What's the key to making your business more valuable? First, get out of your own way.
For your business to be as valuable as it should be--and one day sellable--it needs to be able to grow and operate without you at the helm. An acquirer knows that once he or she writes you the check of a lifetime, you’ll be a bit distracted. Logging 60-hour weeks may lose its appeal.
Setting up your business so it can essentially run on autopilot is a challenge for most entrepreneurs, who are often the go-to guy or gal when employees need a question answered.
Carl Mazzanti, CEO of eMazzanti Technologies, is a case in point. By any measure, his is a successful company. eMazzanti was founded in 2001 and provides technology products and services to business clients. Many of its customers are on monthly contracts, which gives eMazzanti a recurring revenue stream. eMazzanti is also technically strong and gets about 10% of its work from other IT firms that refer eMazzanti complex jobs. This year, the company expects to bring in $4.5 million in sales, with above-average free cash flow. In 2011, eMazzanti ranked No. 3,041 on the Inc. 5000.
On the surface, eMazzanti looks as if it would make an attractive acquisition candidate if Mazzanti ever wanted out. Mazzanti says he’s not looking to sell right now, but he was willing to let me take a look at his business and give him some advice about how he could prepare his company if and when the time comes.
To make his company more valuable, Mazzanti needs to get out of his own way. “Carl is still involved in many day-to-day roles," explains Frank Michel, who is president of Malvern, Pennsylvania--based Exit Decisions and helped me analyze Mazzanti’s business. "He spends about 50% of his time on sales, 10% on CFO and accounting issues, and 10% on marketing. Adding another staff member or promoting a key employee would allow the owner to focus on higher-level items, such as strategy and processes. That would significantly improve the sellability of the business.”
In addition to hiring a second in command, I’d recommend Mazzanti try to be more proactive about getting his employees thinking and acting for themselves. One suggestion is to start answering every question he gets from staff with, "If it were your business, what would you do?" This simple question forces employees to think things through for the good of the business and triggers a decision-making habit that, when cultivated, will have them acting like owners.
With fewer of the day-to-day tasks falling into Mazzanti’s hands, the business will be more valuable in the long term -- and more fun to run in the meantime.