It’s a given that every company has weaknesses. The trick is to fix them. The test of a good company president or CEO is what happens to the company when he or she leaves. Some companies may look the same on paper, but one company may be much more valuable due to weaknesses in the other company. Although not all weaknesses can be resolved or fixed, most can be mitigated. You can not only significantly improve the value of your company, but also increase the chances of finding the right buyer, by fixing or lessening these weaknesses. Here are some common weaknesses that could cause buyers to look elsewhere for an acquisition.
One Major Decision Maker
In many small companies the current president was also the founder of the company, and he or she has made all of the major decisions. There is no one in place to take over if something happens to him or her since no succession plan has been developed. As a result, the company is not an attractive target for acquisition.
Industry Is Declining
The key for companies that are in a declining market is to recognize the situation and make changes accordingly. A “smart” company will realize when a product is declining and have the foresight and the ability to switch over into new product areas.
One Or Two Major Customers
This is a major concern of most buyers. It is not unusual for the small business owner to focus on what made the company successful – one or two major customers. These relationships that he or she has built over the years are seldom transferable. Finding new customers may take time and money, but the effort is absolutely necessary should the owner eventually decide to sell.
One Product Or Service
Many small companies are based on either the manufacture and sale of one product or the creation and development of a single service. It is important to manufacture more than one model of a product or develop more than one type of service.
Retiring Workers/Changing Culture
Many of the trades are filled with employees who will soon be retiring since young people are not entering these fields. Technology may be implemented to replace them, but that decision has to be made. No one wants a business that will have idle machines with no one trained to operate them.
There are many other areas that could be considered company weaknesses. If there is a Board of Directors or an Advisory Board, perhaps they can help the small business owner create a succession plan and just as importantly – a successor. Certainly the time to act on all of this is before the decision to sell is made. Whether current ownership plans on staying the course or eventually selling the company, the good news is that resolving company weaknesses is a win-win situation.
If you are considering selling your company in the next year or so, the time to start is now. Planning ahead can significantly add to the eventual selling price. A visit with a professional business intermediary is the first step.