BVWire notes a nice editorial from Brian Mazar, CEO of American Fortunes M&A. Mazar was characterizing two types of private company owners--both familiar to friends of BVR. What's interesting is that he identifies the use of a certified business appraiser as the first indicator of forward-looking thinking. Mazar says progressive owners can answer 10 simple questions, including:
“I can prove how much my business is worth.” Owners who regularly update a Certified Business Valuation keep their focus on the pulse of productivity and efficiency. Business Valuations expose sensitive spots where cash flow is falling through the cracks. Knowing a business’s short-comings gives a company the opportunity to fix them.
“I know exactly who will take over my business if I am incapacitated tomorrow.” Life happens. Divorce, emergencies, illnesses, and death. Wise business owners acknowledge this and prepare their organization for the unexpected. The prepared business owner knows exactly what will happen to their business, who will be in charge, and how changes will be handled...A potential buyer will ask questions until they know what the business is worth. Don’t wait for a firing squad to answer these questions. Know them in advance and have them documented in a certified third-party business valuation.
“I make my own decisions, but I rely on professionals to show me my choices.” Surround leadership with a great accountant, merger & acquisition advisor, financial adviser, attorney, etc. and be mindful of the difference between a good and a great professional. A good professional will state what could happen as a result of certain scenarios. A great professional will point out several options, note their consequences and state the things that are hard to accept.
The opposite of this kind of thinking results in many common logical errors--as Mazar points out, the most common one is:
“I don’t need a Succession or Exit Plan.” Ahhh…the immortal owner. They will never die; therefore there’s no need for a succession plan. We meet the spouse of this “immortal owner” when they approach us to sell the business after the owner has a serious illness or died and the company has lost significant value. Don’t do this to your loved ones. Plan ahead.