Business Advice

How to Maximise the Value of Your Business by Maximising the Value of Your Most Valuable asset

While I thoroughly investigate the financials and hard assets, I am also asking questions about the people. What is the culture like. Does this current owner have the respect of staff. Will this be a happy transition?­

This is a summary of the key points from an interview between Joanna Oakey of Aspect Legal and Tony Arena of BCI Business Brokers. “How to Maximise the Value of Your Business by Maximising the Value of Your Most Valuable asset”

Value of Staff:

The value of the staff roster does not appear on the balance sheet, is not reflected in sales and until recently wasn’t even mentioned in discussions about value of a business. You can go back to 1920 when business valuation books talked about tangible assets only. These days a business may have goodwill as the only asset, be it a customer list that produces regular income (rent roll, mortgage loan book, online subscription services etc) or similar businesses devoid of tangible assets.

Ask these questions:

You can’t value a business without looking at the situation with staff. The following questions are hardly ever asked:

  • How well are staff paid
  • How happy are employees
  • Do the key people want to stay on
  • What do their contracts or terms of employment cover?

While I thoroughly investigate the financials and hard assets, I am also asking questions about the people. What is the culture like. Does this current owner have the respect of staff. Will this be a happy transition?

Steps to Take:

You can take the following measures to strengthen your staff situation prior to a sale

Sit down and talk to staff before you go on the market. Take them into your confidence and tell them that you are going to sell. Find out if they would be happy to stay post-transaction.

If you are a franchisor business, speak to some of your franchisees and tell them of your intention. Gauge reaction. We recently had a case I saw business fell over because of a franchise revolt right under the nose of the franchisor.

Build the Asset:

We had another sale where the vendor had no operational role but every morning she would arrive and make sure she walked around and found out how everyone was going. It was important for her that her staff knew she cared about them. If your staff know you care about them, they will look after you on the transaction and afterwards.

Built the Roster with Foresight.

You are going to sell your business one-day. Any extra people you put on will build value into the business. Choose people who are going to relieve you of responsibility within the business. If you are going to hire a general manager give yourself at least two years to bed down that position. You don’t want to go to the market with someone who is unproven and could further disrupt your life when you find out this is the wrong person for the job.

Mental Health

We live in an era where employees spend a good part of their life at work. There is often more interaction with people at the workplace than there is at home. If you create an atmosphere of support at work you will be rewarded and this will definitely show up in the bottom line.

You are the coach. Let me give you an example in the sporting world. An international rugby league player once told me the best coach ever he ever had was Wayne Bennett because Wayne used to sit down with him and make him feel he was special, not just another player. In your workplace, people need to know that you care, need to feel that their job has meaning. Under those circumstances they will want to come to work and they will give you more bang for the dollar you are paying them. This is especially so in the workplace of today. Two out of four people will suffer a mental affliction in any given year. You have the opportunity to proactively search out what’s going on in your work force and play a positive part in bringing out the best in each of the people. That shows up in the bottom line and bears on business value.

Mine the Wealth:

Do you have many challenges in your business, to do with costs, productivity, operations etc. The wealth of experience and ideas contained within your workers is immense. Sit down with them and share your problems with them. Ask them for their ideas. They may see the problem from a different view point and might have even seen the problem from their vantage point before. This is a win-win. You may get your solution and your staff member will feel even more valued.

Build your business with the people in mind. They might now show up in the balance sheet but they may be the difference in you having a good experience or a bad one when you come to sell.


For more information contact Tony arena on tarena@bci.net.au or visit www.bcibusinessbrokers.com.au.