Whether or not you’re looking to sell your business, a management team with financial skills is particularly beneficial in maintaining the overall strength of a company’s current and future success.
Recently, I consulted with a multi collision repair center’s management team who were anxious to sell. Tired of the day-to-day work schedules and associated stress that comes along with owning a business, they expressed no interest in staying on after the sale.
As we discussed the preparation needed for a smooth transaction, I asked if their location managers all knew how to read a profit-and-loss statement and if they understood the company’s financials and budget. There was a long pause in the conversation as the owners looked a bit vacantly at me before acknowledging that the answer was no.
That’s understandable, and not uncommon. As owners, when the prospect of selling your business comes up, the focus tends to shift to the payout. You spend all or much of your career building a business, and you’re ready to reap the benefits of that. You don’t think about what comes after you leave.
But here’s the thing: Buyers look for – and pay a premium for – shops that are most likely to run smoothly and profitably after the sale. They are looking at the costs associated with converting your location into their business model.
The buyer’s branding expenses are a given, and perhaps some equipment and training. But what’s really needed is a team, including leadership, that will remain in place and have the ability to make the transition transpire without compromising the shop or shops’ performance during that conversion.
If you have developed a management team that’s built to function and built for growth, that’s much less of a headache for a buyer, which makes your business more valuable.
I conveyed to the owners I was speaking with that they were putting their managers at a post-sale disadvantage by keeping them in the dark about the company’s finances. The prospective buyers will want those managers to understand all aspects of the business, including the mechanics of financials and budgeting. The buyers may want to call one person at a location and get answers to all their questions. The managers need to understand not just how production functions, but how that’s reflected in the financials, in order to run the location successfully and motivate employees.
There are two important things to note about getting your management teams up to speed on this.
First, it’s not a long-term barrier to a sale. Whether you do the training in-house or outsource it, imparting that knowledge can be done fairly quickly. It doesn’t take years.
Second, prepping your financial management team now will strengthen your business whether or not you plan to sell. All business owners and general managers should be “growing” their replacements, the people who can step into their shoes running the business when and if they themselves move on.
Before I sold my business, all my general managers knew how to read financials and were part of the budgeting process. They managed the training for their location. In short, they were performing much like an owner would. I could talk with them as if they were a colleague, another owner in the industry. With all of us understanding the numbers, we were speaking the same language. You can’t hide anything when you talk numbers. It’s black and white. You get answers, not excuses. It’s either there, or it’s not.
I understand that some shop owners are hesitant to share all their company’s financial information. They worry that their managers will want a bigger piece of the pie. But in my experience, it works both ways. Sure, they’ll see all the revenue. But most of them already have a sense of that. What’s more often most eye-opening to them is seeing all the expenses, the cost of goods sold and the overhead, and the impact that has on what’s left at the end of the month.
Buyers, like shop owners, struggle to find good people. Having a leadership team that can hit the ground running on Day 1 after the sale will make your business more successful, valuable and appealing to a buyer today.