Business Owners’ Special Series (#38)
I frequently ask business owners to describe their business’s most valuable asset. “What is the one thing that gives your business significant value, more than anything else?” The responses are predictable, but are they correct? Here are examples of common responses:
“My people are amazing, and they bring the greatest value to my business.”
“It’s my raw materials: we seek out the highest quality parts and we use nothing but the best in our products.”
“Our customers are large, well-known businesses with impressive names. Our customer list gives our business an enormous amount of value.”
“Our reputation. We are one of the longest-standing players in this industry and anyone familiar with our industry has heard of our stellar reputation.”
These are terrific responses because they highlight assets that contribute to business value. However, none of the above responses mention the “one thing” that can be utilized to bring the greatest value to your business.
So, what is that “one thing” that can provide the greatest business value, which you may have ignored and is perishing from disuse?
It is not something on your balance sheet. It is nowhere in your accounting system. It is not sitting in your warehouse. It is not walking into your business every morning. It is nothing you can see, hear or touch. It is something your trusted advisors will rarely speak to you about. And, strangely enough, it is free. Yet, most business owners never take hold of this asset and fully leverage it to propel their business to its highest potential value.
That one thing every business owner can always utilize to propel their business to its highest potential value is time.
Allow me to explain why “time” is your greatest value-building asset.
The most effective way to increase the value of your business is to step outside of your business and look at it through a buyer’s eyes. Not a quick look, but a very thorough look at all operational aspects of your business. That takes time.
You should seek out any weaknesses in your business as a buyer would see them because weaknesses reduce value. Then, identify corrective action and execute an action plan to implement the necessary changes to your business operations. That takes time.
Identify risks in your business, even if they do not keep you awake at night. Buyers will always seek and find the risks within your business. The more risk a buyer finds, the less they will pay for your business. Identifying these risks and implementing an action plan to mitigate or eliminate them will enhance value. That takes time.
Value-enhancing activities regarding sales, management, branding, marketing, customers, systems and processes are a few of the areas of opportunity that exist. To identify, prioritize and create an action plan, then execute that plan for every value-enhancing opportunity… well, that takes time.
Taking the necessary steps to build value, and prove that it is sustainable value, takes time.
As a Certified Exit Planning Advisor, my goal is to make certain that my exit planning clients are leveraging their time to build value. This is not only to identify and implement value-enhancing action steps, but to show proof of sustained value enhancement over time. Why? It’s because buyers have little faith in sudden changes made to your business shortly before you sell your business. Buyers have far more confidence in — and will pay a premium for — value enhancements that have a history of sustained success. That takes time.
The biggest value-degrading mistake that business owners make is not focusing on enhancing the value of their business until they are ready to sell their business. In that situation, the asset of time has been wasted away. There is no time left to develop and implement a value acceleration strategy because you have run out of time.
- Will you need to strengthen your management team and demonstrate its track record of success? That takes time.
- Do you have risks in your business related to too much customer concentration?
- How much time will it take to develop and implement a marketing strategy, and acquire new customers to cure that ill?
- Remember, it is not sudden changes to your customer base that bring value. It is a sustained history of changes to your customer base which will entice a buyer to pay more for your business.
- Expanding your customer base does not happen overnight. That takes time.
- If your business is overly dependent on you, the owner, then your business will suffer a discount in value because of that owner-dependence.
- How quickly can you delegate your responsibilities to your key employees for a successful transition of responsibilities?
You may have to first develop procedures for your employees, so that they can follow a process for doing everything that you have been doing intuitively. You may also have to provide training for your managers to assume these new responsibilities. Lastly, these employees must demonstrate a track record of success in their new roles. Effective delegation? That takes time. As exit planning professionals, we examine a business from over one hundred different perspectives to identify weaknesses and risks in a business, and to identify value drivers. We establish priorities and incorporate them into an action plan. The next step is execution. Value acceleration is now underway. The more time you have for this process, the greater value your business will achieve. Time is your most valuable asset. Do not let it waste away.
At the end of the day, the most important aspect of your business is its exit value. It will determine your quality of life as a business owner today — and long after your business exit. The most astute business owner will focus on enhancing business value every day. And the greatest asset you have at your disposal is time. Maximizing business value takes time. Do not delay. Ready? Set? Go!