The following article was written by Doug Howard and published in Remodeling Magazine.
Each year, every business owner should take a hard look at their company’s performance: Look back at where you’ve come in the last five, three and one year. And look ahead at where they want the company to be in the future – what plans do you have for staffing, pricing, marketing and budget? One of the best ways to do this is to envision you are gearing up to sell your business. Whether you have plans to sell the business or not, what makes a company more sellable in the future also makes it stronger, more profitable and more valuable in the here and now.
These are the things that drive a company’s value:
• Document your reputation in the industry. A business a strong history, legacy of work, recognizable company name, positive customer reviews, and regular community involvement are all teh ingredients of a company’s stellar reputation. In addition to constantly having these in focus and driving your organization towards them, you also need to document them Keep a record of your reviews. Invite media coverage, and tell your story often in a blog on your website. Participate in local and industry events and enter award programs that will celebrate what your do. All of this can be leveraged to attract the best projects and command premium prices.
• Articulate the company’s market position and messaging. The more sellable company is focused on a particular segment of the market and particular types of jobs, and has unique value proposition and a strong, clear message to that market. Marketing is essential; it allows a company to distinguish itself from competitors, and reap a higher yield from its marketing effort.
• Define recurring revenue streams. The more sellable company, even in our industry which works project by project, seeks recurring revenue streams. This can be recurring work such as handyman or home management services. It can also be work from reliable strategic partners such as architects or real estate agents. Know which revenue streams are most reliable and making sure your company is positioned to tap these sources will help maintain consistency and drive profitability.
• Maintain a backlog of work. A sellable company creates and maintains a backlog of work. Many remodeling companies build a backlog of work that carries them for several months, or more, into the future. This allows them to set appropriate staff levels, to design and plan jobs properly, and to avoid periods of time when there is not enough work to meet profit objectives.
• Reduce dependency on the owner. The more sellable company continually works to reduce it’s dependency on the owner. This is done by having written processes and procedures, gradually shifting responsibilities from the owner to members of the staff, and continual employee training.
• Reduce dependency on any one employee. The more sellable company also reduces its dependency on one or a few key employees. Written process, cross training and employee development all contribute to making the company stronger.
• Form a leadership team. The more sellable company develops a leadership team. This small group within a company provides experience, insight and unique perspectives to the company’s decision making. This also allows the company to operate effectively in the absence of the owner and can help maintain a positive an consistent culture.
• Identify a successor. The more sellable company has also identified a successor or potential successor. It could be a partner, family member or leader within the company. The development of this person also gives the company greater stability and continuity.
Taking these ideas into consideration, successful remodeling company owners should develop 3-year and 5-year plans aimed at driving company value. These plans – written down and thought-over by all the key players on your team – are essential for creating those conditions that make the company more sellable. Make these plans the foundation for growth and profitability, and get in the habit of going back to these written plans to evaluate how well you are living up to them. Adjust and refocus as needed.
None of the things that drive value in your company can happen all at one time. In fact, they generally take years to fully develop. However, long-term plans formed around creating a more sellable company will provide the strategic framework for building a stronger company each and every year.
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