Five (5) Truisms About Small Businesses that Hinder Growth and Exit Goals (and how to overcome them)   

Many successful business owners try to answer the question ‘how do I get my company to the next level?’  Many owners exhaust themselves and their resources each year, pushing their businesses to perform at higher and higher levels.  However, there are a number of ‘truisms’ about small business that, once understood and accepted can make the growth (and transition) process more effective.  The five (5) truisms listed below are symptoms that face each small business that is trying to grow and transition, at some future point in time, to a new owner.  This newsletter is written for those owners who are trying to grow so that they can reap certain benefits that may come when it is time for an exit.

Truism #1:  Nothing happens in a privately-held business until the owner(s) decide it will happen 

Privately-held businesses that are run by the founder / owner are driven by that owner’s goals and ambitions.  And, what you slice away all of the strategy and other decision-making in a business, the reality is that nothing truly happens until the owner decides that it will.  A privately-held business will not grow until an owner decides that it will happen.  The same business will not begin a transition or exit plan until the owner feels that it is needed.

As we’ll see in the next few truisms, many owners are not motivated to grow a business, increase the value, or prepare for a transition because other motives are driving their decisions.  Therefore, understanding our first truism about an owner needed to ‘authorize’ any action set an important foundation.

Truism #2:  Most businesses are run for the lifestyle of the owner

Of the many challenges that face growing the value of a business, the largest one is the owner’s motivation to act.  And, in this regard, it is helpful to point out that most businesses are run for that owner’s lifestyle.  Therefore, if an owner is happy with their lifestyle today, they may be hard-pressed to take risks to grow the business which may impede on their lifestyle.

While there are many risks in owning a privately-held business, the reality is that the risks are worth it to most owners because the business provides the owner’s lifestyle.  To that owner, the alternative of going back to work for someone else is so offensive that it is hardly an option at all.  Therefore, to this owner, taking risks that possibly compromise their lifestyle is often not worth moving forward with – even if all of the logic in the world points to reasons why a business should grow and increase its value.  In short, growth means extra work and risk and those are often two (2) words that do not resonate with what an owner values most.
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How much did your home increase in value last year?  Depending on where you live, it may have gone up by 5 – 10% or more.

How much did your stock portfolio increase over the last 12 months? By way of a benchmark, The Dow Jones Industrial Average has increased by around 13% in the last year. Did your portfolio do as well?

Now consider what portion of your wealth is tied to the stock or housing market, and compare that to the equity you have tied up in your business. If you’re like most owners, the majority of your wealth is tied up in your company. Increasing the value of your largest asset can have a much faster impact on your overall financial picture than a bump in the stock market or the value of your home.

Let us introduce you to a statistically proven way to increase the value of your company by as much as 71%.  Through an analysis of 6,955 businesses, we’ve discovered that companies that achieve a Sellability Score of 80+ out of a possible 100 receive offers to buy their business that are 71% higher than what the average company receives.

How long would it take your stock portfolio or home to go up by 71%? Years – maybe even decades. Get your Sellability Score now and you will be able to track your overall score along with your performance on the eight key drivers of Sellability. Like a pilot working his instrument panel, you can quickly zero in on which of the eight drivers is dragging down your value the most and then take corrective action.

Your overall Sellability Score is derived from your performance on the eight attributes that drive the value of your company:

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For many, January is a time of rebirth and resolutions. It’s a month to reflect on last year’s achievements and to set goals for the year ahead.

Some people will set personal goals like losing weight or quitting a nasty habit, and most company owners will set business goals that focus on hitting certain revenue or profit milestones. But if your goal is to own a more valuable business in 2014, you may want to make one of the following New Year’s resolutions:

• Take a two-week vacation without checking in with the office. When you return, you’ll see how well your company performed and where you need to make a key hire or create a new system.
•  Write down at least one process per month. You know you need to document your systems, but you may be overwhelmed by the task of taking what’s inside your head and putting it down in writing for others to follow. Resolve to document one system a month and by the end of the year you’ll own a more sellable company.
•  Offload at least one customer relationship. If you’re like most business owners, you’re still your company’s best salesperson, but this can be a liability in the eyes of an acquirer, which is why you should wean your customers off relying on you as their point person. By the time you sell, none of your key customers should think of you as their relationship manager.
•  Cultivate a new relationship with a new supplier. Having a “go to” group of suppliers is great, but an over-reliance on one or two suppliers can create a liability for your business. By spreading some of your business to other suppliers, you keep your best suppliers hungry and you can make a case to an acquirer that you have other sources of supply for your critical inputs.

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