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How to build a company you can sell 

When the time comes to sell your company, what will make it attractive to buyers? How can you be sure to get a fair price?

The basic answers to these questions are well known. Develop repeatable systems. Keep thorough, accurate financials. Make sure that the company doesn’t depend too much on one person. These and other lessons are fully fleshed out in Bo Burlingham’s excellent book Finish Big: How Great Entrepreneurs Exit Their Companies On Top. We also recommend John Warrilow’s easy-to-read fable called Built to Sell.

But we have a somewhat different angle on the whole selling-your-business issue, and it comes partly from a fellow named Dan Foley. Dan founded D. Foley Landscape Inc. in Walpole, Massachusetts, back in 1987, while he was still in college. He developed it into a full-service commercial landscape company, including maintenance, construction, irrigation, and snow-management services. In 1998 he launched a division called CampusCare, which provided grounds maintenance, landscape, and snow services to local schools and colleges.

Along the way he learned about open-book management and decided that it was just what his company needed. Before long his staff was tracking and forecasting key numbers such as gross profit dollars week in and week out. If they hit the targets the plan called for, they would earn a bonus.

Dan thought his plan for the first year of full open-book practices was aggressive. But his staff got so energized that they earned a payout almost six times as large as the plan anticipated. Later, Dan also implemented lean-management techniques, complete with kaizencontinuous-improvement sessions. “Open-book management really helped with lean,” he says now. “It answered the question, ‘Why are we doing this?”

A potential acquirer—The Brickman Group, as it was then known came calling in 2004. Dan wasn’t ready to sell. But he learned a little more about them and liked what he saw. Brickman came back in 2008, and although his business was not for sale, Dan was prepared to have a conversation. The sale closed in 2009 and was a strategic acquisition, not a conventional rollup. Brickman wanted to acquire D. Foley’s systems, people, and skills, as well as its customers.

So now look at things from Brickman’s point of view. Here’s what the would-be acquirers saw:

  • A company with pristine, up-to-the-minute financial statements, wholly transparent, with the key numbers understood and tracked by the entire management team as well as by many of the production team members.
  • A company that had developed proven and repeatable systems for tasks such as estimating and scheduling the work.
  • A company that operated with little wasted motion or resources, thanks to lean management, and that practiced continuous improvement.
  • A company that could extend its best practices into the acquirer’s existing operations.
  • And most important, a company of people who had learned to think and work like business owners, taking responsibility for the company’s performance and sharing in the rewards. Unlike a lot of entrepreneurial companies, D. Foley Landscape’s operations and success didn’t all depend on the founder.

Source: Forbes.com

 


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Comments expressed here do not reflect the opinions of vanguard newspapers or any employee thereof.