A Strong Management Team is a Powerful Value Driver
I regularly challenge business owners to identify and quantify your resources that will support your “Life Beyond Business.”™ I’ve also written about the elements that create a transferable/sellable company, whether you sell to a company insider or third-party.
The Value Drivers for Sellable Businesses are:
- Stable and Motivated Management Team.
- Operating Systems that Improve the Sustainability of Cash Flow.
- Solid, Diversified Customer Base.
- Facility Appearance Consistent with Asking Price.
- Realistic Growth Strategy.
- Effective Financial Controls.
- Good and Improving Cash Flows.
I know this is not the first time you’ve heard these things…
What I need to convince you is that you may understand that these are the key elements necessary for a successful transfer, but you need to DO IT to achieve the dream! … And that you cannot do it alone!
Let’s explore the first Value Driver:
A Stable and Motivated Management Team
You need intelligent, motivated, engaged, “big picture” management to effectively tackle the rest of the items on the list, to help you make the needed improvements and then maintain that performance.
That means allowing these individuals into your world; sharing your successes along with the responsibility for any failures. That takes a commitment from you, the owner, to “open the books” to the management team. They need to understand how the company operates and makes money and where they fit into your overall plan.
Companies are silos of activities, pieces of a big puzzle. Each silo, and puzzle piece, certainly needs the worker bees to handle the activity contained in their area, yet worker bees work more effectively with the knowledge of how activities before and after their area of responsibility relate to the “enterprise.”
Having a management team with the understanding of the “big picture,” who are motivated to the performance of the company and in positions to communicate the mission to others, is powerful.
It’s that power that ownership needs to take the organization to the level needed to support the owner’s long-term “Life Beyond Business”™ dream.
An incentive program for key employees that ties salary, bonus, and other perks to business performance benefits ownership in a number of ways:
- Company becomes less dependent on the daily, hands-on involvement of the owner.
- Creates the wingspan necessary to lift the organization to increased performance to help support the owner’s “Life Beyond Business™”.
- Increases the value of the business at transfer and can insure the continued performance of key employees, post-transfer, in support of seller “earn-outs.”
- Provides “golden handcuffs” for key employees; a critical component to the continued success of the business and the completion of owner’s exit plan.
- Generates a potential additional buyer(s) group for the business if not conducive to sale in the third-party arena.
I understand that it’s uncomfortable for owners to let others, especially those on whom you rely most heavily, into the sometimes scary world of a business owner.
You want to protect them from the fears and uncertainty that you face regularly so as not to affect their performance and commitment.
Believe me… I get it!
In protecting them, however, you are missing a HUGE opportunity to make your job less stressful now and create a company that is more attractive to potential buyers in the future.
An experienced advisor can help you identify the employee incentive program that is best for you. You can also find information on Employee Incentive Planning, and Short-Term Key Employee Incentive Planning throughout our website.