My father owned a small service business during the time that I was growing up. I remember going out on service calls with him on weekends and school holidays and was so impressed with the way he interacted with his customers, the way he cared. Unfortunately, he was not surrounded with good advisors who could help him grow and develop the business. My father was what we call a grinder, one who worked in the business; he was not a finder, one who could grow the business. Before I understood better, he was forced to sell the business and ended up with very little to show for his effort. This marked me in ways I am only beginning to understand.
Both from an educational and a business perspective, I was drawn to learning about and working with private businesses. I did not understand it at the time but later came to realize that my passion is to help the owners of private businesses be successful however they define it, and I don’t want anyone to go through what my father endured. I believe that private businesses are the life blood of our country and that every business owner is important to our success as a nation.
Now there are many keys to the success of a business. Some of these key areas are to grow profitably, generate positive cash flow and to prepare the business for a transition. These are the areas that I focus on.
Wherever you are on the life cycle of your business I am prepared with well-established processes that work; to build toward success. As with any goal, you need to develop a plan and if part of that plan is to ultimately sell your business the sooner you begin this process the more successful you will be.
Areas of Expertise
- Business Coaching
- Leadership Coaching
- Business Lending
- Business Valuations
- Capital Budgeting
- Capital Structuring
- Cash Flow Management
- Financial Analysis
- Transaction Advisory Services
- Management Systems
- Strategic Development
- Building Products
- Commercial Services & Supplies
- Construction & Engineering
- Construction Materials
- Food Products
- Real Estate Management & Development
I had the pleasure of working with Phil Elworth for several years at Northland Laboratories. Phil provided an expert level of analysis of the company with a strong business mind that helped drive many good decisions in the business. I found him to be responsive, trustworthy, very competent, and dependable. I would highly recommend Phil Elworth for any company considering utilizing his services.
Every business owner I know wants their business to be valued at the highest possible level. But to accomplish this there are a number of areas of your business that need to be reviewed at and changed. Let’s call these business value drivers. You would...
7 Ways to Add Value to Your Business
Every business owner I know wants their business to be valued at the highest possible level. But to accomplish this there are a number of areas of your business that need to be reviewed at and changed. Let’s call these business value drivers.
You would not sell a house without first sprucing it up and getting it ready to show. The same is true with a business. All the areas of the business that you have been living with for years and are very comfortable with (risks) may not feel the same to a potential buyer. So, we need to fix them. There are many more than 7 factors to business value but here we will talk about 7 of the most important for every business and which are under your control to maximize.
1. Revenue- often called quality of earnings. Wikipedia defines Earnings Quality as the ability of the company to report earnings that predict a company's future earnings. It is an assessment criterion for how "repeatable, controllable and bankable" a firm's earnings really are. To simplify this, it really comes down to recurring earnings. Are all your sales one time? Or do you have customers who provide reliable repeat business? Are your sales inflated by special circumstances or are they made of solid reliable sales? What do you need to fix to improve the quality of your earnings?
2. Sales and Marketing- How strong is your sales and marketing process? Is your marketing process driving leads to your sales team? Do you have a clearly defined and documented sales and pricing process? How large is your largest customer? If any one customer is larger than 5% of your ongoing revenue it could trigger a lower value. What do you need to do today to diversify your customer base and improve your overall customer acquisition process?
3. Operations-How you provide service or products to your customers. Are your costs and processes clearly documented and defined? Do you know what your gross margin is for every product or customer? Do you have a standard cost for each product or service? Having a clear and documented understanding of how your business works and what your costs really are is critical to the value of the business and especially to the quality of your earnings. At what capacity are you currently operating. Do you have room to grow your business or are you close to being tapped out? There is a balance between having too much capacity yet needing the ability to grow the business. So being able to articulate a growth strategy is part of the value proposition for your company.
4. Financials-Too often I see businesses run as a life style business rather than the investment that it really is. Are all your business expenses real or do you have personal expenses run through the business in an attempt to lower your taxes? Likewise, are all your business expenses appropriate for the market? By this I mean if you are paying yourself and family members a salary for being in the business, are these salaries at market? The idea here is that your business needs to be set up for a potential buyer to look at. If you are intentionally lowering your net income and that is what a buyer sees; you will be under valuing the business.
5. Human Resources-Do you have an employee manual? Is it current and has it been reviewed by a legal professional? Are you in compliance with all the regulations for all the states in which you operate? How is your employee moral? Do you have an engaged work force? If a buyer interviews your key people, what will they find?
6. Legal-Have you had a legal review of your business and all the various contracts you use? Are your contracts up to date and appropriate for the marketplace? Have you reviewed your by-laws and are you in compliance with everything you should be doing? Do you have minority shareholders and are you following all the laws related to their rights? Are all your corporate documents up to date. If you have intellectual property that is critical to your business, is it properly protected?
7. Taxes-Would your tax returns withstand an audit by the IRS or are there questionable practices that may need to be reviewed? Are you in compliance with all the state and local taxes including sales and use tax? Are you registered in all the states with which you do business (nexus)? Tax returns are a key part of the due diligence process which provide a lot of inside information to a buyer in how the business was operated. Having them in good order will increase the value of the business.
My whole career has been built around acquiring the education and knowledge in order to help the owners of private business achieve success. I have worked in public accounting, business start-ups, family businesses. Over my 15 years with B2B CFO® I have worked with businesses from $5 million in revenue to those with more than $250 million in revenue in everything from manufacturing to transportation; professional services; distribution; construction and real estate to state a few.
Seeking Systems are a part our brain that create natural impulses to explore our world; learn about our environment; and extract meaning from our circumstances and relationships, this is according to Daniel M. Cable in his book Alive at Work. The Seeking...
Seek and You Shall Find
Seeking Systems are a part our brain that create natural impulses to explore our world; learn about our environment; and extract meaning from our circumstances and relationships, this is according to Daniel M. Cable in his book Alive at Work. The Seeking System encourages us to find new hobbies and seek out new skills; all because they are of interest to us. The process of activating our Seeking System will ignite our passion and our sense of purpose, which in turn fuels our desire to succeed. According to Daniel, this is the way we were wired to live and to work; to explore, experiment and learn. So, do you feel like exploring, experimenting and learning at work? Are you able to do so? Are your employees able to do so? If not, you are losing a lot of productivity.
In his book Daniel draws from an example of an on-boarding process that Wipro uses. When a new group of employees comes on board a senior executive comes into their meeting room and discusses why Wipro is a great company, that working at Wipro gives you the chance to express yourself. After sharing his personal story of working at Wipro he then asked the new hires to answer in writing the following question: “what is unique about you that leads to your happiest times and best performance at work? Reflect on a specific time-perhaps on a job, perhaps at home-when you were acting the way you were ‘born to act.” He then had each of them introduce themselves to each other by introducing their best self. Afterwards each employee was given a small customized gift to remind them of this event. The new employee felt that after the event everyone around them knew a lot about him and vice versa.
What is interesting about this company, is that they did a study where they broke new employees into different groups, one group received the treatment in the above paragraph the second group received a more normal onboarding process where the senior leader talked about how good the company was, the values of the company then asked the new employees to reflect on these values and discuss with each other. Afterwards they too received a token gift but it was more generic and not personalized.
A third group was onboarded with a more traditional skills training process and less about values and nothing about personal best self.
After six months of tracking the performance of the three groups they found that the best self-group had outperformed the other groups and showed an improved retention rate of 32%.
Onboarding processes are normally stressful for new employees, so by doing a best self-exercise like this Wipro had exercised what psychologists call a wise intervention. This is when you do something new and small but has a disproportionately large effect because if fixes something, onboarding, that makes people feel emotionally vulnerable. Thus, the new employees are set up for success when they start working.
If you want to separate yourself from your competition then think through how you can set people up for success and engage their seeking system. It does not have to be just when they start, you can start this process at any time. You want to help your employees to engage their Seeking Systems because this will make them happier employees and normally happier employees are more successful.
The concept of Seeking is an intrinsic urge to explore and thus is rewarded by the discovery. This is very different from our normal reward system; which is extrinsic in nature and based upon action. While rewards happen after a behavioral event, Seeking happens before, but the beauty of Seeking is that it never runs out. According to Mr. Cable, who is a Social Psychologist, when we are encouraged to operate using our Seeking System (best self) we are actually happier. The flip side of this if we are not allowed to operate in this mode, we grow resigned to our circumstances and thus become less motivated. Inspiration comes from this inner Seeking mode and inspiration leads to success.
So, what normally stops us from moving into a Seeking mode at work; FEAR. The boundaries of our life are defined by our fear. If we can learn to move through our fear then the world opens up to us.
To help you understand what sparks your Seeking mode, do the exercise defined above. Test the theory, see if it helps you unleash your passion and drive, then introduce it to your employees.
I was recently introduced to an acronym that describes what owning a business may mean for many in this period of history. The acronym is VUCA. It stands for Volatile, Uncertain, Complex and Ambiguous. Think it may fit? The term VUCA was originally...
Is Your World a VUCA World?
I was recently introduced to an acronym that describes what owning a business may mean for many in this period of history. The acronym is VUCA. It stands for Volatile, Uncertain, Complex and Ambiguous. Think it may fit?
The term VUCA was originally coined by the U.S. Army War College in the early 1990’s to describe what the world would be like after the Soviet Union’s collapse. Looks to me like it was spot on, but how does this apply to business?
Let’s start by defining the terms:
Volatile: A situation that is liable to change rapidly and unpredictably, especially for the worse. So, what do you see coming in your industry? With your key customers? Technology? Do you see smooth sailing or change coming?
Uncertain: Something that is unknown or unable to be relied on. How secure is your revenue source? Will your key employees stay? What is coming that will rock your industry? Or do you know exactly what is going to happen?
Complex: Something that is composed of many interconnected parts or compounds that is complicated or involved. So much in business today is interconnected. Rarely does a business have “control” over all parts of its operation things like hurricanes, strikes, regulation or the changing needs of your customers all creates a complicated matrix that is your business. Ask any business owner from Houston what this means to them?
Ambiguous: Open to having several possible meanings or interpretations and often of a doubtful or uncertain nature. How often have you left a meeting only to hear later that the other party had a totally opposite interpretation of what went on? Has this ever happened with a customer order, or a supply specification? Is your business really clear cut or is it open for interpretation?
Does this describe your business or your customers? Leading in a VUCA world will take different competencies that are tailored to this world. Competencies that you may not have given much thought to in the past. In order to grow your business and ultimately transition your business you need to develop these competencies not only for yourself but also the key employees around you because as the leader you need to point the way forward. The clearer you can be about the direction you are going; the clearer will be the common purpose which brings everyone into alignment.
In the area of volatility, you will need to be resilient and adaptable since you cannot control the change. You will need high levels of business insight in order to make the high-quality decisions necessary to stay on track. Do you have the key team or advisors around you to help make this happen?
If something is uncertain, then you need to be a nimble learner to quickly adapt to a changing landscape. As a leader, you need to be decisive. You need to obtain all the facts you can then make your decision confidently to move forward. Uncertainly means that you will win some and lose some, but your key employees need to follow a decisive leader. It is said that any battle plan does not survive the first hour of combat which is why you need to be aware of the changing landscape and be willing to change direction as needed.
Complexity is a part of daily life but as a business owner the complexity of the business rests on your shoulders; but you should not be doing this alone. You need a team around you. Do you have a leadership team in place for your company? Do you have an advisory board to help you navigate changing waters? Are you creating an environment that drives engagement, where all employees are motivated to do their best for the organization? Do you have the financial acumen around your table to monitor how you are doing and plan the way forward? Complexity will always be with us, but it is important for you not to carry it alone.
Ambiguous shows us that the way forward is often unclear. What if we get this big order, what if we don’t? Having someone around your leadership table with a strategic mindset helps you to look into the future, see the possibilities and translate them into clear strategies. Do you have a clear Vision and Purpose for your organization? Are all your crew members rowing the same direction or as I have written in a separate article are they all trying to go different directions. Clarity of purpose in an ambiguous environment will go a long way to you as the owner achieving the goals you have for the organization.
The beauty of the competencies noted above is that they can all be developed, learned or added to your leadership table. The same as a battle plan does not survive the first hour of combat, neither does a business plan if you are running it alone. Is your world a VUCA world? Would you like help figuring it out? Help is always available for those who ask.