Year-End Planning to Create Greater Value for Your Business in 2022 |

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The following was first published on the International Fiber JournalDecember 21. It is republished here with permission.


Technological advances have transformed the global economy into a local economy. While this has created opportunities for business owners, it has also paved the way for significant threats and challenges.

Do you see new and / or stronger competitors appearing in your market? Are innovative technologies emerging that will have an impact on your customers’ preferences or purchasing habits? Have you taken into account the impact of shrinking markets, new regulations and / or raw material shortages on your business?

Resilience is a fantastic word to describe your property over the past 24 months. Congratulations on leading your business over the rapids and now looking through the windshield as 2022 looms on the horizon.

Now is the time to stand out even more and use some of the lessons learned to position your business for 2022.

Is this the year you will seriously think about your life after possession? Did you know that there are specific strategies that you can execute immediately and in the months to come that will create value in your business, so that when you finally decide to exit, you can get the most value out of it?

As you begin to plan for 2022, taking a hard look at your business model and reshaping it as necessary can allow you to take advantage of new opportunities and protect your business against new threats that may present themselves around the corner.

Mid-market business owners tend to spend more time working in their business than on their business, and often lose sight of the strategic priorities and direction necessary for success.

Taking a proactive approach to assessing threats and opportunities today will help maximize the value of your business in the future.

Consider the middle market business opportunities

To make the switch, you need to consider the opportunities that you may not have considered in the past.

Customers, Products, Services, Innovation: Have your customers’ needs changed? Could you deliver your product or service in a more meaningful way to generate increased customer loyalty or engagement? How can you innovate your business model to deliver a better customer experience?

In the good old days, if you delivered a quality product or service at a reasonable price, customers would always come back. This is not the case today. Businesses need constant innovation to meet the changing demands of their customers.

Your Employees: Your organization’s employees are as essential to its success as you are.

The stronger your internal team, both at the management and staff level, the more valuable your business becomes.

The greater value can be derived when the owner is considered replaceable.

The greater value can be derived when the owner is considered replaceable. It might seem callous, but it’s important that potential buyers see a strong management team that doesn’t depend on the owner. You must demonstrate that the thriving organization you have built will continue to operate successfully without the same level of involvement.

Doing it effectively can take some time. Your experienced staff have made a tremendous effort for you over the years. Now is the time to take a close look at who you think can continue your legacy and start preparing them, perhaps starting with a promotion.

A strong leadership team with clear functional roles and experience will go a long way in retaining and reducing your daily activity over time.

In addition to having a strong management team, potential buyers usually rely on existing staff to carry on business as usual.

Consider ways to keep your staff loyal and motivated. Loyalty should be rewarded with recognition, both financially in the form of a bonus and / or visual recognition with internal rewards or notices such as “Employee of the Month” and similar accolades. Small gestures of recognition go a long way in letting the team know they are appreciated.

Make sure finances are bearable and in control

It is good business practice to review and validate the accuracy and truthfulness of your financial data on an annual basis, as well as to test your financial controls and procedures.

This review process will be essential at the time of a transaction and if it is not currently part of the culture it may take a few tries to get it right. We recommend starting as early as possible, as potential buyers should have complete confidence in the financial picture presented to them. The quality of your financial statements will play a key role in consolidating the transaction.

Your financial statements must be reliable, accurate and available on a timely basis. While it is common to present “redesign” adjustments that can more accurately reflect the operations of the business, make sure that these adjustments and projections are justifiable and realistic.

Another key factor in creating value in your business is the processes and controls you have in place around finances.

The quality of your financial statements will play a key role in consolidating the transaction.

A potential buyer will have more confidence in your information when you can demonstrate systematic procedures and controls used to ensure the accuracy of the data. An SOP (Standard Operating Procedure) document will further ensure that you have taken this process into account.

Depending on the size of your business, buyers often request three years of audited accounts. If you haven’t got these types of systems in place, now is the time to start building and documenting them.

Also make sure that your other internal technology systems are integrated. Companies that have streamlined technology to directly feed into an Enterprise Resource Planning (ERP) system are in the best position to provide valid information to potential buyers.

A one-time system improvement expense, such as adding inventory and accounting modules to the ERP system, will absolutely be a valuable asset at the time of sale. Without this integrated technology, buyers can reduce the bid as they will incur the cost of upgrading the system.

Dealing with threats

Technological advances have transformed the global economy into a local economy. While this has created opportunities for business owners, it has also paved the way for significant threats and challenges.

Do you see new and / or stronger competitors appearing in your market? Are innovative technologies emerging that will have an impact on your customers’ preferences or purchasing habits?

Are innovative technologies emerging that will impact your customers’ preferences?

Have you taken into account the impact of shrinking markets, new regulations and / or raw material shortages on your business?

While many of these threats may be beyond your control, their impact can be mitigated (or even deflected) with proper strategic planning.

Determine your next step

The rapidly expanding middle market is becoming increasingly complex and facing major changes that will create exciting opportunities but also bring immense, often unpredictable obstacles.

Taking the time to develop a strategic plan to meet these challenges and seize these opportunities will benefit you this year and for many years to come.

Even with the pandemic, the economic forecast for 2022 remains positive and favorable funding is still available.

By incorporating some of these strategic steps into your 2022 plan, you will increase the value of your business. So when the time comes to retire, the foundation is in place to get the most out of all your years of hard work.


About the Author: Len Laporta is general manager of The DAK group, an investment bank specializing in medium-sized private companies. LaPorta advises business owners on buy and sell side transactions, capital advice and valuations.

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