To every thing there is a season, and a time to every purpose under the heaven:. (Ecclesiastes 3:1 - KJV)
I first heard this BIble verse as a song recorded byThe Byrds in 1965 -- "Turn! Turn! Turn! (To Everything There Is a Season)"
I thought of this song and passage this morning as my 20 year old daughter, who is living with us, got up and drove to school. She attends school from 8:30am to 5:00pm every weekday -- like a job. The school is about 45 minutes away, but in rush hour, it is a little over an hour. As she was getting ready, I was still in bed. My commute is up a flight of stairs as I work from home and can be at my desk in one minute.
She was probably thinking, "No Fair! Mom has it so easy!"
But she doesn't realize that I commuted to work for over thirty years, many years with an hour and a half commute each way without traffic. I remember staying at work until 10-11pm so there would be no one on the road when I had to drive that long drive home and then getting up at 4am so I could be on the road by 5am the next day. I remember spending many years "paying my dues" and gaining the experience needed for my role today as an advisor to businesses.
In my mind, I have "earned" the privilege of working from home and dictating my own schedule. I know she is unaware of that first thirty years and only sees the last ten years that I have "had it easy".
I have clients that remind me of my daughter. They own businesses and see their peers selling for $XX million or for Y multiple of EBITDA and think -- that is what I should get for my business. And when they are ready to sell and the offers are a fraction of what they saw others get, they think, "No Fair!"
In order to get a good offer and a good multiple, and have it hold up through Due Diligence, a company has to "pay its dues" first. For example,
They need clean financials statements -- with no personal expenses on the company books
Financial reporsts should include data that show profits by customer, profits by line of business, etc.
Processes should be in place so that the owner is not involved in day-to-day operations.
The value of the business needs to be IN THE BUSINESS and not IN THE OWNER
Buy-Sell Agreements should be executed and accessible
Key-man Life Insurance should be in place
Steps should be taken to remedy these items long before the owner is ready to sell. These are not "cosmetic" changes that can take place months before an offer is sought. They are fundamental changes that need to be made YEARS ahead of time. They are changes that should be made NOW -- because the past can't be undone. It is never to early to start doing things right. AND, the changes can help shape the trajectory of the company because new insights will be available to the company to help chart its course.
Many owners say the can't afford to make the changes necessary because the economy is in a slump. I have learned that the best time to work "on" the business is in a downturn. There are fewer fires being put out and the volume of work to convert is lower. Employees have more available time and are able to embrace new processes.
In the dot.com bust in 2000, I was in Silicon Valley. We undertook a massive project to convert ourselves so that all client data was digital. In those days, it was a lot of scanning and organizing because data warehouses didn't exist. We were cutting edge. Our founder likened the work to Franklin Roosevelt's WPA (Works Projects Administration) in 1938 which helped pull us out of the Great Depression.
Is this the Season for you to build up your business so you can get the most out of it when it is the Season for you to depart from it?