If someone offered to buy your business tomorrow, would you be proud of the price?
We analyzed which of our peer group members recently sold to private equity for top dollar; they were all companies we directly coached. That was a proud moment, and it raised a powerful question — what were the areas we focused on during coaching?
It came down to a mix of short- and long-term strategies. The truth is the same things that make your company attractive to a buyer also make it more sustainable, scalable and less stressful to run today.
Don’t wait until you’re ready to sell. Start thinking about the following now.
1. Recurring revenue: Lowers stress and evens the bumps
When I first started coaching Planted Earth Landscaping in Maryland and Drost in Michigan, both were dependent on design-build. They did great work, but every year started at zero.
I would always implore them to grow their maintenance division. Over time, they both expanded maintenance, grew enhancements and added new service lines like tree care. When they eventually sold, both enjoyed a strong exit with a stronger self-running company.
To build that recurring revenue, start here:
⦁ Grow full-service maintenance contracts rather than one-off services.
⦁ Develop account managers who relish proactively selling enhancements and upgrades to existing clients.
⦁ Add seasonal programs like snow, irrigation or holiday decor that keep clients engaged year-round — then turn those into their own divisions.
⦁ Make maintenance a core pillar, not an afterthought.
And, for a pro tip, aim for at least 55-percent recurring revenue so you can handle economic bumps. Then, push toward 75 percent or more for real value creation.
2. Profit improvement: The core driver of value
Profitability is the engine of business value. If your business delivers strong, above-average margins, you’ll command a higher multiple and keep more of what you earn.
There’s a lot you can do here, but let’s break it into two main levels. First, drive your team to achieve and beat your budgets. Use profit sharing, lean thinking and ongoing variance discussions in every department to uncover profit opportunities.
Second, benchmark your firm against others — and against the best — in the industry so you can uncover blind spots and opportunities for brand-new approaches.
With Drost, we focused on both areas, holding every team accountable to budget and comparing their results against top performers, which ultimately grew their gross profit, net profit and revenue.
3. Organizing leadership for growth
If your business depends on you (the owner) for sales, client relationships or daily operations, it has less transferable value — and keeps you stuck in the weeds.
The goal is to build a leadership team that can think, decide and execute without constant oversight. Hire or develop leaders smarter than you in their disciplines. Train your middle managers to lead, not just supervise. And if you’ve got “problem leaders” who hold the team back, address it quickly; a company can’t easily rise above its weakest link.
When you build a leadership team that runs the business day-to-day, you free yourself to focus on vision, strategy and growth. That’s how both financial value and freedom are created.
Culture matters
But it is still your culture that becomes the glue that holds it all together.
A motivated team of engaged employees gives your future buyer the confidence that your company will continue thriving after you exit. It also makes it more enjoyable for you as owner.
Invest in developing a team of leaders who think and act with an ownership mentality, and your company will prosper with and without you. For help on this journey, visit us here.
