Wilson (not his real name) took over management of the company from his father, who founded it in 1978. Over the five years Wilson has been in charge, company revenue has doubled. The company is well known in the community, and Wilson is a respected business leader, much like his father was.
Wilson has not retained me to sell his company. At the age of 48, he has no interest in slowing down, much less selling. But he wanted to meet to discuss how he might transition some equity interest to his brothers who aren’t involved in the business. He wanted my experienced perspective on how to do this in a way that combined smart business practice while preserving family harmony.
In the course of our casual lunch, I asked Wilson for his strategy to grow the company. He replied, “By our best estimation, we have 10% market share, so we have a lot of room to grow.” I replied, “That’s cool, but how do you do that?” He replied without missing a beat, “By selling more.”
Since growth strategies weren’t germane to the topic for which we were meeting, I didn’t press Wilson for an explanation. But as I reflect on the conversation, I wish I had asked him for more detail because I sense his answer was a dodge, meaning he likely doesn’t actually have a growth strategy. After all, “increasing market share” is not a strategy, it’s the result of a strategy
In fairness to Wilson, his inability to describe a growth strategy is not unusual. Having worked with scores of business owners over the years, I can tell you they fall into three categories: about 50% are short-term thinkers (getting through payroll this month), about 40% are near-term thinkers (meeting this year’s budget), and only about 10% are long-term thinkers with a deliverable-driven strategy requiring an investment of time and money. Yes, that’s right, I think no more than about 10% of all business owners actually have a strategy for growth.
Now to be clear, some short-term thinking owners have strong, profitable, and growing businesses. But getting those business owners to think and act strategically is very hard. Which can be fine, until they are ready to sell the company.
If an owner has a deliverable-driven strategy to grow their business, their business will be sold for a premium. Guaranteed. Buyers want to see a return on their investment, of course. But if they feel their return is likely to grow, they will pay more. That’s why I help my clients develop and articulate a deliverable-driven growth strategy before we take their company to market. I call it an “if this, then that” plan: if I invest this, then that will happen. Said another way, if we invest this much money this way, then we will have this specific result. Boiled down to two words: proactive intention.
While simple to say, this is hard to do, and that’s why so few business owners can do it. Even the word “growth” scares most owners if, like Wilson, they have to explain it beyond what we’re doing now.
Articulating a tangible if-this-then-that growth strategy is the fastest way to improve your business valuation. Don’t be afraid to try.
Tennessee Valley Group
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