Guest Lectures

April 20, 2010
Dennis Crumb, President
Crumb & Associates, LLC
Maximizing the Value of Your Business -- Developing a Strong Management Team is the Key

May 19, 2010
11:30 am to 1:30 pm
Heritage Planning: Preparing Heirs so they Control the Inheritance Instead of the Inheritance Controlling Them!

May 19, 2010
11:30 am to 1:30 pm
Heritage Planning: Preparing Heirs so they Control the Inheritance Instead of the Inheritance Controlling Them!

More...

April 7, 2010
Sept. 1, 2010
Nov. 3, 2010

Business Owners CLICK HERE

Advisors
CLICK HERE

Maximizing the Value of Your Business

Management Team is the Key

Dennis Crumb, President
Crumb & Associates, LLC

Guest Lecturer
April 20, 2010

Click Here for Details

A strong management team is key to maximizing the value of any business; I know this is not earth shattering news as most business owners know this intuitively.  What they don’t know is just how much value a strong management team can add. Often businesses don’t invest in this key value driver. 

What is the value of your business?  Don’t be fooled into thinking that the multiples listed in trade journals will tell you what a business is worth.  Typically these trade journals publish the average; and often the standard deviation of the data points is HUGE.  What causes similar businesses within the same NAICS code to sell for such different multiples is mostly what we call value drivers.

Four value drivers you should focus on are; 1) Sales Growth, 2) EBITDA Growth, 3) Sales Concentration & 4) Strength of Management Team.  Again, most businesses know this intuitively, so why do most companies still have issues with one or more of these value drivers?  I believe the answer to that question almost always lies in the strength of their management team. 

As companies go through the stages of growth, the most successful ones go from where the business owner does everything to where the management team works on the day to day operations and the owner works on the business not in it.

A simple test to see if you are working on your company not in it is, can you take three months off, no meetings, no emails, no phone calls, without it having a negative effect on your business?  If your business is dependent on you performing tasks or making decisions on a daily, weekly, or even monthly basis, you are not done building your management team. 

To run a successful business, at least 5 disciplines are needed.  Most owners are good at one maybe two of these disciplines, but if they are still running all 5 disciplines they have 3 or 4 bad managers.  Why are business owners reluctant to hire strong managers?

• Can’t afford it 

The reality is you can’t afford not to.  A good manager will always more than pay for themselves.  There is a way to systematically add management so that it only temporarily impacts cash flow. 

• No one else can do it right 

If you have had trouble getting someone to do it right, it is probably your system, not the people.  If you hire right and develop good systems, someone else can not only do it right, but probably do it better.  The problem might be in your management style.

• I don’t have time to find someone and train them

The reason you don’t have time is you are trying to do everything!  You need to make this a priority.  Successful companies do it, so can you!

The bottom line is; if you want to receive maximum value for your business, you need to get rid of these excuses and start building your management team. 

For example if you take two identical companies with sales of $10M, EBITDA of $1M, 2% below industry average in sales and EBITDA growth and with a high sales concentration, both with weak management.  One company immediately starts to hire a strong management team and the other doesn’t.  With very modest improvements at the end of 5 years the company with a strong management team will be worth nearly 50% more then the one without, ($9.8M vs $6.6M). 

Failing to hire a strong management team can leave
millions on the table