A Cold Plunge is Just What Your Business Needs
Increasing the Value of Your Business Before Selling.
[this article appeared initially on the Waypoint Private Capital website and can be viewed here]
One of the most popular influencers in the health arena right now is Gary Brecka, a human biologist and bio-hacker. He tackles health and longevity from a perspective quite different than that of traditional doctors. One of Gary’s favorite sayings, which really grabbed my attention, is, “Aging is the aggressive pursuit of comfort.” He continues, “We’ve got to stop telling Grandma not to go outside because it is too hot or too cold. Stress is very good for the human body.” Daily cold plunges are one of the stressors he recommends. For those who aren’t familiar, a cold plunge involves submerging yourself in ice-cold water for a few minutes.
OK, I’m in! I’ve been doing the cold plunges, vigorous exercise, and fasting that he recommends. None of them are fun or comfortable, but I know they will lead to good outcomes, so I am committed to following through with them. My motto this year is “Do the Hard Things.”
While Gary Brecka doesn’t specifically discuss business, I believe his concepts and non-traditional approach can be easily applied to business, especially for business owners thinking about selling their business. Many business owners should consider doing the hard things for a year or two prior to selling their business. They should give their business a metaphorical cold plunge to increase its value prior to selling it.
The cold plunge for the business can result in higher revenue and earnings, a stronger and more focused management team, a company that isn’t completely reliant on the CEO for its success, a better understanding of the financial drivers at the company, and a company that is less risky than it was before the plunge.
When my partners and I help business owners sell their companies, it is very easy for us to spot the opportunities for value enhancement that we consider to be low-hanging fruit. If we had met the owners earlier, we could have helped them see those value-enhancing opportunities. Instead, we are left to point out those opportunities to the buyers, so they can make the changes and reap the rewards.
We had a client not long ago that was one of the largest companies in their industry. Although they were selling their products throughout the country, they were doing it from one location. Sales in that industry are driven by strong relationships, so when we questioned the CEO about whether having regional sales offices would be helpful, he said it would absolutely help to increase revenue. He just hadn’t chosen to pursue that opportunity. We highlighted the opportunity when selling the company, and after the sale, the buyer pursued the opportunity immediately. Three years later, the revenue at the company had increased from $55 million to over $200 million, and their profitability had increased proportionally. But because the buyer pursued the opportunity instead of the seller, the resulting increase in company valuation went to the buyer, not the seller.
We’re not alone in seeing these opportunities. I was recently talking about this topic with two business consultants. They both see the same pursuit of comfort by business owners who are simply coasting towards retirement rather than trying to increase the value of their business.
Patrick McIntyre, a founder and sales consultant with SX Wisconsin, approaches value enhancement for his clients by focusing on sales. He has been able to significantly increase the growth and value of their client companies and put sales teams and processes in place that make companies more saleable and less reliant on the owner. Patrick observes,
“We see many misfires in sales by owners trying to make the easy fixes without a well-thought-out sales strategy. On the surface, these changes occasionally lead to temporary sales improvement, but without a well-structured sales process in place, the systemic problems always resurface, negating short-lived success. We help companies develop and implement sales strategies and systems that are targeted and data-driven, customer-centric, and aligned with the company’s broader strategy. This leads to lasting increases in revenue and profitability that can significantly increase the value of a company.”
While Patrick tackles value enhancement from a sales perspective, Erik Owen, the founder and a certified exit planning consultant with Oak Hill Business Partners, focuses his efforts on strategic and operational issues. Erik has worked with dozens of business owners to help them increase the value of their business. Erik shared that,
“All the companies we work with have numerous opportunities to increase the value of their company. We find that most business owners and their management teams are so focused on their day-to-day execution that they rarely step back to think about how to solve problems or proactively make strategic changes that will increase the value of their business. We most often see opportunities for value enhancement in the areas of strategy and communication, culture, and understanding the financial drivers at the company. When we work with business owners on those issues, it leads to better execution, stronger and more stable teams, and higher profitability.”
Steve Sprindis is the author of this article and the co-founder and managing director of Waypoint Private Capital.
Waypoint Private Capital is an investment banking firm that advises the owners and management teams of middle-market companies through critical stages of their business’ life cycle. Waypoint helps business owners sell companies, buy companies, raise equity and debt capital for growth and recapitalization, and plan for a successful exit from their business. To learn more visit waypointprivatecapital.com or call 608.515.3354 or 918.633.2647 and speak with a Waypoint Private Capital expert.
