Several years ago my business law professor, Lloyd Peak, introduced me to the picture above. He showed us how people could all look at the same lake but depending on the viewpoint each observation was likely to be different. The differences could be the angle of the sun hitting the lake, the times of day, the season during the observation or the personal past experiences influencing the observer. I'm sure you could also describe a thousand other different reasons for the various differences in observations.
As owners we often see, through a filter, our businesses in how we want them to be viewed to others. After all, isn't that why we spend so much time branding and marketing our companies to be viewed in a certain way? But are we painting a picture that is only valuable from our view point and not our successors? We can certainly go through the merger & acquisition process and find out the view point of purchasers or ask potential internal successors about their views. But will that give us enough time to go back and fix issues to paint a different picture?
If you want to maximize your companies value you will need to first understand what the purchaser likes to see and if that is a white shiny picket fence then you need to build and paint a white shiny picket fence. But let me warn you ahead of time. Do not paint a white shiny paint over a rotten fence. Otherwise you might be staring back through gray shiny bars or looking at a very large bill sometime later down the road.
Plug for Austec: We spend a lot of time listening to expert advisors, to past business owners who have sold a company, transitioned the company to insiders and/or purchased a company in hopes of transferring that knowledge to other business owners. We really want to help you not make the mistakes of previous business owners by waiting too late to fix the issues that can take years to address before you transition the company. Call us today at 720-519-6073 for a friendly conversation and/or a high level assessment report.
Now to share what inspired this article:
A business man walked into a bank in New York City and asked for the loan officer.
He told the loan officer that he was going to London on business for two weeks and needed to borrow $5,000 and that he was not a depositor of the bank. The bank officer told him that the bank would need some form of security for the loan, so the business man handed over the keys to a new Ferrari.
The car was parked on the street in front of the bank. The man produced the title and everything checked out. The loan officer agreed to hold the car as collateral for the loan and apologized for having to charge 12% interest.
Later, the bank's president and its officers all enjoyed a good laugh at the business man for using a $250,000 Ferrari as collateral for a $5,000 loan.
An employee of the bank then drove the Ferrari into the bank's underground garage and parked it.
Two weeks later, the business man returned, repaid the $5,000 and the interest of $23.07. The loan officer said, 'Sir, we are very happy to have had your business, and this transaction has worked out very nicely, but we are a little puzzled. While you were away, we checked you out and found that you are a multimillionaire. What puzzles us is, why would you bother to borrow $5,000?'
The business man replied, 'Where else in New York City can I park my car for two weeks for only $23.07 and expect it to be there when I return?'
Don't ever underestimate a business man!
Have a great rest of your week!
Austec Business Transitions, LLC.
I was reading an article this morning about the "Rule of Thumb" to have your exit planned on the day you start your business. This might surprise you that I would be reading about the exact work that we do for our clients, but I'm sure that it probably does not.
When I left college I only knew my future as far as my next job and I certainly did not image I would be starting a couple of companies years down the road. A couple of my advisors told me when I left college to make sure that my job fit my personality which was another "Rule of Thumb". I remember thinking to myself, "yeah that's nice but I have to make money" and I could only think as far as getting that first big paycheck. It was only twelve years later that I could get the fog out of my head from chasing a paycheck and realize that the "Rule of Thumb of job personality" was correct.
And although I agree with the exit planned in the beginning theory it is not always what faces us first in founding a company. Most startups have very limited cash and often are started because the owner is just looking for a way to generate some income to live on. I've had owners of a company tell me that they would never have started the company except they were forced to figure out something after the recent layoffs at work. Some mentioned they just couldn't take it from their boss anymore.
Don't misunderstand me, because I'm not indicating this is the best method to start a company. Rather that sometimes with little cash and very little time to generate income to pay the bills most startup owners would be hard pressed to spend the time thinking about their exit. Many companies are just asking the question "Will I have the option for an exit?”
Rule of Thumbs are often very helpful to keep in mind but not always practical to implement early and often can only be understood fully after we've messed up. Hindsight allows the brain to make that "aha moment" that recognizes the "Rule of Thumb". But if you want to avoid the self-discovery mistakes and avoid driving with a rear view mirror then I would suggest you find a mentor or advisor who has made lots of mistakes and/or seen many more. It is only by listening to these advisors that you possibly can avoid some of the same mistakes.
I personally have several mentors that have steered me around very difficult potholes and yet I still find myself sometimes driving forwards by looking in the rear view mirror. Mentors and advisors cannot always prevent us from driving with the rear view mirror but they can be a passenger who says "Hey!!! Stop it!!"
To be continued....
John Hamel is the Managing Member of Austec Business Transitions, LLC. helping businesses optimize value relative to exiting their company.