Many owners I interact with still run their business the same as the day they started. They are the first one there in the morning and the last one to leave. They know what is going on with every file. They are the only ones allowed to make decisions.
This level of dedication is admirable. Unfortunately while it can feel profitable and even feed our own ego, it often gets in the way of maximizing the value of your business. You want your business to run better today and be better positioned for tomorrow – even if you are not planning on selling any time soon.
In order to maximize the value of your business you have to view your business from the outside in. Or, as a good friend of mine once told me, work on your business not in your business.
Realize your company is an investment not a job
You may have started your business because you enjoyed a certain aspect of the industry. It is great to have passion for your trade. But the primary objective of any business it to earn a rate of return that adequately compensates all providers of capital commensurate to risk.
In other words the business needs to make enough money that an outside party would choose to give you money today in exchange for the right to future cash flows of the business. The best way to ensure that is to build a business that you would invest in today. If you would not invest in your own business do not expect any other party to do so either.
Fire yourself
What do you do every day? What do you do that no one else can do? Write them down and teach someone else you trust to do them. Never be the only person that can do something at the business.
Do you lock up every night? Review every file? Manage every account? A buyer does not want to see that level of involvement in the business. Instead, they want to see systems in place that ensure the right things get done at the right time without the required involvement of an owner.
The less involved you are in day to day operations, the easier it is for a new owner to step in with minimal disruption. Even if you are not planning to sell any time soon this is good business planning. What happens to the business if you get run over by a Mack truck tomorrow?
Know your financials
A wise man once told me, “Tomorrow is today. So do today what you would rather put off until tomorrow.” For many, reviewing your financials falls into that category.
But make no mistake a buyer will ruthlessly comb through your financials. But again, even if you are not planning to sell, knowing your financials allows you to better communicate business goals with employees or negotiate with vendors or banks.
A consistent financial review allows you to run a better business, PERIOD.
Get more customers
Would you buy $100,000 of stock in a company that sold to only two customers? Most people would not. But many businesses (not just collision repair) ask companies to spend much more than $100,000 to acquire a business that only sells to a small handful of customers.
Go out there and get more customers. Sign more deals. Find more referral sources. Minimize as much as possible the impact of any one customer on your business. Not only will you look more attractive to a buyer, you will also sleep better at night.
I know that in the collision industry this is often a difficult task. But if it was easy everyone would be doing it. The better able you are to demonstrate to a buyer that you have multiple sources of referrals the less risky your business will appear (and more valuable). Risk does not equal reward for the seller.
Conclusion
Regardless of whether you have no plans to sell your business or will jump at the first offer, take a critical look at your business. Recognize that your business is an investment, not a job. Get yourself out of the day to day operations. Know your financials and go get more customers. You will own a better business as a result and if you lost the spark for your business, you may even find it again underneath that stack of monthly financials!
As always, if you need help getting ready for a sale, or just want to talk strategy please reach out to me via the contact page.
Until next time.
Good points here; What do you do every day? What do you do that no one else can do? Write them down and teach someone else you trust to do them. Never be the only person that can do something at the business. ( this is my favorite) When you do not know how to delegate, it is difficult to take a vacation !
Thanks Gayle. I like how you put it – it is hard to take a vacation when you do everything!