Part I: Building Business Value Series

July 12, 2016

by Linda Colon

Linda ColonThis monthly blog series focuses on the important challenges business owners and the Connecticut economy face within the next two to five years. Subsequent blog posts will define business drivers, how they affect the value of your business and help you gain insight into your operational strength while identifying the value gap (the difference between what your business is worth and could be worth).

The baby boomer generation, born between 1946 and 1964, used to comprise the largest population boost in American history (now bumped to second largest with the arrival of the millennial generation).

Nationally, 70 percent of all businesses with more than one person on the payroll, or 4.2 million companies, are owned by baby boomers.¹ In Connecticut, 39 percent of small business owners are over the age of 55 according to a Main Street Alliance analysis of the U.S. Census Bureau’s Survey of Small Business Owners Public Use Microdata Sample.

On the cusp of retiring, more than one million small business boomer owners face a laundry list of to-dos due to looming decisions on selling their companies or turning them over to the next generation within their families.

These include:

  • replacing employees who are also planning to retire – management
  • increasing business value and reducing the value gap
  • financials and consistent growth – ensuring documentation is in order and accessible
  • customer diversification – developing a strong customer mix

These critical drivers can help you add value to your company, elevate its worth beyond mediocre stability and ensure a comfortable retirement.

Generational US Births by Year

Compared to the Boomer generation, the Gen X population’s decline (as much as 25%) raises the concern that the most experienced yet smallest demographic won’t be able to fill all the job vacancies of their Baby Boom predecessors.

Building Business Value CoreValue

For businesses with revenues under $50 million, 80 percent do not sell nor do 65 percent of companies listed with revenues over $50 million.²

What makes the retirement planning and subsequent business transitions challenging is that historic data shows a large percentage of businesses that are listed are never sold (see “Selling with CoreValue” bar chart). Not knowing which value drivers have the greatest impact on your business, which ones potential buyers may be looking for when considering a business and which ones you may be neglecting, may result in your business being passed over. Once these value drivers are determined, taking steps to identify and make the necessary changes will set you apart from other businesses, making yours more attractive to buyers.

The small percentage of Gen X successors coupled with the less-experienced millennials makes for a weaker hiring pool. So, what are your next steps to getting your business in order? Do you have the latest manufacturing equipment such as automation or robotics? Is it in good, working order? Are you courting the next generation to fill the soon-to-be-vacant roles in order to carry on your established business? If you’d like to learn more about CONNSTEP’s services, please contact us at info@connstep.org.

Next month, in Part II of our Building Value series, we will look at assessing talent shortages, examining the most common business owner issues that may detract from making your business more attractive to potential buyers and how to continue addressing your value gap.

 

 

 

Footnotes

  1. United States Census Bureau, Statistics of U.S. Businesses, http://www.census.gov/econ/susb/
  2. Thomas L. West, The complete Guide to Business Brokerage, p. 36

CONNSTEP solved a huge problem for us and helped us bring our delivery rate to 100%. As a direct result of that, we have been awarded with an increase in business which, ultimately, will also benefit (our supplier) Har-Conn.”

CT manufacturer Pegaasus

Chris DePentima

CEO, Pegasus Manufacturing Inc.

“I see great value in the new experiences and perspectives CONNSTEP brings to our business, at reasonable prices. They’re not like consultants, they’re like partners in the business – willing to roll up their sleeves and help.”

AGRussell logo

Mark Burzynski

President, Arthur G Russell Co

“CONNSTEP has proved to be a tremendous resource for ESI. CONNSTEP has helped us to adapt to today’s marketplace and remain a quality minded, competitive global player. Our ISO/TS16949 implementation process was efficient and rewarding. I look forward to our future projects with CONNSTEP.”

esi CT manufacturer

Ron Delfini

President, Engineering Specialties Inc.

“CONNSTEP worked with FuelCell Energy to educate and facilitate Lean initiatives and to help meet our needs to establish an overall production improvement plan. This plan has been utilized over a period of time as a ‘guiding light’ to spur numerous improvements that dramatically reduced our product cost.”

Tom Lucas

Manager, Fuel Cell Energy

“CONNSTEP is a valuable partner to Hologic, providing the expertise and ‘outside eyes’ everyone needs to keep their continuous improvement on track. We are now well-positioned on a dynamic growth path and look forward to a long-term relationship with CONNSTEP.”

Greg Safarik

VP Manufacturing Operations, Hologic

“Our experience working with CONNSTEP has brought us benefits we never expected. It’s a great team to work with!”

Bruce Wheeler

VP of Operations, Metal Finishing Technologies Inc.

“The goals of the team were to reduce manufacturing lead-time, reduce floor space utilized, and increase worker productivity. All the goals were met. CONNSTEP helped us to better compete.”

Tornik CT manufacturer

Dan Rubbo

General Manager, Tornik LLC

“The Business Growth Program is working well for us. We enhanced our website following the meetings to improve our SEO and become more visible to search engines. The segment on negotiating …  promoted changes in our thinking and improved how we interact with customers. The mentoring between sessions was helpful in boosting our progress.”

CT manufacturer Colonial Spring

Bill Lathrop

President, Colonial Spring Co.

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