Reflections

When you sell your business, the acquirer will apply both

A common misnomer we hear is, when I look to sell, the exit multiple someone pays me is whatever the market will bear at that time and I just can’t influence it.

You can influence it and you should have a plan today for doing so.

At a very simplified level, the acquirer will begin identifying what they want to pay for your business by applying Science. Meaning, they will look at your data, specifically your historical profitability and they will apply a multiple that the market is generally paying for companies like yours. The dollars they are willing to pay you starts here. This part you can only influence by ensuring you’re presenting a business with attractive profitability but you can’t influence the range of multiple the overall market is paying.

Then the Art enters their equation. And it’s this part of the acquirer’s valuation that you can greatly influence. This is where the acquirer will evaluate critical variables of your company such as;

-Quality of your financial tracking/reporting

-Visibility/predictability of ongoing growth

-Customer/vendor concentration

-Uniqueness of your product/service offering

-Organization/culture strength

There are potentially other variables the acquirer will consider specific to your industry but these are often the key ones in any acquisition. The acquirer will start with the Science they applied to identifying what they might pay, but during due diligence, they will evaluate these variables. Present a business with these variables impressing them, your multiple will move upward in the range. Present a business that is lacking in these variables, the exit multiple they apply will absolutely move downward.

Ask yourself – am I working a plan that has me managing and improving the Art side of our future exit multiple?

And keep in mind, the acquirer has two levers to play with in buying your business. The first is the overall valuation they are willing to pay. The second is how they want to structure paying you that valuation (i.e.: all cash or combination of cash and other tools at their disposal such as earnout, reinvestment, seller notes, etc). By influencing the Art variables in your future exit multiple, you’re not just influencing the valuation you’re influencing the potential to get a more favorable deal structure.

Use time as a friend in influencing the Art side of your future exit multiple. Doing so will have you on a stronger path to achieving your future euphoric exit event.

It's not the “doe” you might be thinking of

When you look to sell your business one day, an acquirer most likely will look closely at all or some of your team to consider who will be joining theirs. How they feel about your team will definitely impact the valuation they place on your business.

It’s important therefore to give consideration to your team today. Are you building a solid team and culture that will help excite an acquirer? As you consider this question of what you need from your team, think about what they need from you. They need DOE.

If you ask executives what employees care about most, they will respond with all employees care about is their compensation. Although this is a critical piece, it’s not the only critical piece you want to be managing effectively. It’s D.O.E. that your employees care about.

D = Dignity.

Employees want to be treated with dignity, they want to believe they are respected. Does leadership know their names? Does leadership know their backgrounds and their experience? Does leadership care to hear what they have to say? Does leadership show them respect as human beings?

O = Opportunity.

Most employees, not all certainly, but most want opportunity. Opportunity for ongoing employment, opportunity for development and advancement. Opportunity to become something more in your organization – do you provide some or all of your employees development and advancement opportunity?

E = Equity.

Employees want to feel they are treated equitably for their time, effort and results. Yes, this includes compensation and benefits and the general considerations that are being provided in the marketplace from other area employers.

You could argue that Equity is the most important of these 3 elements but the 3 come as a package. Deliver on one or two, and you’ll still be missing the boat in terms of employee motivation and retention over the long term.

So ask yourself, how is my company doing as it relates to meeting the DOE requirements? And you could think about this in terms of all your team or just parts of it, like your key managers or senior leadership team. Don’t take your team for granted. They may be a major factor in what your future acquirer is willing to offer you. Think about how you’re addressing DOE and in doing so, you could be accelerating the progress you’re looking for in terms of building your company worth.

One of the sharpest tools in your leadership toolbox is your ability to ask insightful questions

The best leaders carry with them daily an effective toolbox of skills. The one skill that is most likely going to help you build a business that will one day excite acquirers, is the skill of asking thought provoking questions. Thought provoking questions can help your team be strategic versus tactical, it can help them ensure you’re not confusing motion for progress and it can help facilitate productive dialog for business performance enhancements.

Let’s refresh your toolbox with some of the basic questions owners and CEO’s should be discussing with their teams to facilitate healthy dialog:

-     - Are we building the value, or worth, of our company? And this goes well beyond just growing your revenues and profits. Growing your company worth is an entirely different ball game.

-     - Do we truly know where we make profit in our company and what processes or equipment or systems are critical to enabling it?

-     - Do we know what our core competence is? This is knowing your special sauce that customers see value in and are willing to pay a premium to get it.

-     - Do we know what parts of our product or service portfolio are pulling up our company performance and what parts are pulling us down?

-     - When we might look to attract an investor or an acquirer, do we understand what company worth drivers will be important to them? In other words, when they come to kick our tires, where will they focus their attention?

-     - Could your company be disrupted by a step a competitor takes? Could your company take a step that could have you playing the role of a disrupter in your market?

Ask yourself whether your dialog with your team, especially your senior team, is tactical or strategic. Tactical questions are fine and needed but generally just help keep the tires on your car. It’s the strategic questions that will help you with game changing ideas.

Knowing could help you at time of future company sale

In last weeks posting, we threw out the question of whether your team could improve on some of the basic business fundamentals. This week, ask yourself, when is the last time we checked with a cross section of our customers or clients to simply identify where they have pain points in areas where we might be able to help them?

The best ideas for improving your business can come from within your four walls but more often, they will come from outside. You and your team have pain points in what you do each day so put on your customer glasses and see what theirs are. Asking could identify opportunities for where your team already has a product or service that your existing customer isn’t aware you have. Or, having a dialog with an existing or new customer, you could identify an opportunity for introducing a new product or service.

Right now you’re probably saying well, this is a pretty basic idea. Yes it is. But is your team regularly checking on customer pain points? If yes, great. If not, what a great and easy muscle to build that could be a gift to your company performance.

Building your company worth starts with the fundamentals, how are yours

When you look to sell your business one day, an acquirer will come in to kick your tires and they will look to see if your team can handle the basic business fundamentals. In working with clients, we often find fundamentals are lacking and it’s hurting performance.

Here are a few of the more common business fundamentals we see missing. Sit with your leadership team to ensure you have these covered:

-     - Customer retention isn’t being effectively monitored. Does your team regularly review retention and metrics by customer segment/geography?

-     - Win/Loss monitoring isn’t being effectively monitored. Does your team regularly review your wins and losses on customer activity? And this should be monitored for existing versus new customers as the win/loss metric will be different.

-     - Lead management is weak. Does your team regularly monitor number of leads received, response time to each lead, outcome of each lead and ultimately moving a lead to becoming a customer (which links to the win/loss rate)?

-     - Customer phone or email queries aren’t effectively being managed. Does your team monitor the customer experience related to customers (existing or new) trying to phone or email your team? How fast are phones being answered or emails replied to, how many buttons does a customer have to push to reach a live person, is your team responding effectively and doing what they committed to do, etc.? Don’t assume your team is managing these at a world class level.

These are just a few examples of the basics that we find are often missed. Fixing them can directly or indirectly positively enable your company and even help build company worth. Don’t commit assumicide with the basics.

There are many variables to factor into your decision, here are a few often missed

When you start thinking about what the timing should be for selling your company, there are many variables to factor in. Too often, there are key variables missed and it definitely negatively impacts the deal process or the deal valuation.

1.   - Areally bad day is when you attract an acquirer to consider buying your company and while they are doing their due diligence, your monthly revenue (and/or profit) is going flat or even declining versus recent prior periods. Now the acquirer’s due diligence has to probe what’s happening and why it’s not continuing an upward trend. This variable should be factored into your exit timing decision and you want to exit when you are forecasting a solid growth period during the acquirer’s due diligence period.

2.  - During the due diligence, the acquirer points out you have a key customer or supplier contract soon coming up for renewal and the renewal is key to the ongoing business. This could be viewed by the acquirer as a meaningful risk to them and now the deal they offered is being modified to protect them from the potential risk. Build a calendar of key contracts and their renewal dates so you can see how their timing might impact your exit timing.

3.  - You are ready to sell but your business has one or more key roles in the company either open and/or with a key employee about to retire. You’ve read here in prior postings that an acquirer many times is investing more in the jockey than the horse. Your team is the jockey that the acquirer will be adopting, and during their due diligence they will look to see the strength and stability of that team. Trying to exit while you have key open positions unfilled or key personnel soon to retire could signal potential risk to the acquirer. It may not reduce their desire to acquire your company, but it may impact the purchase price or deal structure they offer.

Here is the bottom line. There are mutliple variables for deciding when to sell your company. Too often the driving variable is the Seller simply wants to move on and that’s fine. But other variables must be factored in. When preparing your company for a future sale, you want to minimize or eliminate risks that the acquire will see during their due diligence. The more risks an acquirer believes there are in purchasing your business, the lower the purchase price and/or the worse the deal structure will be. Begin thinking about ALL the variables that should go into your decision as to when is the right time to sell your company. Doing so could mean the difference between a euphoric or less than euphoric exit.

Seems like a silly question, but it’s not and needs to be clear before selling your company

Ask yourself – who owns creating the demand for my brand (and my product or service)?

For businesses that sell primarily online such as BtoC (business to consumer), your salesperson is in essence your website so it’s your website and social media investment/activity that is trying to create demand for your brand. But for more business to business type sales where face to face selling is required, we often come across private businesses that aren’t effectively creating demand. We see these common scenarios negatively impacting the demand creation for a brand:

-    -  You sell thru a distributor or middleman. The issue is that the distributors believe your company should be creating the demand which they will fulfill. You believe they are responsible for creating the demand and fulfilling it and your team supports them but they believe you are responsible for building the demand which they will then happily fulfill. Well, which is it?

-     - You have a sales or account management team that is focused solely on working with your distributor or other sales partners but not focused on themselves getting out to create demand. In this scenario, you believe you have sales resources on your team building demand for your product when in fact they are not. If you delve in to how they spend their day, they are focused on the middlemen, not creating awareness for your brand with the end customer.

-     - Your team is out making sales calls on the end customer/consumer but each member of your salesteam has their own message they are delivering.  The good news is you have resources out creating demand but the bad news is they aren’t consistent in how they are doing this. This means your brand isn’t being consistently messaged in the market and could be causing confusion for the end customer. A good brand has consistent messaging in the market, not inconsistent messaging because each salesperson has a different belief on what your company message should be. Meet with your salesteam and find out what messaging they are delivering – is it what you want them saying, is it consistent, is it effective?

-     - You have a salesteam, but ask yourself out of a 40 hour work week, how much time are they actually selling, creating new demand for your brand. We often review this with new clients and very often we find that maybe a 1/3 of a salesperson’s time is spent selling. The balance of time is in meetings, following up on existing customer orders and questions, doing paperwork, etc. but not actually having quality sales time to create new demand. Meet with your salesteam and make sure you truly know how much time they have available each week for actual selling.

The bottom line here is part of exciting a future acquirer, who can then excite you with their purchase price and deal structure offer, is to ensure you have clarity around who owns creating demand for your brand and good proof it’s actually getting done. Don’t assume it’s being done. Don’t assume it’s being done optimally. Now is the time to sit with your team and review this because as owner and/or CEO, brand ownership at your company starts with you.

Are you realizing the benefit that should be gained from having an employee bonus plan

Selling your company one day will have a third party probing all aspects of your business. If they plan to assimilate your team, they will take a close look at your compensation plans and will specifically inquire about the philosophy and structure of any bonus plans you have. One question they will ask…is your bonus plan delivering the results you intended?

Let’s start with what an employee bonus plan is designed to do. Its purpose is to influence and reward behavior. Ask yourself, are the bonus plans we have in place for members of our team driving the desired behaviors? If yes, great. If no, then although it’s nice that you’re paying your team additional compensation, you’re not benefitting from the payments (other than a feeling of goodwill) and certainly not using your bonus plan as a tool to help build your company worth.

An effective bonus plan contains the target or targets (the fewer the better) you want your team to strive toward and the associated behaviors needed to achieve the target(s). And an effective bonus plan is one that employees can easily understand how it’s designed, calculated and reported on a regular basis.

We often recommend the following:

Senior team bonus – these are often the direct reports to the CEO, leading the functional departments. This plan is often set on achieving Revenue, Margin and/ or Net Income and also contains a small number of personal goals for each senior leader. This bonus plan is annual in nature as you want these key leaders thinking longer term and not just month to month.

Sales team – these teams are often commission based so generally no additional bonus plan is required. The right commission plan should be motivating to your team and driving the right sales behaviors that align with your strategic sales plan.

Rank and file – these are your line managers and all employees reporting to them, so it’s the balance of your workforce. This bonus plan is set to the company achieving a financial target and as well a metric related to customer satisfaction (on-time delivery/fulfillment, quality, etc). This bonus plan is more often quarterly to every 6 months in payout as these members of your team are critical more to the short term performance of your business.

If you’re investing in bonus dollars today, great. But if you or someone has to act as Solomon in deciding payouts and employees have little to no idea what their bonus payouts are based on, then you’re missing a wonderful company worth building opportunity. Give us a call and we can help you decide what type of bonus plan to get in place and can show you samples that may quickly fill your need.

Knowing the difference can mean millions of dollars one day to you

When you look to sell your business one day, the acquirer will look at several factors in deciding what dollar amount and what deal structure to offer you. One such factor will be what your company’s future growth trajectory is. And for this, it’s not the “what” they will focus on, it’s the “how”.

In reading many strategic plans over the years, a common issue arises. The plans include the numbers, such as the revenue, margins and cash flow targets that are desired and these are the “what”. But the key ingredient too often missing is the “how”. How will the What be achieved.

You may very well have a business with a bright growth trajectory remaining for an acquirer to enjoy. But you don’t want to just show them a hockey stick shaped financial projection without the specifics of how your team will deliver the results. What markets you can expand into, what new products or services you could add for existing or new customers or specific changes you could make in your product or service fulfilment model that could greatly enhance your margins. The What without the How is rather meaningless in the eyes of most acquirers.

Look at the strategic plan you currently have your team working. Is it equally rich with the What and the How? If yes, great. If not, now is the time to address this so you use time as a friend in your planning. And if your answer is no, let’s get addressing this now so you don’t miss out on meaningful valuation dollars and an attractive deal structure one day. Your future euphoric exit is out there…with the right planning it can be a reality and not a pipe dream.

What does it look like to NOT be ready to sell your company

We are helping a client conduct a bolt-on acquisition. The seller decided to sell their company but is exhibiting all the signs of being ill-prepared. And the seller’s lack of preparation is causing them unnecessary stress, causing a deal structure that the Seller isn’t happy with but has to accept and is now putting the transaction in jeopardy.

Here are classic signs of being ill-prepared:

-     - Not thinking through what internal resources will be needed to support a normal due diligence. This causes information to flow slowly to the buyer and in fragment pieces that make it difficult for the acquirer to review

-     - Sending information to the acquirer but not thoroughly reviewing it prior to ensure it doesn’t conflict with other data or information provided. Example: operational data conflicting with financial data

-     - Not having effective documentation of key business processes and scrambling to craft it to meet due diligence requirements

-     - Not being able to provide non-operational data such as normal KPIs that should have been tracked to show historical performance – in essence conveying to the acquirer that there aren’t effective KPIs in place to manage the business

-     - Not able to share a strategic plan of how the business can continue to grow – showing a lack of general planning disciplines

-     - Seller not engaging with an M&A lawyer but preferring to use their long time business lawyer. Lack of M&A experience by seller counsel is causing delays and unproductive dialog with the acquirer’s seasoned M&A counsel – causing both acquirer and seller to incur unnecessary legal fees

-     - Seller that is so engaged in the day to day running of their business they have little time to support the sale process.

You might laugh as you read this but unfortunately this happens more than you’d think. Conduct a due diligence dress rehearsal long before trying to sell your company. You’ll do yourself a great service by avoiding these common mistakes and increase your chances of having a smooth, euphoric exit event.

They have one critical element in common

To get the most out of Artificial Intelligence, you need to frame the right questions. To get the most out of effective exit planning, you need to frame the right questions. Poor questions will lead to poor results in both cases.

Ask yourself these questions –

-     - Are me and my team good at asking and discussing insightful strategic questions about our company and market? Or are we heavily tactical in our dialog?

-     - When I’m with others, do I regularly ask insightful and thought provoking strategic questions? Or do I need others to ask the insightful questions because I’m more comfortable with tactical matters?

What is assumed here is that you have a clear understanding of the difference between tactical and strategic thinking. Think of tactical as the HOW. Think of strategic as the WHY and WHAT.

The strategic, or why and what, is discussing longer term what do you want to accomplish, how will you measure it and why are you wanting to accomplish it, what’s the value to your business. The tactical, or the how, is discussing how you’re going to accomplish something. Tactical is generally more day to day or week to week and strategic tends to be month and year(s) oriented.

Owners and CEOs who confidently and competently know this difference and regularly brainstorm insightful strategic questions with their team are generally those that create greater company worth over the long term. Those who are more tactical in their thinking and discussions, generally miss opportunities to grow their company worth.

Use time as a friend in building this muscle of strategic level thinking. It’s your path to building company worth and getting yourself to a future euphoric exit.

Preparing yourself and your company to one day deliver a euphoric exit requires regular monitoring of the most important questions you should be addressing. Let’s cut right to the chase and review what they are:

-      - What do I want my personal legacy to be in this world?

-      - Is my business my legacy or is it a means to achieving my legacy?

-      - What do I want my business to achieve for me one day – how can my business make me euphoric when the day comes I exit it?

-       - Do I have a strategic plan for moving my business from where it is today to where I want it to be in order to make me euphoric one day?

-       - Do I know what I want to do each day when the time comes I no longer have my business?

-      - Am I building a lifestyle or legacy business? (the difference will matter to an acquirer)

-      - Do I have the right people on the bus with me – right people (their experience and drive) in the right roles with the right focus?

-          Am I building a business that has a special sauce, a capability that makes us unique versus the competition?

Answering these questions isn’t a nice to have, they are a must have if you truly want to one day see your business getting you to a euphoric state. Use time as a friend to address each of these and by doing so, you’ll be giving your future self a wonderful future gift.

Just because a friend got a great multiple doesn’t mean you will

When the day comes you look to sell your business, the deal you get will be custom for your company. Don’t fall into the trap of believing that what a friend received for their company will be what you get.

It’s common when we meet company owners and CEO’s to hear that a friend they know with a company in their market space recently sold and “got a great deal”. They then start to assume that the deal their friend got will be the one they will get. Most time, it’s not.

It’s fine to use other transactions in your market space as a reference point but not as a definitive. No two businesses are alike, therefore no two transactions will be alike. Your company will be unique in key areas such as;

-          - Scale of revenue and profit

-          - Quality of the sources of revenue and profit

-          - Customer or supplier concentration

-          - Visibility to future growth – predictability of that growth

-          - Infrastructure to scale further

-          - Intellectual property or a special sauce that provides a competitive advantage

-          - Quality of the organization and team (no reliance on selling ownership)

Begin preparing today to ensure this list above is getting quality attention and improvement by your team. Focus in these areas and you will greatly increase the likelihood of one day receiving a strong offer from a third party. But not addressing these areas and just hoping to get what a friend said they got is a surefire way to a disappointing exit.

Did you grow your company worth in the first half of the year

When you look to sell your company one day, an acquirer is going to look at your business in all aspects but very closely in certain aspects. Do you know which aspects they are going to analyze the most with your company?

You want to know today what these aspects are, or as we call them, company worth drivers. These are going to be what drives up or down the exit multiple the acquirer applies to your company. Deliver on the drivers that the acquirer will be looking most closely at and you will likely achieve your euphoric exit event.

Here is a template (Company Worth Template here) to help you think about the company worth drivers for your company. This template contains three pages:

-     - A listing of the most common company worth drivers. Not all of these will apply to your company, but you want to identify which ones will. And there maybe some unique to your type of business or industry, but these will get your wheels turning.

-     - A sample showing what the template for your company could look like, meaning once you’ve identified the company worth drivers for your company you could track them on this type of template.

Give us a call (949.874.0787) if you want help thinking through determining the company worth drivers for your company. Identifying and working them today will be a great gift to your future self at time of exit.

Landscapes change and can impact your company worth

When you look to sell your business one day, the acquirer will most likely have a very good understanding of your marketplace. They will know which parts of your market are becoming more commoditized versus where customers are still willing to pay for value. They’ll even have an idea of your competitive landscape and where you fit within it. Are you monitoring these things?

Knowing your market landscape and where your company plays within it can be of enormous help to you as an owner and CEO. It can help you make many strategic decisions and it will help you know where to focus in building the worth of your company.

What will your market landscape help you understand:

-     - How large your served market is and which parts are shrinking, which parts are growing – this will help you direct your resources to the right market segments at the right times.

-     - What the various subsectors are for your overall market – this will help you learn to understand the nuances of each subsector so you can ensure your messaging and portfolio meet the needs of each that you want to serve. It will also help you know which subsectors you can move toward when you’ve tapped the segments you’ve been serving.

-     - What the Good, Better and Best markets are – every industry has customers that just want the Good product or service, others that like to go upscale to something Better and other customers they only want the Best. Which do you play in and do you understand the unique needs of each.

-     - Where the value is – every industry evolves and what today is viewed as high value to the customer, over time becomes a commodity. An example would be looking back to the 1980’s and 1990’s, players making all types of computer hardware realized high company valuations as customers were willing to pay a premium to get this hardware. Then come the 2000’s, the value shifted to the software. Computer software became where the value was appreciated by the customers and hardware became more of a commodity. The value of the hardware companies decreased and the value of software companies increased. And now we’re seeing another shift, the value of software companies is decreasing as a result of the advent of AI. Are you monitoring this value evolution in your market.

-     - Where you stack up versus competition – knowing this will help you see where you’re unique in the market versus where you look like everyone else. Knowing your competitive positioning can help in building and protecting your competitive moat.

Developing your market landscape isn’t just a nice to have. It’s a valuable strategic tool that can help you in making many strategic decisions about your business. Our job as owners and CEOs is to build company worth. Leverage the market landscape tool in building yours.

Knowing what your focus should be will grow your company worth

Was doing an early onboarding of a new client and the following question arose – what is your job as CEO? This client said he works hard every day, puts in lots of hours with his team and customers but agreed it is worthwhile to challenge whether he’s spending his days most effectively as we now work on building his plan to a euphoric future exit.

The answer to the question of what a CEO’s job is, is very straightforward – your job as a CEO is to:

1. Build and protect the brand of your company –your brand is your promise to your customers. When they hear your brand, it conjures up a perception. Ask yourself, what do I do daily/weekly/monthly to ensure that me and my team are effectively building and protecting my brand in the marketplace so that when existing and potential targets hear our brand name, it conjures up a positive perception.

2. Build and protect your culture – culture eats strategy, it can kill a brand and it certainly will destroy company worth. Ask yourself, what do I do daily/weekly/monthly to ensure that my organization culture is truly something to be proud of. Not just in some departments but throughout the organization?

3.)     Deliver results – good CEO’s know the difference between motion and progress. Ask yourself – do I have a good strategy for growing my business and on a daily/weekly/monthly basis am I measuring the right targets and therefore knowing whether we are making progress or not?

There should be no mystery to what a CEO’s role is. Revisit your role and focus and ensure it’s growing company worth.

Answering these questions can help you protect, even build company worth

When you look to sell your company one day, any acquirer coming to kick the tires will most likely bring a strong awareness of your market dynamics. These dynamics could impact the purchase price they will be willing to pay you. It’s for this reason that you would be best served to regularly monitor your external market dynamics and have an external situational awareness of how to navigate the findings. Here are good standard questions for monitoring your external situational awareness:

- How big is the market we serve? What are the sub-segments and what is the growth rate of each?

- Where could we be disrupted by an existing or new competitor?

- Is there a part of the market where we could be a disruptor?

- Have our customer’s decision drivers changed? How might they change going forward?

- Are there any changes happening or potentially going to happen to our supply chain?

- Are there technologies currently or potentially going to change our industry and our business?

- What is our competitive landscape? Are we facing new competitors and if so, what changes might they be bringing to our industry?

- Are there or could there be upcoming Legislation changes that could help/hurt our business?

- Will the economy of the markets we serve be an enabler or barrier to achieving our growth targets

- Is investment money flowing in out of our industry from strategic players or private equity or venture capital? Do we know the reasons behind the investment dollars entering or leaving our market?

- What changes are happening or could begin to happen related to attracting and retaining needed labor?

Too often leadership teams only possess an internal situational awareness, what’s going on inside their company four walls But in effective strategic thinking and planning, these are basic questions you’ll want to explore with your team. The answers could provide insights on steps you could take to protect your business and even grow it. Meet with your leadership team and start building the muscle of discussing questions such as these. These are questions you’ll want to regularly have on your radar screen and not just once a year.

Are you focused in the right area when screening for talent

When you look to sell your company one day, the acquirer is very likely going to size up your team to see what talent they will be adding to theirs. This makes the decision of adding key personnel to your team, especially senior level talent, not only important today but also important to your future exit.

Too often, many executives aren’t good at screening for this needed talent. The issue we see is that executives miss a key element when conducting an interview. They miss whether the candidate in front of them would be the strongest at achieving the deliverables needed to be achieved by this role.

Executives will interview for education, work experience, cultural fit and these are important. But, what you want to be most clear on is in the first 90 days, 6 months, 1 year, 2 years – what are the specific deliverables you will need from this position. Once you are clear on targeted deliverables, and be as tangible as possible in identifying them, then craft your interview questions.

You could interview candidates that meet various criteria within your job description for the role. But that’s not to say they will be the right candidate for achieving the deliverables you’ve set. Very often job descriptions are broad and vague, get specific as it relates to deliverables.

Starting today, when you are screening for key talent to join your team, supplement your interviewing by identifying the deliverables for the role. Once you are clear on these, then set your interview questions to look for the experience and skills that directly relate to your desired deliverables. Taking this step will have you conducting better screening and could have you on a better path for adding talent than can help you accelerate building the worth of your business.

Do your investment decisions today bridge to your company worth

A good sixth sense to develop is knowing when an investment decision you’re facing is one that could impact the future sale of your company and which ones won’t.

In making an investment decision in new hires, systems, equipment or capacity, there are multiple lenses that you will want to look through in evaluating the investment. One such lens is asking yourself, how might this investment impact my company worth?

The math to do this is simple. Let’s say you are thinking about hiring a new Marketing Director and the all in cost could be $225,000 per year. So if you’re EBITDA is running annually at the rate of $5,000,000, then when you hire this person that EBITDA drops to 5,000,000 - $250,000 or $4,750,000.

Now ask yourself, what do I estimate the exit multiple might be that an acquirer could apply to my business if I were selling it today. Let’s say that number is a 7x exit multiple. The investment decision I’m considering isn’t going to cost my business $250,000, it’s going to cost me $250,000 x 7 or $1,750,000 of company woth.

Looking through this lens, you next ask yourself – will this Marketing Director create new company worth (i.e.: by directly or indirectly accelerating our sales or margin growth) equal to or greater than $1,750,000? If the answer is a resounding yes, then just applying this investment decision lens would support the decision. If the answer is no or my confidence isn’t high, then this lens should give you pause.

You can apply this thinking to any investment, not just people. Some investments are minor in magnitude and don’t need this lens applied. But you want a sixth sense for which investments you should be applying this lens.

Investing in your business can be a great way to build your company worth. Start thinking about the investments in this way. Yes, there are multiple lenses to look through when making an investment decision. But this lens is an important one to add to your decision mix.

Knowing will help you focus your investments to build company worth

As you are thinking about building your company to be sold one day to deliver you a euphoric exit event, a gift to give yourself today is knowing what your company’s primary strategic growth need is for at least the near term. This may change over time, but you want to be thinking strategically on a regular basis about where to focus your growth energies.

There are only 4 ways to grow a company and the MPPH model helps you think about it:

• Market: Is your market, your sandbox, that your company plays in today large enough to meet your growth requirements? If yes, then Market isn’t a growth barrier for you. If no, then it’s an opportunity to think about submarkets or adjacent markets to enable growth.
• Product: Is your product or service portfolio broad and deep enough to meet your customer/client needs? For some businesses, their growth is limited by the limits of their offering so they need to expand it and bring more solutions to their existing customers.
• Presence: Does your company brand and market coverage give you enough presence, or access to your target customers and clients? Do users of your product or service know your company even exists? If your target customers and clients already know to call you then Presence is already strong for you. But if there are large parts of the market where there are buyers for your offering and they don’t know you exist, then Presence might be your strategic growth opportunity.
• Hit: What is your hit (or win) rate and is it above, below or at your industry norms? Leadership teams often focus on finding new leads but they are layering new leads on to a bad sales process…meaning, if they fixed their follow up and sales process to improve their hit rate, they might see meaningful growth from leads they are already getting.

Don’t play whack-a-mole with your company’s growth strategy. Know which aspects of the MPPH model need your focus. Knowing this and focusing could accelerate your building of company worth.