It’s one of the biggest limiting factors that can prevent a business from succeeding, and it doesn’t show up in the financials. You won’t find it on the balance sheet or the depreciation schedule. It’s not in the company contracts or legal records or even part of the property.
One of the most important factors to a company’s success is its people.
Sure, we hear this all the time. Whenever a company receives an award, the executives get up and thank the team—and they truly mean it. Yet when it comes to buying or selling a business, both parties forget just how valuable those people-resources are.
Buyers look at financials first and often ignore staffing issues. They’ll overlook the fact that the owner is making all the major decisions and dictating to employees what they should be doing.
Purchasing into such a scenario comes with inherent risks. Buyers should set up an extended transition period with the seller so they can learn everything possible. Even so, if the seller fails to meet any training commitments you won’t get the full value you paid for.
On the flip side, sellers must also recognize that a strong management team will be a real value driver in a sale. Not only will key employees increase the sale price, but they can contribute to lender confidence and get you more cash at closing.
That’s one reason why, in these down economic times, proactive business owners are looking for ways to strengthen their employee base. If your financial situation can support it, this is the time to add star players to your team.
Take them on, train them, and empower them to make decisions. They won’t always make the right decisions at first, but that’s part of the growing pains of any organization.
Transition yourself from 60 hours a week down to 40 and then 30. As your team becomes more independent, the value of your business grows.
They’ll have a positive impact on your business now, and performance will soar as the economy picks back up. They’ll add to cash flows, business value, and your quality of life.
I’ve said it before: the number one reason business owners sell is because they burn out. Adding key staff or building a management team is a way to phase yourself out of the company without giving up cold turkey.
Too often owners sell at a company low point because they just can’t muster the energy to manage it any longer. Building a strong team can mean the difference between limping or sprinting across the finish line.
Likewise, this team can be the difference between long-term success for a buyer and eventual failure. Either way, in the entire storm of small business ideas, it’s crucial to remember that people assets count.
Scott Bushkie is President of Cornerstone Business Services, a low-to-middle-market M&A firm. Reach him at 888-608-9138 or [email protected]