Most business owners think growth or sale is an economic decision. In most cases, that’s not entirely true. The decision to stay in business and grow a company, or sell and move on to retirement or perhaps a different industry is a highly personal decision that may have very little to do with economics.
To help you tackle this difficult decision that every owner must eventually face, we’ll give you some highly personal questions to answer and then an internal assessment to provide you with a snapshot of your company’s strengths and weaknesses to help you gauge whether your company should grow or go.
The Highly Personal Questions:
1. Are you still having fun? Sounds too simple doesn’t it? But it’s at the crux of the decision. If you still enjoy coming into the office each day (alright, most days!), and really enjoy the industry, this is your first indicator you should stay and grow.
2. Do you have children in your business? Even if you aren’t having fun anymore, (usually because profits have waned), if there are children and grandchildren in the business who love it and are counting on it for their livelihood, you may owe it to them to at least entertain staying in business, making the changes needed to foster profitable growth.
3. Are you still making money? If the answer is no, what you need to do is get at the root of your profit problems (we’ll get to this in a minute in the internal checklist) and see if they are solvable. If you honestly see no hope of a turnaround, even with children in the business, you need to get out. In this case, the sooner you do, the better.
4. What would you do if you got out? You’ve probably heard jokes about the Dad in his 90’s still coming into the office every day even though the company is owned entirely by his kids. Well, this is no joke; we see white-haired dads and grandfathers who couldn’t leave the business because they simply had no interests outside the business. If you are truly contemplating getting out, and even if your company is still growing like a weed, you need to find life outside the company. This is a great time to think about developing new hobbies or making a list of other businesses and industries that peak your interest.
The Internal Assessment Questions. The following internal assessment questions were designed for retail locations, but are easily adaptable to wholesale operations.
Employees – Is your company culture one of teamwork and getting the job done? Do your employees have good problem-solving skills and the willingness to pitch in? Do you see lots of blaming going on or self-responsibility? How is your turnover?
Locations – Are your sites in the “right” locations given changing demographic trends and traffic counts?
Curb Appeal – Would the customer you want to sell to stop at your location based on your current curb aesthetics? If not, what investment would it take to create that curb appeal?
Target Marketing and Merchandising – Have you identified the ideal target customer for each location (or division) of your operations? How effective is your merchandising to those target customers? One indicator of your company’s score in this area is product velocity. Is it good or do you consistently have slow-moving products?
Product Management – How would you rate your supply, purchasing, pricing and inventory expertise? Is your retail inventory efficient (turning at the top industry quartile average 35 times per year or better)? Do you periodically analyze margins, checking for correct mark-ups and benchmarking to competitor pricing? Are you scanning (in and out) for accuracy? How is your shrink?
Customer Transaction Efficiency – How quickly do you meet your customers’ needs? What is your transaction time inside and outside? How customer-friendly is your sale transaction process? (Wholesalers should rate their order and delivery systems here.)
Accounting System – How accurate and efficient is your accounting system? How much is manual versus automated? Error frequency? Errors being measured?
Asset Utilization – For the money you have invested in hard assets, are you getting adequate return? (Use Return on Assets for this measure – Pre-tax profit divided by total assets.) Do you optimize profits through consistent asset use or have idle assets? How is your asset maintenance efficiency?
By brutal, honest rating of your company in each of these areas, you will have a clear snapshot of your company’s internal strengths and weaknesses. You may be able to leverage your strengths through growth or sale. On the other hand, this assessment may illuminate serious weaknesses. They may be correctable. You may be able to bolster those them through merger with a company strong in those areas. Or, you may decide your best solution is to get out. No matter what the results of your assessment, one thing is perfectly clear – you must decide whether you want to grow or go. If you try to stand still, to maintain status quo, you will only go backwards.
Meridian Associates has been partnering with family-owned businesses for over 30 years to remove barriers, accelerate business growth, build their legacy, and reduce stress levels. With three, high-impact business events each year, The CEO Exchange, Women in Family Business, and The Family Business Intensive, we continually provide best practices & proven strategies that keep multigenerational businesses thriving. Discover how Meridian can help your business thrive through our combination of high impact business coaching, advisory, M&A, and precision company valuations by visiting www.askmeridian.com or calling us at 817-594-0546.
