In the Driver’s Seat: Tips for Intentional Business Planning

BY BOB LATHAM, M&AMI, CBI
PRINCIPAL, MANAGING PARTNER

Do you run your business, or does your business run you?

It’s a rare business owner who doesn’t occasionally lament the latter, and it doesn’t have to be that way. You are the leader of your company, and leading means rising above merely putting out fires and letting your circumstances dictate your direction.

To regain control, be as intentional and disciplined now in your business planning as you were when you were starting up. As this article is written, the fourth quarter is right around the corner, and that’s as good a time as any to:

• review performance and key metrics from the past year,
  
  
• recognize what caused your successes and setbacks,
  
  
• set goals for next year,
  
  
• create a plan that will help you seize new opportunities in the next year and beyond, and
  
  
• prepare for a top-dollar sale.

If intentional business planning is a skill that you haven’t exercised recently, you might have a few questions.

DO WE HAVE TO DO IT IN THE FOURTH QUARTER?  No. My IBG Business colleague Matt Frye (Oklahoma) estimates that “70 to 80 percent of businesses don’t do any meaningful planning,” so scheduling a planning event at any time of the year puts you ahead of the field.

The important thing is to get it on the calendar, commit to the date, begin making a list of issues you want to cover, and decide who should be in the meeting.

WHAT SHOULD BE ON THE AGENDA?  That depends on what you want to accomplish. If a 600-pound gorilla needs to be tamed, consider limiting your agenda to that one issue.

Or you can choose from a long menu of issues that can boost your profitability and market value. For example:

• What went right this year, and how can we build on it?
  
  
• What went wrong? How can we avoid a repeat?
  
  
• For which issues would significant improvement yield the greatest results?
  
  
• What opportunities and challenges do we anticipate in the next __ months, and what are we going to do about them?
  
  
• What are our goals, and whom will we hold accountable for each?

WHO SHOULD BE IN THE MEETING? Depending on what’s on the agenda, consider some combination of:

• Just you. Pick a day and go somewhere – e.g., a resort, golf course, lake, mountains, museum, art gallery – that allows you to think, create, problem-solve, and focus. Commit to an all-day experience, but don’t be surprised if you need only a few hours.
  
  
• You and your tax advisor and/or business attorney. For this option and those that follow, pick a suitable meeting environment – away from your office.
  
  
• You and your management team (e.g., operations, finance, sales, HR, IT).
  
  
• You and an M&A professional. Why? Read on.

SHOULD I THINK ABOUT SELLING?  Always – the only question is when.

An IBG M&A professional can help you identify the correct time to consider a sale and how you can use your planning process to sell for top dollar to the best buyer.

“One of the first things we ask about is the ‘why’ and the ‘what,’” says Matt Frye. “If the owner wants to sell now, what is the motivator? Do they want to retire? Are there health issues? Also, what do they want to do post-sale? Travel? Volunteer? Spend more time with family? Buy another business?”

We can help you identify business-improvement priorities and action items that (a) align with solid business practices, (b) you can fold into your business planning, and (c) won’t tip your hand to your key employees, customers, and suppliers. Examples include:

1. Improve cash flows. A prospective buyer wants to see the “true cash flow.” Try to drive all income to the bottom line.

2. Broaden your customer and vendor bases.  No customer or client should account for more than 10% of sales, and try not to be overly reliant on any supplier.

3. Upgrade your management team. Develop a capable leadership team that reduces the company’s reliance on you. By improving the skill levels of your key people, or replacing them, create a true “C-suite” comprised of all the “chiefs,” e.g., CEO, CFO, COO, CIO, CHRO, etc.

4. Clean up your financials. We will “recast” your financials, but “cleaning up” your financials is something only you can do:

• Make sure your inventory and asset records align with what is physically there.
  
  
• Remove from the books any unsellable inventory, or property or equipment with no value.
  
  
• Document your non-business expenses so they can be justified in the recasting process.
  
  
• Strengthen your ratios: working capital, debt-to-equity, “quick,” price-to-earnings, return on equity, etc.

5. Upgrade your professional advisors.  If your business has outgrown your attorney or accounting/tax professional, we can advise you on the most important criteria and provide introductions if helpful.

6. Document what you do. Written records and plans give a buyer greater comfort that they will be able to emulate your successful growth.

7. And a few more:

• Resolve any pending litigation and other legal issues.
  
  
• Refresh and spruce up your facilities.
  
  
• Order appraisals for your real estate and equipment.

IBG FOX & FIN CAN HELP. “Plan to succeed, or plan to fail.” Being deliberate about improving your company’s income statement, balance sheet, and market value can deliver substantial benefits, whether you’re planning to sell next year or farther down the road.

We can help you identify opportunities to achieve top dollar in a sale. IBG Business has advised on over 1,200 successful transactions, and our 86% closing rate is more than three times the national average. To start the planning process for your business growth and ultimate sale, contact an IBG Fox & Fin team member.