A company’s assets can be sorted into two buckets: tangible and intangible assets. Tangible assets are things the firm can buy or sell, such as inventory, real estate, equipment, machinery, offices, or company vehicles. Most business owners are pretty comfortable inventorying and appraising tangible assets.
But do you know how to measure the value of your intangible assets: your staff. Are you getting the most out of your employees? Are they as valuable as they should be? How do you know who to hire, which positions to create, and whether a job candidate is the best fit with your firm?
Start By Establishing Measurements for Positions, Not People
Instead of starting with employee traits for an evaluation, start by mapping out the parameters of that position. What should anyone in that job accomplish? Why does the role exist? What purpose does it serve? What personality traits should anyone in the post have? Establishing benchmarks for each job allows you to assign performance standards, desired personality attributes, and expected contributions.
Each Position is Assigned a Personality and a Prototype
Some business owners are uncomfortable assigning an ideal personality for a job. But when you take the current employee out of the equation, you can start thinking about traits that suit the position and match the business culture. For example, should a CMO be outgoing, creative, and enthusiastic in your firm? Does your organization need a meticulous, team-oriented, and predictable COO?
Once you put a personality in place for the position, you add a list of essential functions of the role to round out the prototype. For instance, in some companies, a CMO manages communications, creates sales materials, and handles PR. In another firm, the CMO may also oversee sales. Each company is different.
With position benchmarks in place, evaluating an employee’s or prospects’ suitability becomes much more manageable. If they match the job’s benchmarks well, it will be easier for them to meet your company’s expectations. Therefore, they will probably be more effective, experience success, and consequently show more loyalty. Matching people to benchmarks is a win-win.
The Role of Company Culture
The personalities and prototypes for a job can vary significantly among companies. Don’t assume that all positions look the same in all organizations. The change among industries is significant, so the needs of positions will vary quite a bit. Additionally, company culture plays an important role.
For example, suppose your company culture is innovative, creative, and brash. In that case, you may want an extroverted, big-idea CMO comfortable taking big swings and making a splash with the public.
Conversely, another company may be conservative and research-driven. They may need a CMO with focus and a professional, restrained manner.
Looking at these two examples, it becomes easy to see that companies A and B need two different types of CMOs. Can you imagine how unhappy the high-flying creative would be working for company B? And how frustrated company A would be if they hired a restrained introvert?
Benchmarking Needs Change Based on a Company’s Growth Cycle
In the startup phase, companies operate differently. They must be nimble, run lean, and change quickly to meet market needs. But established businesses should be focused on creating order, systems, and processes that allow them to scale up.
That’s why it’s wise to revisit benchmarked job descriptions as a firm grows. For instance, independent workaholics are invaluable initially but can get in the way once systems are in place. Process-driven staffs are excellent for a large organization but can be ineffective in the launch phase.
Benchmarking is the First Step to Increased Productivity
Benchmarking is not an exact science. Assumptions are made based on your circumstances. But it is an effective way to begin inventorying and leveraging your company’s intangible assets. Creating benchmarks for each position makes it much easier to identify and find people who can achieve their full potential within your organization. You start to hire better “fits” with your culture and requirements. You’ll also identify existing employees who may not fit into the company structure.
If you can find the right person to do the right job, you’ll be happier, they’ll be more productive, and your company will grow faster.
Carl’s Interview Starts at 20:57
Selling Your Business? Avoid These Mistakes!
Selling a business is not as straightforward as selling a house. After all, a company is a complex organism, and only some (or maybe none) of the value lies in physical assets. I’ve built and sold multiple businesses in my 30+ year career. In those first sales, I learned from my mistakes. And after a few hard knocks and some intensive research, I now know there’s a better way. If you’re considering selling your business now or in ten years, this article can help you avoid common mistakes.
Mistake #1: Doing It Alone
Most of us don’t sell companies very often, so very few entrepreneurs are experts at selling firms. That’s why so many business owners bring in a few professionals. Start before the sale by hiring an experienced business valuation expert. They will assess the firm to determine the fair market value. This valuation gives the owner an idea of how much the enterprise is worth “as is” and should also provide pointers to improvements that will increase the size of future offers. Often, with a few small improvements, you can substantially increase your market value.
Your financials will be held to a very high standard during a sale, so even minor errors or omissions can cause big problems. A reputable accounting firm with experience in business mergers, sales, and acquisitions, can help your internal accounting team compile financial statements and documentation in sale-friendly formats. Accounting consultants will help the team create, modify, or clarify income statements and balance sheets, catch errors, and ensure financial records and documents are above reproach.
Corporate law attorneys specializing in sales and acquisitions can handle legal or regulatory situations that may affect a potential sale. In addition, those same lawyers should be on hand to review contracts and agreements, such as leases and vendor contracts, to ensure they are transferable to a new owner.
Mistake #2: Choosing the Wrong Type of Sale
Business sales can be structured in a variety of ways. Each type of sale has its own benefits and drawbacks. So, make sure you’re working with a business consultant and a corporate attorney who understand sales and acquisitions.
We’ve listed the most common sale structures here.
Private Equity Firm
These buyers usually have the financial resources and expertise to grow a business. However, a private equity firm may have a short-term investment horizon, which means they are focused on maximizing their return on investment rather than maintaining the long-term viability of a company.
An employee stock ownership plan (ESOP) enables employees to purchase shares in the company over time. Employee ownership rewards staff members and ensures that the firm is run by people who are invested in its success.
An employee ownership consultant may be required because the Employee Retirement Income Security Act (ERISA) of the Department of Labor and the IRS’s Internal Revenue Code section 404(a)(3) govern ESOPs, so deviations from the prescribed process, intentional or accidental, break federal laws.
While it may seem simple to pass on the family business, it’s important to formalize the process to address legal considerations and prevent anyone from contesting ownership. The transfer should be formally documented and detail valuation, taxes, and ownership structure.
If an individual wants to buy the business, the process should start with a letter of intent (LOI) outlining the proposed terms for sale. Owners should also qualify individual buyers before moving forward by conducting background checks.
Selling to a Competitor
Your business may have the most value to your competitors. These types of sales usually require the seller to agree to non-compete clauses, which may limit their ability to run businesses in the future.
Mistake #3: Not Hiring a Consultant
It’s easy to view consultant fees as an expense, but when it comes to selling a business, their role is to minimize risk and maximize the asking price. Good consultants are not cheap, but their recommendations can protect owners from legal and financial threats. A consultant’s recommended improvements to the business can add millions to the asking price. And accountants’ contribution to bookkeeping can prevent costly delays or dropouts. When you look at the bigger picture, you can’t afford to keep them out of the process.
Want to learn more about how to get your business ready for a profitable sale? Contact 7 Stage Advisors today and start talking about your business.
After building and selling various multimillion-dollar organizations, Carl Gould’s 7 Stage Advisors has mentored some of the fastest-growing companies like Walgreens, Walmart, American Idol, IBM, and more. Carl is an international speaker, CEO, entrepreneur, author, & advisor, and we had the opportunity to get him in our WHOA GNV Studio. Being our first guest outside of Gainesville, Michael and I were able to get his perspective of the city and hear his awesome story. Fun fact: To spend a day with Carl Gould and get his expertise would cost you $20,000, so we were grateful to get an hour of his time on our podcast! 6:29 Tell us how you got to where you are today. 12:54 You want to be who you are and sell it big! 19:59 Find what your differentiators are, promote what those are, and you pick fights. 20:02 How did you get the opportunity to work with Inc. 500 fastest growing companies? 28:18 I’m not tied to the result and how we get there, I just want to make sure you get there. 30:50 People aren’t always hiring a coach because they want an expert. 36:08 I’ve looked to various sources and found my inspiration one slice at a time. 40:54 I like to listen to people who have a distinctly original take on things. 42:01 Everyone is so different that I find it almost impossible to see competition. 46:00 Understand what a “goal” actually is. 56:22 What’s success for you – do you feel like you’ve made it? 1:00:03 I made a deal with myself – I’m never going to work again that I don’t love. 1:08:12 Every two weeks I block out time. 1:13:45 You want to become better than the problems you’re facing.
Trump won the Republican nomination by being divisive and separating/distancing himself from the ‘traditional candidate’…He now needs to UNIFY the Republican Party, and some of those within the party that he was once attacking. It doesn’t seem that he will be able to regain his footing in the race against Clinton unless he can evolve his message and platform to inspire the necessary endorsements and alignment from his own party. Much like a turnaround in business, you separate yourself from the bad habits and leadership style that go the business in trouble, but then it is imperative that you unify/align those around the new vision and direction. If you can’t rally the team around the new vision, the turnaround will be unsuccessful.