To continue from the last two posts, here are my comments on situation number three.
- Losing money.
- Recent upward trend or reduction of expenses. Is it a spike or a trend?
- Long-term consistent growth with steady profits.
What could be better than situation three (we are not talking about investor grade, emerging businesses)?
I like to say (especially to business buyers with stars in their eyes) that, “turnarounds make headlines because they are rare.” On the opposite end of the spectrum businesses that are humming along are just about as rare.
If you’re the owner of one of these, congratulations. For business buyers it doesn’t get much better than this. As much as buyers say they want to see where they can value, show them a business as described above and they’ll get even more excited.
So what qualities does this type of business have? Here are five:
- Great people with depth of management, above average compensation (to attract better employees), and a good culture.
- Systems in place that increase productivity and can be implemented by numerous people (no dependency on one tech person, one machine operator, etc.).
- Speaking of dependencies, the day-to-day operations are not dependent on the owner. The owner can spend their time on strategy, vision, and solidifying customer relationships.
- Ecstatic customers that look to the company as a solution provider and partner. And of course there’s low customer concentration.
- Excellent financial systems, which lead to accurate financial statements and management reports that allow management to make intelligent decisions.
These five things present in a company make that company as rare as a successful turnaround and cause headlines to be written about them in business journals and magazines.
“What are the implications of this decision 10 minutes, 10 months, and 10 years from now?” Suzy Welch, (quoted in Inc. Magazine’s article titled, “35 Great Questions)
