Defining an organization’s culture as a “Family” culture reflects tolerance to subpar performance. Rather focus on those characteristics of a “family” culture that you want.
I believe that being “Sell Ready” is the only way for business owners to maximize value on exit, and all companies need to be “Sell Ready” even if their owners don’t intend to sell because life is Uncertain.
There is a common belief that we control our lives and destiny; however, if we are objective, we can see that luck is an important determinant, and life is Uncertain. Recently, the uncertainty of life was brought home to me twice. A high school friend of mine, Marty Davis, owned a scrap metal business, and we had recently reconnected after 35 years through Facebook. We planned to get together soon as he was now living in North Carolina. A week later, I learned that a palette of copper had fallen off a forklift truck, killing Marty instantly.
A month ago, a member of my Vistage group, Mike, an ex-marine and fit in his 40s, pulled over on I-75, not feeling well. He suffered a major heart attack and was dead by nightfall.
Life is Uncertain, but are we ready for it? In most cases not, even Prince wasn’t, dying with no will, albeit a plethora of advisors surrounded him. However, Uncertainty is more than death; it includes Disability, Divorce, Partner Disputes, Running out of Energy, etc. There is no excuse for not being preparing for Uncertainty! Also, the disregard it shows to your family and employees is undoubtedly not the legacy one wishes to leave. If you are “Sell Ready,” it doesn’t matter in what form Uncertainty arrives, you will be positioned to survive.
So what is Sell Ready? I define Sell Ready as those companies that realize a price higher than their value. As Warren Buffett said, “Price is what you pay, Value is what you get” so for a seller I take that to mean, Price is what you get, and Value is what you give up, i.e. in 2008 at the height of the crises, Ford debt was selling for 35 cents on the dollar – price definitely less than value. On the other hand, HP’s acquisition of Autonomy for $11.1 billion, 79% premium over market price – price exceeding value. If you are Sell Ready, you want to be like the Autonomy shareholders.
I will expand on “Sell Ready” and what that means in future posts, what it is, how to be “Sell Ready,” and the benefits. Stay Tuned.
© 2016 Marc Borrelli All Rights Reserved
Knowing the profit of your core customers is key to building a growth model. Many companies have identified core customers that are generating a sub-optimal profit and so they cannot realize the profits they seek. Identifying the correct core customer allows you to generate profits and often operate in “Blue Ocean.”
The European Super League collapsed within days of launch due to hubris and the founder forgetting the key parts of their business model, value creation, sales, and value delivery. The collapse might bring a high price.
Many business owners want to sell at the top of the market. However, market timing is tough. Is this the best strategy? Probably not.
Working with many companies looking to grow, I am always surprised how many have not built a financial model that drives growth. I have mentioned before a financial model that drives growth? Here I am basing on Jim Collin's Profit/X, which he laid out in Good to...
As we emerge from COVID, the current employment environment makes me think of a surfing concept: “Being Caught Inside When a Big Set Comes Through.” Basically, the phrase refers to when you paddle like crazy to escape the crash of one wave, only to find that the next wave in the set is even bigger—and you’re exhausted. 2020 was the first wave, leaving us tired and low. But looking forward, there are major challenges looming on the horizon as business picks up in 2021. You are already asking a lot of your employees, who are working flat out and dealing with stress until you are able to hire more. But everyone is looking for employees right now, and hiring and retention for your organization is growing more difficult.
“Why don’t they use common sense?!” You may have said this phrase yourself, or heard it with your managers, when discussing an employee’s actions. However, the frustrated appeal to “common sense” doesn’t actually make any meaningful change in your organization. We all make decisions based on the information we have and the guides we have to use. So if the wrong decisions are being made in your organization, it’s time to examine the tools you give decision-makers.
You can only determine profitability when you know your costs. I’ve discussed before that you should price according to value, not hours. However, you still need to know your costs to understand the minimum pricing and how it is performing. Do you consider each jobs’ profitability when you price new jobs? Do you know what you should be charging to ensure you hit your profit targets? These discussions about a company’s profitability, and what measure drives profit, are critical for your organization.
If you were starting your business today, what would you do differently? This thought-provoking question is a valuable exercise, especially when it brings up the idea of “sunk costs” and how they limit us. A sunk cost is a payment or investment that has already been made. Since it is unrecoverable no matter what, a sunk cost shouldn’t be factored into any future decisions. However, we’re all familiar with the sunk cost fallacy: behavior driven by a past expenditure that isn’t recoupable, regardless of future actions.
Bringing clarity to your organization is a common theme on The Disruption! blog. Defining your business model is a worthwhile exercise for any leadership team. But how do you even begin to bring clarity into your operations? If you’re looking for a place to start, Josh Kaufman’s “Five Parts of Every Business” offers an excellent framework. Kaufman defines five parts of every business model that all flow into the next, breaking it down into Value Creation, Marketing, Sales, Value Delivery, and Finance.