Archives for May 2022

This is the Way to Grow Your Business

By Tom Grandy, Founder

Working with this contractor, as a customer, was an out of body experience!  It was kind of like riding a great roller coaster.  Each part of the journey gets better and better.  The ride ends and you take a deep breath and say to yourself, “That was a great experience.”

The paint store recommended a specific painter for our project as it meant stripping and re-staining our front door.  It takes a unique talent for this type of work.  I was not familiar with the company they recommended but I made the call.  To my complete amazement, the owner answered the phone and set an appointment to meet with me the following day.  He showed up right on time.  My wife and I walked him through our list of painting needs both inside the house and outside.  He took notes and made a list of what needed to be done.  After sharing his hourly rate, he informed us that since it was fall it would be at least 6 months before he would be able to do the work.  We were a bit downcast but to date, had not been able to find any painter willing to tackle the door.  He was given the go ahead and we were on the list.

Two weeks ago, he called.  Since we had inside and outside painting to do and it was still too cool to work on the door, he asked if he could start the inside painting the next day.  We gave him the go ahead.  He told us he and his son would be at our home at 8:30 AM the next day.  They showed up at 8:30 AM sharp!  After some introductory chit-chat we discovered this father/son team were third and fourth generation painters.  His grandfather was a painter and had 12 children, seven of which were boys.  All the boys were painters.  His dad was one of them.  Their work ethic and attention to detail quickly became evident.  They were not only good at what they did, they enjoyed it!

We never touched a thing.  Furniture was moved, pictures were taken from the walls and clean drop cloths covered everything.  They left at 3:00 PM but before they left everything was in order.  Drop cloths picked up, all paint and supplies were neatly stored in the corner of the room, and they vacuumed the area.  Yes, they vacuumed the entire area!  Except for their small pile in the corner, all was neat and clean.

Each day they arrived at 8:30 AM sharp and left at 3:00.  Later we found out that he left at 3:00 each day to go do estimates for customers.  He explained that he answers every phone call personally and visits each potential customer the next day, no matter how backed up he may be.

The quality of their work was amazing, and they were fast.  What I thought would take at least a week to do, inside the house, took less than three full days.  Best of all, the price was about a third of what I expected.  Quality workers tend to work fast because they are good at what they do.

By the time they left everything was back in order.  Furniture was in its place and all pictures were back on the walls.  If you didn’t know they had been here, you would never know it. 

What Did We Learn?

  • Answer the Phone – It’s hard to make a sale if you don’t answer the phone. If your company is large, it may take a team…but answer the phone 24/7/365.  If you or your staff can’t answer it personally, have someone (real person) answer it.  When a customer calls, they want to talk to someone or they would not have called.  If no one answers the phone, the lead is likely lost.
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  • Give the Customer a Visit ASAP – Remember, the customer called because they have a need. Slow responses give the impression you are not interested in their business.
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  • Show Up on Time – Show up for bid appointments and for the actual job on time. Respect the customer’s time.
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  • Tell Your Story – Potential customers want to know how long you have been in business and why you started the company. In general, you need to share your history.  It creates a bond and builds relationships.  Customers want to work with people they trust.
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  • Fully Realize There Is a Direct Relationship Between How Clean You Leave the Site and the “Perceived” Value of the Work – Most customers see a direct relationship between the quality of work performed and how clean the area is when the work is done. Clean the area when you leave = Great job.  Mess when you leave = Poor quality of work.  It may not be true but perception (in the customers mind) is truth.
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  • Top Quality Work Is a Given – Top quality work is very important. However, if you fail in the above areas, quality work will not be enough to win over the customer.
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By the way. How many people do you think I will share with about the great painting job I just had done?  That is why my painter invests zero dollars in advertising and marketing.  Word of mouth keeps his schedule full.

Although everything we just discussed is true, if the product or service isn’t priced right the company is still going to go out of business.  If your office staff and employees don’t believe in your pricing, they will tend to undercharge the customer. 

This month’s Website Special is our Why Do We Need To Charge So Much? program.  It helps everyone within the company understand why the company needs to charge what it charges.  The program is normally $139.95 but this month it’s only $99.95Order today and enter coupon code: Why40 at checkout.   

Valuations & Pricing of a Business For Sale…What Should be Considered

By Glen Herman, Business Intermediary, Creative Business Services

We often discuss the importance of clean and accurate financials when running a business or positioning it for sale.  To properly value your business, you will need to have 5 years of financials (specifically, the Profit & Loss Statements and Balance Sheets).  While the financials will help determine the baseline of your value, they may not reflect the potential pricing of the business in terms of what the market is willing to pay.

We often see “rules of thumb” and see calculators on the internet when it comes to the value and pricing of businesses.  These are often based on a multiple of revenue or income but inevitably fail to consider some key components that will leave money on the table when you exit your company.  The reason is simple, they often fail to account for the personal use items that can be added back to earnings (cell phones, autos, etc.) and, also fail to consider the market forces that impact value (scarcity of labor, geography, availability of capital, etc).  We will discuss a few of these methods and considerations:

 Multiples of earnings:  While these are typical starting points for the value of a business, there is a lag time between the data reporting of business sales across the nation, and the valuation of a business at a given point in time.  We have seen an increase in multiples since 2021 in several sectors.  Although these multiple changes do not represent dramatic shifts, having an in-depth understanding of the market niche clients are in can have an impact on value.  Think about the difference between a multiple of x3.5 and x4.0 would do to a business with earnings of $500,000/year.  “Rules of thumb” in the case of multiples are not the most effective means of determining value.  They really need to be considered by a valuation and pricing specialist. 

Scarcity of labor:  There are occasions where a buyer is looking to expand market share or grow into a specific territory but is constrained by labor.  This can mean a potential value proposition in terms of sale value.  Labor can be a large barrier to entry for competing firms to enter your market.  If you have a well-trained and professional team, there is value there.  A firm’s greatest asset is often times it’s people!

Geography:  For well established companies (not in terms of longevity but in terms of market share) that have 90% market share in specific communities, geography can be a barrier to entry for competition.  If demand for entrance into a specific geography is desired by the market of buyers, a premium may be available in terms of pricing of a company.

Buyers-test method:   This is a determination of value that provides the value based on what traditional lending sources are willing to lend to a buyer to purchase a business in a particular industry of a particular size.  While this approach takes into account traditional financing, it does not look at creative deal structure, like owner financing and earn-out provisions.  This is often the consideration of value that individual buyers will focus on because they are using traditional lending.  A business broker can help add value to the sale through creative deal structure to maximize seller value. 

When considering the sale of a business, a professional business broker sets a sale pricing with their clients based on the determination of financial value, market value, and market appetite.  While the process of setting a price begins with the valuation, the process of positioning a business for sale often starts years before.  An early result will almost always result in a higher sale value!

If you have any questions regarding the sale of your business, please call or email me today!

Glen Herman   |   Business Intermediary

Creative Business Services / CBS-Global LLC

Business Brokerage | Mergers & Acquisitions | Consulting
p 262.719.2270

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