When you hear business owners talk about growing their business, they are usually referring to increasing revenue and profits. The conversation immediately goes to growing their sales force, adding new clients, increasing their market share, and so on. More often than not, it is about doing more and more of what got the business owner where they are, which in one way is fine. On the other hand, it likely does not take into account those characteristics that will lead to maximum return when it is time to sell or transition out of the business. More often than not, the business remains highly dependent on its owner or certain key people, has co-mingled business and personal finances, the “processes” of the business are more accurately described as “habits” than systems, and there is no clear “strategy” for growth beyond the capabilities of “doing more of what we’ve always done.”
At Benchmark Business Group, we call it growing a business of value. A business of value carries with it a larger meaning than simply increasing revenue and profits. To be sure, growth in those areas is essential. It is a basic goal of business to be profitable, to meet payroll, to effectively manage expenses, and to support yourself and your family in ways many others can only imagine. But what is the larger meaning, the bigger picture? Is there some grander idea to starting business than just showing up to work each day and making a living for your family? We believe there is. For most business owners, their business is the most valuable asset they own...or should be. For most business owners, their business is the object of their greatest investment of time and money. For most business owners, their business IS their pension plan. So the goal in growing a business of value is twofold: maximizing its value to you while you own it, and maximizing its value to you when you sell or transition out of it. We have seen firsthand too many business owners invest time, money and energy in a business, only to realize too late that they have created something that has very little value to potential buyers. How is that possible?!!
We once began to work with a client who owned a small business for over twenty-five years. He had several employees, and for the most part they all worked well together in the business, side by side with the owner. Some employees had been there almost from the beginning, and would likely retire when the owner decided to. The owner continued to do many of the same things he had done since the day they opened: ordering product, selling product, customer service, checking information provided by his in-house bookkeeper, approving the bills, and so on. And oh, I forgot about opening in the morning, making coffee, changing lightbulbs, and closing for the day, among other things. Over the years the business had grown steadily until it hit about $1.5MM in revenue, which it had continued to do for the most recent 5 years...not much change. The business had hit a wall, and the owner felt it. That’s why we were talking. He had always dreamt of a business with three locations, each doing $2M in revenue, and giving him time to be much more of a manager and overseer, and doing only the things he loved to do, when he wanted to do them. Imagine.
After several conversations and some evaluation of the business, one thing became painfully clear, and our business owner had an epiphany. He had proven beyond any doubt he could build and operate a business that depended on him and certain key people to show up every day and bring in $1.5M in revenue. He had in no way built a business that would do what he could see in his mind’s eye. (See last week's article on designing a business) More importantly, he had not built a business that would achieve maximum value and return for his years of hard work and risk. In order to grow a business of value, you have to own a clearly defined strategy that is completely aligned with your growth goals...with the end game. Your strategy for growth must consider ways to make your business far less dependent on you, and even on key people. Your strategy must include a systems strategy to capture the intelligence of the business, how it works, how it can be replicated for growth. The strategy might include growth by acquisition, adding new products or services, entering into niche markets, or expanding the area/territory you do business in - whatever your growth strategy includes it needs to insulate the business from too much dependence on too few clients, creating greater client diversity and a healthy percentage of new business each year. It needs to include a process for adapting to changes in market and economic conditions, technologies, and even life changes to ensure your goals are met well into the future. In short, your growth should also be designed with your exit in mind, however you see that happening.
Our combined background in business coaching/consulting and business brokerage services gives us a unique perspective. We understand the end goal of your business, better than anyone out there. We have the tools, resources, and experts on our team to help you grow a business of value. Getting results today is important, but we do so while constantly challenging you to understand and focus on the big picture, which is always, “Value Realized”. Contact us today about how to grow a business of value.