It’s always refreshing to see how willing successful entrepreneurs are to help the next generation of business builders, innovators, and disruptors. The purpose of magazines like Forbes and EntrepreneurClout, organizations like Vistage and Young Presidents Organization, and the countless accelerators is to help new business owners learn from the mistakes and wisdom of those who came before them. Since very few ventures ultimately become multi-generational family businesses, many of you are looking to maximize the value of your company for a future sale.
Jeff Kropholler, former founder and CEO of Synergy IOM, has some gems every business owner needs to know. As background, we met on the board of Studio 3A, a San Antonio based health tech venture studio. While learning about the studio’s portfolio companies’ innovative approaches to hospital and surgery scheduling, prenatal care of high-risk patients in rural areas, and improving the surgeon-medical device interaction, I took four great takeaways from Jeff’s advice:
Jeff’s 4 Juicy Jewels
- Don’t Let Perfect Become the Enemy of Great
- Delegate Responsibility, not Relationships
- Profit and (Sale) Price Don’t Always Match
- Leaders Admit When They Are Lost
Don’t Make Perfect the Enemy of Great
If not for you, this company wouldn’t exist. You may have done everything to bootstrap the organization, so you know how every part of this company should operate. If you want everything to be done with the level of care, creativity, and control that you would give it, you are bound to fail.
Your desire to make everything perfect will make everything take too long, and cost too much. In military circles, there is a saying, “no plan survives contact with the enemy.” Get your product or service out there, get feedback, and make changes as you go. Things are going to change. Don’t worry about perfect – that’s impossible.
When you accept that things won’t be perfect, you will be more open to delegating important tasks and responsibilities to others. When you accept that mistakes will be made, and that you can help figure out how to change, you will allow yourself to leverage the efforts of others and get a lot more done.
Delegate Responsibilities, not Relationships
Launching a new company is exciting, but it’s a ton of work. You may also be the smartest, most detail-oriented, most creative, most charismatic person on the payroll. You may be the best writer, speaker, motivator, marketer, and closer. Last I checked, you only have 168 hours in the week. You must find, or invent, ways to leverage your time.
Entrepreneurs are eternal optimists, so it makes sense that they want to delegate away compliance, administrative, and regulatory functions. It’s also common to set up customer service mechanisms to deal with those pesky complaints. This is a huge mistake.
Staying involved in both the PRE- and POST-Sale activities of your company will give you invaluable feedback. Losing touch with your key customers, suppliers, and distributors means you will the last person to find out about important shifts in the market or industry. Knowing what your people want, how they want it, and what they don’t like about your current company is paramount. Being able to assure them that they are important and that they are being heard will help retention more than you can imagine.
Profit and (Sale) Price Don’t Always Match
For most entrepreneurs, one big liquidity event is all they will ever experience. In many cases, the firm that is buying your company has done many acquisitions and it is your first. This puts you at a severe disadvantage for your “once-in-a-lifetime” negotiation.
What Jeff shared with me really struck a nerve, because I lost out on over $3.5 million in my last sale – because of the misplacing of one sentence in the closing documents.
Jeff pointed out that most entrepreneurs are so focused on the P&L (profit and loss) statement. Obey the 3 rules of business: increase revenue, reduce expenses, maximize profit. Though this makes for higher annual income, it doesn’t necessarily make your business attractive to buyers. Most entrepreneurs are not interested in implementing expensive systems, but those are the things that create opportunities for scale.
Investors who buy your cash flow will give you a fair multiple. Investors who buy your systems, so you can be the cornerstone for future acquisitions, pay much higher multiples.
Leaders Get Lost, Too
What many people are afraid to tell you, is that entrepreneurship is an incredibly lonely endeavor. Despite all the staff, investors, customers, and networking, all the decisions and responsibility ultimately fall onto you – the founder, entrepreneur, business owner.
No matter how smart you are, you can’t be prepared for everything. It’s ok to admit you’re lost or afraid – just not to your staff! You need to have an advisory board, if not a board of directors, and outside help. You may want to be a member of Vistage, YPO, YEO or some other mastermind group consulting. You should routinely engage outside consultants to give you valuable feedback. How can you have your finger on the pulse of your industry to make key strategic decisions, while managing your operations or direct reports, preparing for sale, and dealing with investors or board members?
On your journey crafting a lifestyle business or building a company someone will want to buy, the most important lesson is that “time” is your most valuable asset. You need to leverage the efforts of your people to save your time. In today’s economy, attracting and retaining top talent has become much more difficult than securing financing. If you want to have any chance of competing, let alone winning, you will need to better understand what your employees want, how they make decisions, and then segment your offerings to better connect with the different types of people who make up your organization.
After selling his medical company, Jeff Kropholler co-founded Quantum Health Benefits to help businesses lower the costs of attracting and retaining top talent. For a free quote on how your company can receive subsidies for expanded employee benefits, please contact Jeff at email@example.com.
Chris Jarvis is the author of 16 books and his TED Talk was the #2 most viewed in 2022. He created the Wild Factor to help companies better understand their employees and their customers. Readers can take the Wild Factor for free ($20 value) by using the code FORBES at https://chrisjarvis.me/wildfactor-exam/
Credit: Forbes Brunei