Surveys show that greater than 75% of companies have done nothing or very little in regards to succession planning. Business leaders who want to stand apart realize that successful companies have continuous value beyond the current leadership. Having a mindset that you are preparing a company for an eventual sale gets leadership to focus on improving the overall business.
Prospective buyers have many options in which to invest their cash. As such, company leadership should incorporate into their overall ongoing operating goals the following five key characteristics of continuous value:
- Good growth prospects
- Unique products or services with operational strengths
- Proven trends and profitability
- Good management team and high employee retention
- Repeat customers with low customer concentration
Continuous measureable operating benchmarks should specifically link to the above and be evaluated on at least a quarterly basis. This process will clearly show value adders and detractors within the business.
In addition to the above, leaders should view their business from a standpoint as to how the company would be perceived through a buyer’s due diligence perspective. If your time frame for a potential sale is five years or less, then performing your own internal due diligence as a means to prepare can uncover weaknesses that can be mitigated thereby strengthening the company’s overall value and minimizing negative price adjustments. This process should include utilizing a detailed due diligence list to determine areas that need more focus. From a broad perspective, leaders should:
- Examine financial records and internal financial controls
- Review internal and external agreements
- Document policies and procedures
- Mitigate employee, litigation or environmental issues
- Comply with applicable government and industry regulations
Business leaders who incorporate the above value-focus activities within their continuous operations will realize higher valuations for their company. A highly-skilled and experienced Harvest CFO Consultant will help business leaders to understand, evaluate and measure value drivers as well as value detractors. A CFO Consultant can also play a key leadership role to improve a company’s value drivers and mitigate or eliminate value detractors.
