In my last few posts, I explained why it’s likely you’ll have a difficult time selling your business if you intend to exit over the next 15 years, and what you need to do to increase its value so your business is one of the few that proves profitable in that timeframe. Now lets begin creating your roadmap to financial freedom.
We’ve discussed what you need to do at length. Now it’s time to get into the nitty-gritty of how you can pull off this value increase over the next 3-5 years.
What’s Your Business’ Current Value?
If you were to try to sell your business right now, what would its value be? It is devastating to wait to ask this question until you’re ready to execute your exit strategy. You need to know what a real buyer will pay for your business at this precise moment in time. Only then will you have a clear picture of the gap you’re attempting to bridge.
It’s impossible to close that gap unless you know how wide it is.
If you’re hoping to sell your business for $5 million and you think it would sell right now for $4.5 million, you’re only going to need to improve the value of your business by half a million. But if you do a proper assessment and discover that market price for your business as it stands is only $2.5 million? You’ll have a much better idea of the work that lies ahead of you.
Naturally, you can assess the value of your business by making inquiries for potential buyers, but doing so can have significant downsides for both your current business operations and your long-term chances of making a profitable sale. Better to work with an experienced valuation expert who can use the same metrics to value your business that your potential buyers will one day use.
Once you have a solid number, you may be feeling a bit chagrined. Small wonder, when most businesses have the potential to improve their profits by 70-100%. But gazing at the gap won’t make it any easier to cross.
It’s time to build a road map that will get you where you need to be.
How to Build Your Road Map
When I help my clients build roadmaps, we start by dividing up the company into different silos of influence that represent the primary areas of their industry.
For example, one business’ silos might encompass Planning, Sales, People, Finance, Leadership, Marketing, Operations, and Legal. For another business, their silos may need to incorporate Technology or Software. It all depends on what the business does and how great an influence these silos have on its success.
You are the expert in which silos have the most influence in your company. Right now, you can probably tell me immediately which departments have the biggest sway over whether your company is profitable. To make an informal road map, write down each of the important silos for your company, in approximate order of their influence over your company’s operations.
What are the Weaknesses in These Silos?
Again, a professional can do a more precise job at assessing your company’s weaknesses, but you’re the expert in your company, and you can probably immediately identify some major problems in each of those silos. Perhaps your marketing department is never on time with its reports. Maybe your sales team works hard but has unusually high burnout rates.
Write down every weakness you can think of for each of these departments. Don’t worry about how to solve these problems just yet, and don’t leave anything out simply because you don’t think there’s a solution. You’re looking for potential improvements.
Minimizing Unsystematic Risk
There are countless ways to minimize your risks, but most of them fall under a few large umbrellas:
- Innovating Customer Interaction Procedures
- Market Positioning
- Employee Development Programs
- Leadership Training
- Streamlining Processes
Take a hard look at your list of weaknesses for your departments. Would any of them be solved by the application of one of these risk mitigators? For example, your sales employee burnout problem could be solved with either Employee Development or Innovating Customer Interactions. Your Marketing Department’s late reports can be solved by Streamlining Processes.
Once again, the how is not important just yet.
You’re looking for countless small ways in which your company can improve – thereby increasing its value overall. Creating precise solutions is a collaborative job between you, an expert consultant, and the key players in each of these departments.
What you need to know right now is that there is a gap between what your business is worth now and what it could be worth. You need to know that this gap will damage your plans for a profitable exit strategy and the legacy you hope to leave behind. You need to know where those problems exist and that basic solutions are available for each of those problems.
In short, your business is currently worth significantly less than it should be.
And you can fix that.
My business is helping my clients improve the value of their companies for eventual sale. I’ve seen innumerable solutions to the most common problems, and I know how to adjust those solutions for every industry. If you’re looking at the gap between where you are and where you’d like to be and wondering how on earth you’re going to close it, give me a call.
Oh, and if you haven’t been able to find the time to even make that road map? You’re definitely going to want my help. That gap doesn’t get smaller simply because you don’t have time to tackle it.