Being the best business doesn’t always mean having the latest technology or the coolest gadgets. To Peter Holton, MA, CM&AA (Certified Mergers and Acquisitions Advisor), being the best business means preparing your business for sale, even if you’re not looking to sell.
“A business owner never knows what is going to happen in the future, but as long as the business is being tended to in all aspects, such as human resources, financial statements and customer retention, it will improve the overall bottom line and will be attractive to any type of buyer,” Holton said.
Holton is the managing director at Caber Hill Advisors. His work is dedicated to helping business owners eventually sell their businesses. The topic of his 2019 Contracting Success Conference peer-to-peer session is “Financial Management of the Janitorial Business.” In it, he explores the many steps to making a business financially sound: budgeting, investing and cash flow management, to name a few things.
“The overall health of any business starts with the financial statements,” he said. “Once the financial statements are in order, then the next step is creating a business that is a turnkey operation.”
Holton believes that people often look at business finances one dimensionally — they’re concerned that their clients are being taken care of to the extent of losing money. While it is important for a business’ top line, it’s not the biggest driver for value. Holton said business owners need to look at their businesses from an outsider’s perspective: If you were looking at buying your own business would you honestly pay top dollar for it?
“People aren’t necessarily thinking long-term,” he said. “But it’s just like managing your personal finances. You wouldn’t treat that with neglect, so why would you do that to your business?”
To really see what you’re working with, Holton recommended getting a valuation completed by a third party who has expertise within your industry. This can help business owners identify what they’re doing well and what they need to work on from the financial and non-financial perspectives.
“It’s eye opening,” Holton said. “I’ve had clients come back to me and say, ‘Wow, I never knew my businesses was doing this or that – thank you for pointing out these issues.’ But it also gives a chance for people to see what they’re doing well and figure out why they’re doing it.”
It will also identify processes that need to be improved. Holton said many businesses pass down procedures or budget assumptions from year to year without looking at how to improve them. If owners are working in the business and not on the business, they will not be able to identify ways to improve the overall health of the organization.
Making changes isn’t easy, though. Typically people don’t look at issues until they’re considering selling their business. But Holton said a responsible business owner should be looking at this way before the thought crosses their mind.
“God forbid something happens to the business or the business owner, but if that happens, it’s done. There isn’t anything anyone can do,” he said. “Business owners need to protect their families. They need to protect their employees. They need to protect from what could happen in bad scenarios.”
To hear more, attend Holton’s peer-to-peer session at the 2019 BSCAI Contracting Success Conference