Whether you are growing your business or undertaking succession planning, most successful entrepreneurs want to maximize the value of their business. There are lot of tools available for business owners and in this article, we break them down between talent, operational and financial factors.

Strengthen Culture

In our recent blog post, How to Build a Strong Organizational Culture, we explain that by communicating a unifying vision, attracting talent, rewarding, and recognizing your team and factoring culture into onboarding, entrepreneurs can align and mobilize a team. The next logical question is:  

‍“What can be done to engrain that culture, so it endures long after the founder/CEO is gone?"

We would argue that the only way a winning culture can be sustained is if it was built organically from the bottom up. What does that mean, you ask?  

As a team evolves, they either learn to take risks, make decisions, learn from mistakes, and grow as professionals or they learn to clam up, defer accountability, assign blame, avoid risk, and stagnate. As the top leader, you should clearly have a bias towards the former if you want a team that can thrive in your absence.

Thus, the first critical lever of value maximization is a healthy and strong Organizational culture that rewards action, tolerates or even encourages risk and promotes rapid learning and development.  

“Strength and growth come only through continuous effort and struggle. — Napoleon Hill

Build Workflow

One way you can help your team thrive and grow is to document, train and, where possible, automate recurring and routine tasks. Establishing a workflow management system provides your team with the psychological safety required to do their best work. When team members know what to do, how to do it and when to get it done, you will have set them up for success.

The trade-off between structure and chaos is a never-ending balancing act for entrepreneurs. But generally speaking, you need playbooks and some consistent procedures to process workflow for your team if you are going to organize the operations in such a manner that ownership can be transferred.

An astute buyer should be asking to see documentation about standard operating procedures because at the very least they will want to know if your business can stand without you or if it can be integrated with a comparable rival. If there is nothing in place, it stands to reason that they will want to pay less, if anything at all, for the ongoing business operations.

Pay Down Debt

When a prospective buyer evaluates a business for sale, they invariably must determine how they will finance it at the lowest possible cost. If the mortgage on your building is topped up, the line of credit maxed and equipment leases not paid down, you are not leaving the acquirer with much financial flexibility. An organization’s debt capacity is a key value determinant.

It is good financial management to refinance any debt at the lowest possible rate, seek removal of any restrictive covenants, maximize the safety margin on your financial ratios and pay down all non-amortizing debts.

“It’s very easy to be different but very difficult to be better.” — Jonathan Ive

Retain Management

Ensure your key managers are engaged, have internal career options, and agree to defer some compensation under a long-term incentive plan. For hard-to-replace leaders, you might consider offering some equity participation, so they stand to gain from your managed exit plan. If they can make some money in the process, they may be more open minded to work with the buyer on an ongoing basis.

Key managers should be apprised of and engaged in the strategy as an active potential buyer would want to speak with them during negotiations. Keeping them in the dark is bound to lead to an unpleasant surprise when they find out that you are moving on in life. These are likely professionals that you know and trust so keeping them informed is good business and good friendship as well.

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