In this two-part series, Andrew Usher, director of Catand Advisory, gives some helpful advice on how to brush up your finances and streamline your operations in the event of selling your business.
If you were approached by someone offering to buy your business for top dollar, would you agree to sell, knowing the business would possibly fail without you at the helm? People and culture are assets of a business just as valuable as goods and hardware, arguably more so.
In part one of this article we asked how easy it would be for you to put together an accurate picture of your business’s finances at the drop of a hat, assuming somebody was looking to buy it tomorrow.
Another key part of selling your business is the consideration of whether the business could run without you. Could it? Let’s look at the factors in play.
Removing the owner from a business is a critical risk factor for any acquirer; it is unlikely they will consider buying your business if it is solely or heavily dependent on you. This is of particular importance for an owner-operator pest control business as you have the direct relationship with your clients. Without you, it is extremely difficult to retain these clients (and sometimes staff).
A question that is commonly asked within this space is ‘How do I make myself ‘redundant’ in my own business?’
Selling your business does not necessarily require you to employ more people or add unnecessary costs; a lot of the work you do, as the owner, can be controlled or circumvented by having appropriate operational manuals, automated processes, and checks and balances in place. Any potential acquirer of your business will be impressed with its efficiency, and see less risk and more value, if things in your business happen automatically.
So, how do you make this happen?
Write down how everything happens in your business
I guarantee that as a business owner, your days are filled with many tasks and ‘to do’ lists, yet if asked, you would not be able to write all this down nor tell someone what you did each hour within the week.
Consider writing a ‘how-to’ manual for your business. The principle of this is that a stranger should be able to pick up the manual and run the business as you run it today. Record every process, and administrative task and do not make it personal – think of the role or function that each person is doing (including family members).
A further step to this is to clearly define the tasks assigned to each staff member, even going as far to write comprehensive descriptions for the most important tasks. This could be a great opportunity to automate functions within the business by creating templates for repeat tasks, which could include simple, everyday items such as creating daily run sheets for technicians.
Use a formal database system
It is often difficult to change operating systems or move from a tried and trusted manual system (that works just fine) to a systemised database. However, if you think about an acquirer, whether they are a large company or a mid-sized firm, they are thinking longer term and will certainly be running their business using a database.
The ease of access to customer information, database analysis and evaluating the quality of customer information and services is a key factor in any acquirer’s due diligence. If you do not run an efficient database you will undoubtedly be making it difficult for the acquirer to do their homework.
The next step within this process is ensuring that the system is used efficiently. I am confident that a number of businesses do not use the full extent of their database system. However, it would be a wise strategy to use the system you are already paying for to automate key manual tasks such as emailing or texting reminders or follow-ups, or even chasing overdue monies.
Whatever you use as a database, it must be easy to extract the information in a structured format such that it can be easily transferred to the acquirer’s database.
Delegate and trust your staff
As a small/medium business owner, you may often see the truth in the old cliché that ‘if you want something done right, do it yourself’ (I do this myself). However, this mindset will not help you in the process of selling or even growing your business. Well planned, systems- based delegation is the key to building an asset of value.
Increasing new or existing team members’ engagement in the business by delegating specific tasks to them must begin with you fully understanding the processes that need to be adhered to for each task to be carried out successfully. After clearly communicating what’s required, you will quickly see that actively participating in the business provides team members with a sense of ownership within the business. This creates a culture where staff are valued – where ultimately they feel motivated to outperform you in terms of how they do the job you created for them.
Create a culture of performance accountability
With a system in place, and an empowered employee fulfilling the requirements of the job at hand, it becomes far simpler to objectively measure, scale, and shift, their role when needed. A strong system of productivity, and target focus, inherently includes an aspect of measurement, which makes it easy for you as a business owner to keep tabs on your business’s growth, and similarly reward your employee when they outperform their targets.
Ensuring specific, simple targets are set and understood by your staff makes it easy for them and you to track their performance and ultimately the business’s performance. Start off by setting simple weekly targets, and make the effort to explain the reasoning behind the targets to your team.
An example could be setting a weekly revenue target of say $20,000 (assuming four technicians). Why this target? Well, the industry averages approximately $250,000 per technician per year, so broken down and factoring in leave, wages, rent, vehicles and operating costs plus debt repayment, $20,000 becomes a reasonable weekly revenue target.
It is incredibly valuable for staff to understand that achieving the benchmark revenue figure ensures the business is successful, meaning they too will be successful.
I am a strong believer in recognition and reward of staff members. A successful business is the result of not only the efforts of the business owner but of the team members within the business, so it is only fair that they should also benefit. Simple, structured financial benefit schemes are one way to incentivise staff and aid them in the ownership process. This should extend through the business from the technician to the receptionist, as everyone has a key role in ensuring a business is run well, especially if you are not present.
Build a team to take the business beyond yourself
This doesn’t mean hiring people to merely execute tasks – it means hiring like-minded people, welcoming them into your team and empowering them with praise and responsibility.
When staff members care about your customers and your business direction, they add value to your business. Engage staff by brainstorming ideas about to how to give a better customer experience, how to improve your service offering, or ways to work more efficiently. This gives them the opportunity to share some good ideas you may not have thought of, and shows that you value their input. There is nothing better than going to work every day, knowing that what you do matters and adds value to someone’s life. In pest control, we actually have the privilege of doing this for homeowners, builders and office workers, protecting them from unwanted pests. Your staff should be proud of this.
In the end, if you are considering a sale either in the short or medium term, it is important to scale back your involvement in the day to day operations of the business, especially with regard to direct customer involvement. This may sound absurd, but be less available to customers and clients, delegate decisions, go into work less often and trust your team, which in effect means you are ‘making yourself redundant’ – and you can use this time to work on the business, instead of in the business. Which ultimately makes your business more valuable both now and in the future.
Andrew Usher, Director, Catand Advisory