Build value in your company

October 27, 2017 -  By
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One of the great misunderstandings of owning a landscaping company is that it will have significant value when the business owner decides to sell it. Unfortunately, statistics don’t support that belief. Between 70 and 80 percent of all businesses don’t sell— they’re liquidated. The reason landscaping companies are liquidated so often is because they often carry little or no value while they’re operating. Consequently, many firms have little or no value when the time comes to sell.

Frequently, landscaping companies are lifestyle businesses for their owners. In other words, the owner primarily possesses the company to maintain and improve his standard of living through being his own boss, tax benefits, write-offs and other extras. This scenario often provides wonderful compensation during ownership but might lead to difficulties when the time comes for the owner to leave.

Additionally, consider the following list of reasons landscaping companies are liquidated rather than sold:

  • Fifty percent of owners don’t exit voluntarily. Death, disability, divorce, financial distress and disagreements among partners are just a few of life’s unexpected events that can adversely affect a company’s value.
  • Every day, about 10,000 baby boomers turn 65. It’s estimated baby boomers own more than 50 percent of all U.S. companies. There are many landscaping firms available for sale, so business buyers have many options.
  • Only 30 percent of all family-owned businesses survive into the second generation. Only 12 percent survive into the third generation. Family members often are the most logical buyers for landscaping companies but frequently don’t possess the management and financial abilities, skill set or interest to obtain such a company.

Back to basics

So what can you do to prevent your company from becoming an unwanted statistic? What can you do to build and maximize the value of your business to increase the chance it will be sold instead of liquidated one day? Return to the basics.

1. Differentiate yourself. Be different. The most valuable landscape companies are often the most unique ones in a marketplace. Perhaps you can add or combine services to differentiate yourself from the competition.

2. Respect your competitors. For the vast majority of landscaping companies sold, the seller is known to the buyer or the buyer is known to the seller before the decision is made to sell. Always treat your competitors with respect. Consider expanding services that would make your company attractive to your competitors.

3. Bring value to customers. In what area does your company excel? The things you do best should be the same things for which you’re known. Your goal should be that when a person in your marketplace needs a specific landscaping service, he’ll only think about contacting one company to do the work—yours.

4. Be well defined. Do you have a mission statement for your company? All your employees should know exactly what you’re trying to accomplish. Develop a mission statement for your company, and keep it in front of your employees.

5. Target an attractive group of customers. Who’s your ideal customer? Make a list of the attributes of the ideal customer, and then design an effective strategy to cultivate them. Over time, a specific attractive customer might change his expectations of your company. If this change isn’t consistent with your service model, purge that customer from your customer list. Similarly, your idea of an ideal customer also might change. When it does, adjust your marketing strategy to meet the new expectation.

6. Stay focused. Avoid distractions and remain focused on the goals you’ve set for your company. Stay motivated to achieve these goals. Having trouble staying focused on goals or being motivated to extend the maximum effort to achieve company goals is usually a telltale sign it’s time (or past time) to begin the process of selling your company. When your interest in operating your firm begins to wane, act quickly to start the sale process.

7. Emphasize service. Quality service and customer satisfaction are the mainstays of every successful business. Unfortunately (and particularly with landscape maintenance companies), the care with which an account can be serviced is often sacrificed for the speed at which the account can be serviced. Create an employee management system that emphasizes quality and efficiency. The scale always should tip in favor of quality. Establish a customer management system that allows you to monitor customers for cost and quality satisfaction.

8. Insist on contracts. Landscaping companies are notorious for making handshake agreements for maintenance services between the provider and buyer. The trouble is handshake agreements have little to no value to a business buyer. Strive to implement maintenance service agreements with one- to three-year deals and automatic contract renewals.

9. Develop an exit plan. An exit strategy should be part of every business plan. Similar to planning a vacation trip, it’s imperative to know your business’ final destination, too. Plan your exit one to three years ahead of the anticipated exit date. Having an anticipated exit date will allow you to make clearer and more efficient decisions. Certainly, the business environment—and perhaps even your vision for your company—will change. But if your ultimate destination remains clearly defined, you’ll always be able to make effective decisions because you’ll always have a goal in sight. Create an exit plan and update it every six to 12 months.

10. Develop an exit team. At a minimum, your exit team should include an exit planner, attorney and accountant. Depending on your circumstances, you also might wish to include a business broker, a financial planner, an investment advisor and a trust department. Typically, the team should be led by the exit planner who updates the attorney and accountant annually with exit plan details.

Kohn is a consultant at Pro-Motion Consulting. Reach him at kent@mypmcteam.com.

Photo: ©istock.com/alexsl

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