure non-compete agreements well in advance and structure them so that if there is a change in control, the agreement stays in place. How long a term is reasonable? An agreement that specifies five years is unlikely to be supported by the court. The scope of expertise and defined geographic area in question are factors. What it comes down to is you can’t prevent someone from earning a living. Even with an agreement that’s "enforceable", you’ll want to weigh the cost and impact of litigation to keep your position in the marketplace. You may find it better to "give to get". Negotiated solutions can benefit all. The terms and conditions can be anything that is agreeable to both parties.

In our next installment “Building Value In your Business: Top Operational Factors ” we take a step back to address the operational factors that improve the value of a business for owners looking to sell their business.

Sunbelt Business Brokers Edmonton

Sunbelt’s team of brokers, operating at local and regional levels, have experience selling small to medium sized businesses. 

Michael McCulloch

Dale Alton

 

Sunbelt is the world’s 

largest business brokerage firm with approximately 300 licensed offices located throughout the world, 

and 33 offices across 

Canada alone.

More than 1,400 Sunbelt brokers annually coordinate an estimated 4,000 Main Street and Middle Market business transactions.

A variety of strategies are required to sell businesses from different industries, of different sizes, and in different economic climates. Many Sunbelt brokers have specific industry experience and cooperate with their counterparts to identify the buyer and create the right framework for the sale.

Your Local Sunbelt Business brokers sell a diverse mix of main street businesses valued under $3 Million. Mergers and Acquisitions of larger and more complex business transactions of up to $30 Million are managed out of the Ottawa Head Office. We would like to help you plan and look forward to retirement, expansion or an exciting new business opportunity. 

 

Have you ever thought about selling your Business?

 

Sunbelt represents clients who may be interested in buying a business like yours. If you are thinking of selling a business now or in the next 3 years, discover what your next steps should be. Feel free to contact our Sunbelt Business Brokers Edmonton office if you have any questions or would like a free confidential consultation. Give me a call. Dale Alton – 780-878-8787

Sunbelt - The Place to Buy or Sell a Business.

* Thank you Michael and Dale at Sunbelt for providing us with this helpful article!

Having a business plan can help ensure that you're heading in the right direction with your business, and that you have the necessary resources to get you safely to your intended destination!

In closing, we invite you to consider Pro-Vision Solutions Inc. as a part of your TEAM of business professionals. We're pleased to assist you with your business planning, through start-up, growth and expansion. Let us know if you would like to have a conversation!  

NOTE: For more information on the services provided by Pro-Vision Solutions Inc. and how we can assist ... please visit our Website: www.pvs4u.ca