When I started Compass Point nearly 20 years ago, I heard a quote from business owner, who is now one of my mentors, Tom Stine: “The only reason to get into business is to get out.”
I remember thinking at the time, “That’s a bit cold. Sounds like consultant talk.”
But 20 years later, truer words have never been spoken. From an owner’s perspective, the whole goal is to build a transferable business. It’s transferable if it has value. If there is no value, then why would someone want to buy it?
This is paramount in transitioning family businesses. The goal is to set the Next Gen up for success without you. Starting off with a strong business that is focused on maximizing its value gives the Next Gen a leg up on the challenges they will most certainly encounter.
A business that is maximizing its value gives owners options:
- Allows you to achieve your personal goals of time and money today.
- Gives you more options for transition in the future, when you are ready.
- Acts as a contingency plan when one of the 5Ds of business strikes: death, disability, divorce, distress, disagreement. Nearly 50% of all businesses transition due to one or more of these factors – and contrary to what you are thinking, it CAN happen to YOU. Be prepared.
The concept of “always being for sale” isn’t just about a mindset of “I’ll sell if the price is right.” The hard truth is that if you aren’t maximizing value every day you are actively in the business, the price ISN’T EVER going to be right.
Unfortunately, there is no crystal ball to show you the timeline. You never know when there will be a knock on the door. But when there is, you better be ready. Or fortune will pass you by.
Get to work today on the BIG picture of business. Make maximizing value a part of your strategy. Focus on the value drivers in your business – things like:
– Improving profit performance
– Focusing on markets with growth potential
– Producing a strong business model that generates cash vs sucks it
– Creating recurring revenue
– Minimizing customer concentration
– Increasing customer satisfaction, competitive advantage,
– Reducing the business’ dependency on the owner as the hub.
You’ll like running this company, and dramatically increase the odds of passing it on to the Next Generation successfully.
Tom Garrity is managing partner at Compass Point Consulting, based in Bethlehem, PA, a business consulting firm specializing in family-owned companies, primarily in the manufacturing, food processing, construction & professional service industries. Compass Point provides hands-on consulting & coaching to help businesses close performance gaps; give owners practical, actionable tools that drive growth; deliver training to develop leaders and position the business for successful ownership transition; and provide governance guidance to improve communication and harmony in the family.
Learn more at: http://www.compasspt.com