Recently, our founder, Jennifer Peek, was interviewed by Bill Black of Exit Coach Radio. On his show, Exit Coach Bill Black interviews Top Advisors for Tips, Ideas & Precautions for Business Owners who want to grow and protect their company value and plan for a successful Business Sale or Transfer.You can listen to the full interview here. We also captured our favorite highlights below.
Bill Black: I was looking at your website and it looks like you promote that you work very heavily with women-owned businesses and that number of women-owned businesses is really on the rise. Why do you enjoy working with women-owned businesses so much?
Jennifer Peek: There’s a couple of reasons. One is because I own a women-led business and the professionals that work for me are primarily females. The other thing that I have found is that as there have become to be more and more women business owners in every industry that we’ve worked with. There is some catch up that’s going on, if you will, in terms of women looking more strongly at building full companies and eventually building those companies to sell which I think is something that you didn’t necessarily see 10 to 15 years ago. The great part about working with those women business owners is that it really does help them create a legacy of the company that they’re building and move into that next stage of whatever it is that they want to do. We find a lot of our business owners have some element of being a serial entrepreneur in one way or another, and it’s always great to see people be able to complete one business handed off to the next generation…whomever that may be and do the next thing that excites them.
Value Driver #1: Workforce and the VIP Owner
Bill Black: Yeah, that would be my inclination. So that’s what I was wondering and I haven’t seen statistics to that effect either yet. When you work with business owners, what are the three biggest value driver elements or things that that grow their business that business owners you find often overlook?
Jennifer Peek: Well, there’s certainly three. There’s more than this, but these are the ones that I find to be two things, one, the most common and then secondly, the one that have the most bang for the buck. The first one is really having an employee structure that fills the key processes. For lack of a better word to put it right, like a flushed out organizational chart. The opposite of this is what I call the VIP owner. If you have an owner that’s serving a critical value role, i.e., they’re the face of the company, they’re the main salesperson, they’re the ones that answered all of the questions and dictate all of the operations, those are value minimizers. Having an employee organization that really covers those key things is important to the value of the company.
There’s a couple of reasons for this, but certainly one of them is that it gives you multiple opportunities for who you might sell your company to. If an owner has to replace themselves with somebody that has very specific skillsets, then the population of who they can sell their company to is going to be greatly minimized and the value therefore, is also going to be minimized.
There is quite a bit more that Bill and Jennifer discuss on this topic, so you’ll definitely want to listen to the full interview.
Value Driver #2: Customer Diversification
Jennifer Peek: The second one is what I’ll refer to as, customer diversification. There’s several different ways to think about this. The classic one is that customer A is 50% of my sales and it’s to a name, right? It’s that other company or that person, whatever the case may be. But the other things that business owners may want to consider when it comes to diversification is geography. Now, depending upon the company that you have, you may not be able to diversify outside of a certain geography because it’s a retail location or using your example, it’s a doctor where somebody needs to come visit them. But there are times where you can geographically diversify and that certainly has benefits to it.
Bill Black: That’s great tip. Great point. A lot of people are stuck with, maybe they get a huge client and that becomes a large part of their business and they think, “Well, it’s going to take all we can do just to keep up with orders from that particular customer.” And they might stop thinking about diversification, but boy, if they ever lose that big customer, they’re in a world of hurt.
Value Driver #3: Financial Readiness
Bill Black: Excellent. So employee structure and customer diversification. What’s number three?
Jennifer Peek: Number three is near and dear to my heart, right, is what I call, the cleanliness of the financial statement. Lots of small business owners, mid size business owners have a lot of personal expenses that they run through the business. There’s nothing at all wrong with that. That can be anything from the owner’s salary to their health insurance and maybe some travel, right? And they’re very, very common-
Jennifer Peek: … but the ability to separate those and to identify those as expenses that the business wouldn’t have going forward after a sale is the important. The other thing that’s important is that there’s just that we can see when the customers are being invoiced, we know where the revenue’s coming from, we know that the bank accounts are being reconciled. It’s something that a lot of business owners may or may not be aware of that they need to be on top of before they list their company.
Jennifer Peek: But one of the things that we’ve seen is having all of that information in order as they get to listing their company and getting into an offer stage just provides a huge amount of credibility with the buyer right out of the gate, right?