So you have just had holidays - for most business owners it will have been too short. You laid on the beach, slept in, chilled with family and friends at a favourite holiday spot.
There were no deadlines, the phone didn't ring (unless like most owners you took work away with you) except for the kids asking for more pocket money or a trip to Macca's. You could feel the tension ease, the stress lifted from your shoulders, your mind stopped racing and you decided this was a good way to live. Fun has returned to your life and for next 2-4 weeks you smile, laugh, drink, cavort and frolic through a hard-earned holiday.
Now you are back at work (or about to return) and you can feel the demands increase, the heart beats a little faster and mind is full again. Holiday over - back to work.
Unfortunately this describes many business owners and it is symptomatic of two situations (or both):
Your business runs you rather than you run your business.
You want to make a change - either get out of the business or change it.
We find that many business owners contact us in February and ask - "what is my business worth and when should I sell?".
Most of the business owners that contact us are not happy with the value we arrive at and even less are in a good position to sell. Often the price they think the business is worth lying on a beach rarely matches the value a buyer is likely to pay under the microscope of due diligence.
Holiday Business Blues is a real condition and more people should be aware of it's symptoms and what to do when it strikes (yes - this was written with some dose of sarcasm).
These businesses typically suffer from a mix of four symptoms:
Little or no documentation of process and systems in place.
Significant reliance on key persons or the business owner(s).
Limited use of technology to automate or semi-automate processes and support key decisions.
Minimal or no management reporting in place to track and respond to key metrics.
These symptoms often lead to below industry average revenue growth and EBITDA performance and a low EBITDA Multiple. Hence the valuation will be low.
I often hear business owners say - "my business is not reliant on me - I can take a holiday and it is still running when I get back". But when I ask these people the following questions I often find a different conclusion:
Is there a pile of paperwork awaiting your return?
Will there be key decisions only you can make (and hence some issues have been put on hold)?
Has someone been delegated with your authority whilst you are away (with suitable cross checks)?
Is someone responsible for chasing sales and meeting targets or addressing production demands and issues whilst you are away?
Will it take you a week or more just to "catch up on work" when you return?
Usually a business owner will answer yes to most, if not all, these questions and hence we find the business is running them rather than a business that can function without them.
Ironically around February - March is the time many business owners start reviewing their business plans (or making one). We often find that business owners look at the valuation and say "I need to include some improvements and new initiatives in my plan to increase the value".
Ideally - the two activities can go hand in hand. A valuation gives you a critical assessment of where you are now and what drivers or levers you need to pull to increase the value of the business. This makes doing a business plan a lot easier as you have an outsider's view of the current state of affairs and extra ideas and initiatives to add into your action plans.
And I typically encourage the business owner to address the issues that make the business run them and reduce the reliance on key staff.
In my experience most businesses are not ready to sell - or at the very least can make easy improvements to increase the value of the business BEFORE it goes on the market.
It is almost never a good idea to come back from holidays and decide to sell the business. This is a process worth putting in preparation so you get the best price and attracting the right strategic buyer rather than just putting it on the market because the business is giving you the sh*ts.