Seven reasons why waiting for the recovery will not be your company’s savior
A brief, unscientific, study over the last two months (of people in the M&A industry and related fields) led me to come to the conclusion that there are many owners (of small and mid-sized businesses) that would like to sell. No, they would really like to sell their business and move on to their next great adventure in life whether it be retirement, another business venture or something else.
However, they are convinced that valuations are down and once the economy turns around the value of their company will immediately return to what it was in 2007 as they ride the wave up (just as they were pulled down and cast ashore by the tsunami that is called the Great Recession).
Wrong! And here are seven reasons why this wait-and-see strategy won’t work.
1. Smart owners are not hunkering down but rather are being aggressive and looking to increase market share. One of my clients, when told of my research that I mentioned above told me that that is great; his firm is being aggressive and it’s more growth for him when others take a head in the sand attitude.
2. Another client has slashed expenses by almost 30% (on a business he recently purchased). He is running the firm more efficiently than ever and is now putting his efforts into marketing.
3. Companies are using these new efficiencies and expanding their customer and geographic base. In essence, they’ve created their own growth capital and are using it.
4. A third client has also made his business lean and as they expand they are giving the current employees overtime vs. hiring more people (and not taking on long-term overhead and government insurance burdens). He states this has increased employee enthusiasm as these (hourly) employees love having bigger paychecks.
5. Savvy owners are looking to grow by acquisition. I’m currently talking to numerous clients who are involved in “grow by acquisition” scenarios.
6. Banks will finance good companies who have solid strategic growth programs in place and/or have good acquisition targets. Rates are extremely low so the cost of growth is also quite low.
7. Improving culture to allow for expansion is on the top of many aggressive owners minds. I recently hosted a client breakfast and had my friend Libby Wagner speak on creating a profit culture. The discussion was lively as most, if not all, of the attendees were very in-tune with growing and recognized that the culture they create is a key element to growth (vs. a hunkering down mentality).
