Julie was hiring for a key position in her company, one that would allow her to pull back from the day to day operations so that she could focus on the strategy, and ultimately exit the company.
With that piece of the succession plan in place, the next step is pretty straightforward (and you know I like straightforward).
Rinse and Repeat.
Do the same for the rest of the departments in the company:
• Write job descriptions
• Create and implement backups
• Identify cross-training required for employees to prepare them for the position that you’ve identified in their path. Or the hiring that may be required, which should be done for every employee.
Another thing that should be taken into account from a financial stand point is, be sure to include these costs in the budget! After all, there’s no point in doing all this work if there’s no budget to pay for it.
As you budget and forecast, be sure to include:
• Developing talent
Yes, this costs money, but it’s an investment in your company, and your people, and one that your company will earn a return on over time.
You are preparing your company for disasters that may or may not happen, but you have a plan, which will allow you to continue operations in the event that one of those unfortunate situations occurs. This will ultimately increase the value of your company because the ability to continue operations when your competitors can’t is seen as a strategic advantage.
When you’re prepared, your employees are confident, empowered, and efficient.
Efficiency is what drives productivity gains, which in turn drives profitability. Your numbers will tell the real story, and your company value will increase.
The ultimate goal of all of this planning that we’re talking about is to secure a higher value upon you exiting your business.
So, what are the variables?
1. EBITDA – Earnings Before Interest Taxes, Depreciation and Amortization, which is otherwise known as Operational Profitability
2. Multiple/Multiplier – This is largely determined by capital markets. It’s kind of outside of your control, but you have some influence in what that multiple may be. Multiples are usually a range of numbers and vary by industry, and will be influenced by:
• Economic environment that you’re operating in/industry
• Terms of the deal, whatever they may be
• Cost of capital
• Ownership structure of your business
• Exit preference, if you’re selling inside the company, or outside of the company and whom you choose
• Company’s performance vs. the rest of the industry
If you have done your homework properly; meaning, you have a succession plan, you have a budget, and you have contingency plans in place, your company will enjoy the gains that your competitors won’t.
It’s time to get ahead of the pack.
Give your company increased value. Get a better bottom line now and potentially a better multiple when you exit your business.
Be like Julie.
And take the steps outlined in this series of emails to unlock maximum value from your business now, and when you exit.
If you need help taking these steps, I’m here for you. Give me a call.