Selling your business one day will absolutely be affected by your company culture
In prior blogs, we’ve referenced that your future company acquirer will be placing a big bet on the jockey (your team) even more than the horse (your products/services). Your future company acquirer will be drawn to your company because of the market you serve, your company financial performance and certainly it’ future growth potential. But in evaluating these things, they will also determine if they believe your team (the jockey) has the experience and the culture to enable the future. Confidence in your team and culture will build the worth of your company in their eyes. Concerns about your team and culture readiness to enable growth will very much impact the valuation the acquirer places on your business.
We often find in working with new clients that certainly their business strategy can benefit from some enhancement. But more often their team and culture are what need the greatest degree of attention. A good strategy is great but unless you have a great team and culture to implement it, that strategy will most likely take you nowhere.
To help you think about the strength of your jockey (team and culture), here are questions to consider:
- Are there key people on your team that have the experience to take your team to another level….or do you have key people that have helped you get where your company is today but don’t bring the experience or capabilities to get the company where it needs to go next?
- Would an acquirer look at your leadership team and see people with good backgrounds and pedigrees (education levels, job experience) that fit very well the job they are doing? Or would they see people that really haven’t been well prepared for what they are doing which means they may inhibit the company in the future?
- Does your company track employee attrition by department and is the attrition within industry norms? Too high an attrition could be a red flag for an acquirer that something is amiss with your culture…and quite frankly an attrition that is too low could also raise a question or two.
- Do you and your key managers hold people equally accountable for their performance across the board….or do some department leads hold their people to one level of accountability while others do not? Your star employees will see this and they won’t look to shine any more…and your underperformers will see this and know it’s ok because the company really doesn’t address this across the organization.
- When the future acquirer looks at your performance through the lens of your financials and KPI’s, will they see a good history of hitting set targets? This is often the first place an acquirer will look during due diligence – teams that regularly hit set targets can be a positive indicator of a good culture.
- Do you regularly develop and promote from within your business in filling open supervisory or managerial level jobs? Companies with good cultures are more often than not promoting from within, certainly not on all needs but on many.
- Are your employees, especially key ones, informed of your company direction and annual strategic initiatives and know how their jobs are connected to supporting company direction? Companies with good cultures have employees connected to the strategic direction of the company in some meaningful way.
- Does your strategic thinking and planning include soliciting input from employees – soliciting input from a broad range of stakeholders, including employees, is often a sign of a good culture.
There are many more questions to consider when evaluating your team and culture. Too often company owners/CEO’s believe the future acquirer will focus only on company financial results in setting their purchase price offer. This is a myth. Yes, financials will be important but equally so will be your team and culture. Use time as a friend to ensure you’re building and leading a team and culture that will help you one day achieve your euphoric exit event.