With the impending winter upon us, you may be dreaming of warmer days. I know I am. I wish the warmer days would last the entire year. Yet, as we dream, we are strategically planning for a successful winter season. Planning is something we, as snow plow contractors, have to be adept at in order to survive each year.
After attending the Lawn & Landscape Top 100 event this year and listening to the panel discussion on mergers and acquisitions, I began to wonder if I was planning enough. I wondered if my business would be merger- or acquisition-ready if a local or national entity approached me with a deal to make those warmer days a reality. I questioned whether or not my company would be in the best position to sell for top dollar should the opportunity ever present itself. Based on the information from the session and further research, I identified three areas of focus that would allow any company to maximize value and be ready for a merger or acquisition.
1. A predictable recurring revenue stream.
One of the most critical aspects of preparing for a merger or acquisition is to have a predictable recurring revenue stream for your snow removal business. One of the ways we created this stream in my company was to diversify our portfolio with both commercial and residential plowing contracts. You are probably thinking, residential plowing? Is this guy crazy? The truth is, maybe, but we plow 600 driveways a year at a fixed price based on the square footage of the pavement being plowed. Each residential contract is prepaid, with no discount, before Nov. 1 of each year.
2. Completely turnkey operations.
The most important question to consider here is: Can your business run without you? Any potential buyer will want to know, without a doubt, that they are acquiring or merging with a turnkey operation that will not fall apart without its original owner. Therefore, it is critical to create predictable processes and systems that do not require the business owner to see them through each day. The ability to create a turnkey operation, that will continue to grow and thrive without the business owner at the helm, will net a maximum payout in a shorter amount of time.
The approach we took at Callahan’s was to create a turnkey employee system that was automated through our customer relationship management software (CRM). This system included employee recruiting, screening, interviewing systems, on-boarding, and automated video training. As you reflect on your own business, consider tasks that you could easily document and automate so the new business owner could continue business as usual without you. In a recent interview I conducted with author Mike Michalowicz, he suggested taking four weeks away from your business to see if it could run the same without you. I have tried this myself, and as scary as it sounds, it was actually a success. Michalowicz’s advice; it is truly a liberating experience and will force you to see your business from an alternate perspective to prepare for future growth.
3. Historical sales growth.
Always strive to perpetuate upward growth. A potential buyer will want to see a historical track record of growth in sales and revenue from year to year. Should you experience a dip in sales and/or revenue in any given year, you must explain why it happened and how you plan to avoid it in the future. To ensure this growth, it is critical to have a detailed marketing plan and marketing budget that shows: all marketing sources, leads produced per marketing source, how many leads converted into a client, and the cost of acquired client per source.
Planning is at the fabric of our being as entrepreneurs. It’s what we do. The possibility of a merger or acquisition could be a reality in the future. Will your company be ready?