Systems Increase Value

It's odd how things happen sometimes. Unknown to one another, a good friend and a valued client each called me this week to say that they'd made the decision to sell one of their respective companies. Both businesses are successful. Both are solid cash-flow generators. Both are growing in growing industries. The owners, however, have too many other irons in the fire to comfortably continue to manage these ventures. And since the businesses are profitable, they are marketable and potential profit-makers for both sellers. Wonderful. Right?

The fly in the ointment is that each of their companies is dependent upon THEM — the owner — to function and that's not one bit wonderful. As things stand, those businesses may actually lose $$ value when it's time to display the For Sale sign. Why? The current owners just don't have systems in place to allow someone else to walk in the door and hit the ground running. Yes, the purchaser would get tangible assets (buildings, equipment, etc.), but they would not get a business poised to quickly generate cash and recoup the purchase price. And, duh, THAT is what most buyers of businesses want from their investment.

Put Systems in Place

After swallowing hard, they each asked me if they could quickly solve this dilemma and protect their respective business' value. I just had to be honest and tell them that there's no quick fix to their far-from-unique circumstance—but there is a solution. First, they must put systems in place that clue other people (i.e., primarily their staffs) to what the heck it is they're trying to accomplish. I then assigned each of them strategic planning homework: What role does the staff play in the plan? What needs to happen and by when? What values do they want their companies to exhibit?

Basic strategic planning is not only crucial for organizations planning a long life, it is essential for businesses that are being groomed for sale. A business with drive, value, direction, and energy is much more attractive and viable than one without. You gotta do your homework.

If you want to sell your business—if you want to hand the reins of leadership over to someone else—what are they actually getting? A building and equipment or a business?

Liz supports clients with strategic and succession planning, as well as leadership training and executive coaching. Learn more about Liz on LinkedIn!

Liz Weber, CMC CSP

Liz Weber coaches, consults, and trains leadership teams. She specializes in strategic and succession planning, and leadership development.

Liz is one of fewer than 100 people in the U.S. to hold both the Certified Management Consultant (CMC) and Certified Speaking Professional (CSP) designations.

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2 thoughts on “Systems Increase Value”

Linda Keith says:

April 8, 2011 at 8:46 pm

You hit the nail on the head, Liz. So many self-employed people think they are business owners.

Nothing wrong with being self-employed unless you want to sell the business when done.

It seems that besides systems, the owner needs to figure out how to replace herself or himself as the revenue generator. Hard to do if the business is consulting, for example, unless you build a team of consultants, don't you think?

So what is the approach if the owner is also the main generator of the revenue?

Reply
1. Liz Weber, CMC says:
  
  April 9, 2011 at 11:15 am
  
  Hey Linda thanks for the comment!
  To answer your question: I believe the same idea to create systems applies - but with a twist. Now the systems take on a different focus and purpose. Instead of serving as training aids for others, they now focus on and service as potential new processes to generate passive income. This provides the sole revenue generator with additional revenue streams, and additional "potential" services/products to include in the sale of the business down the line.
  Either way, systems help.
  Thanks again for the comment!
  
  Reply