Selling your company one day for a euphoric outcome means bringing more simplicity to it today
Where there is complexity in your company, there is generally cost. Where there is simplicity, there is generally lower cost.
Ask yourself – have we built any complexity into our business?
Sit with your P&L, Balance Sheet and Cash Flow Statement and ask yourself these questions:
- - How broad and deep is our product offering?
o Do we have older products/services in your portfolio that we’re incurring cost to maintain but the market is no longer rewarding us for holding on to them?
o Do we maintain a number of products that we bring to the market under various brand or tradenames and the burden of the sales/marketing expense, packaging cost, working capital tie up due to inventory are not being rewarded by the market?
- - Do we serve a large number of small customers that consume sales/marketing/support expense but we’re not getting the reward of good profit from each?
- - Do we maintain a larger office or production footprint that is bringing unnecessary cost to maintain? Is our use of the space efficient or have we grown in to a larger space than we really need?
- - Do we serve multiple end customer segments and/or geographic segments while incurring sales/marketing/support expense but not reaping the desired profit?
- - Do we have an organization structure that is complex in terms of who reports to who, overlapping areas of responsibility between departments, inefficient decision making, all of which bring costs to our business?
- - Do we monitor our asset utilization (trucks, vehicles, equipment) to ensure we’re not incurring the costs to own and maintain them without achieving the targeted benefit?
As you think about the strategies your team should employ for the upcoming new year, besides thinking about how to grow, think about whether you have financial opportunity to simplify. A common strategy we introduce with clients is to introduce simplicity to their business and time and time again they realize financial benefit.
Don’t wait to sell your company one day only to see the value the acquirer places on your business negatively impacted because of unnecessary complexity they could see in your business. Reducing complexity today will help your financials in the near term and you will also be rewarded at time of exit with a stronger acquirer valuation.
