Blind Spots and Deal Killers
All of us have blind spots. Some owners are humble to ask for guidance and others are nose deaf for many reasons. No matter how good you are at what you do, most entrepreneurs have at least one or two unrecognized weaknesses. Negative habits, behaviors, blind spots will eventually lead to harmful outcomes to your business, your relationships and your ego. You cannot separate your personal from your professional habits and behaviors. Some blind spots include your capability and capacity, your communications, financial operational and strategic performance. Business blind spots are areas of weakness or vulnerability that leaders may not see or fully understand. These can be manifested in several ways:
• internal policies in opposition to business goals and objectives
• talent gaps where skills within the organization create fail points
• egos that stifle growth and limit operational efficiency
• failure to understand what customers value most
Two paths running concurrently must occur to identify and eliminate blind spots and holistically prevent hidden issues from crippling your business. Here’s the ‘can you – will you’ step:
Assess and Evaluate Current State. Take a fresh perspective of your business – operations, financial, technology, people, product, process and customer experience – to identify areas not performing optimally.
Seek Employee and Customer Feedback. Employees know what’s working and what’s not more than you do and customers can share pain points you may overlook.
Leverage Data to Optimize Performance. Establish performance metrics (if none exist), analyze data to identify and evaluate trends and anomalies indicating problems and potential solutions, develop action plans with contingency strategies and execute those plans.
Work with a Trusted Advisor. It will take an outside perspective because if it didn’t, then why haven’t you done it already! Whether you bring an advisor, or a fractional executive for a period of time to see what’s hidden in plain sight our experts at JSP specialize in uncovering and addressing business blind spots.
For example, David performed an assessment of a niche Midwestern manufacturing company looking to sell to a private equity firm five or six years ago. They weren’t ready and we took it off market. After adopting several strategies, the owner and his team improved the risk metrics we identified. They successfully pulled several value levers we recommended and scaled the business to where it commanded a premium valuation. The risk points our original assessment concluded were either eliminated or significantly reduced, and that’s the point.
Owner: “Why didn’t someone tell me that years ago?”
Advisor: “Would you have listened? Would you have done anything?”
Know where you are; leverage the strengths, address the weaknesses, mitigate the risks, plan for future growth potential and build out a business case with an advisor’s guidance. Unfortunately, too many owners are tired and want to retire after a transaction and for them that’s the biggest blind spot. They’re comfortable with the risks because they’re lived with them for ten, twenty years or more. The problem is an outside buyer will perceive businesses like that as a very high risk.
One of the bigger blind spots or misconceptions is some owners we represent believe selling their business equals retirement. The reality is that unless you spent the previous 5-7 years proving the business to operate independently of yourself it’s unlikely going to occur. “Why didn’t someone tell me that ages ago,” is a question we hear all too often.
If the goal is a maximum valuation, a premium sale, and you’re involved in the day-to-day operation of your business then it’s dependent on you. If it needs your presence to run efficiently and effectively and you want to walk away on Day One post-close that’s a deal killer to a buyer. It’s why you’ll see earn-outs, employment agreements or TSAs (transition service agreements), rollover equity (maintaining a percentage of the business) and run it day-to-day, so near term future success depends on you achieving the buyer’s goals for a second bite of the apple.
