This past week I had some thrilling conversations with my coaching clients on their growth strategies.
I told a few of them “either you are buying low, or someone else is buying low, and they could be buying you!”
Let me explain what I mean.
Scale Determines Value
As the hype of the merger-mania floods our industry, it makes it looks sexy to sell one’s business.
But unless you have achieved significant scale, you are losing out and leaving massive opportunities on the table.
The scale of your business determines its value.
The profit “multiplier” used to determine your company’s value (3x, 4x, 5x, etc) goes up with the scale of your company’s earnings.
Are you selling or buying?
One way to achieve scale is by buying smaller firms where the owner is retiring or burnt out.
Fact: The baby boomer generation is in or nearing retirement, and has to decide what to do with their business.
You can buy smaller firms at a lower value (lower multiple), and then when it comes time to exit, you will have a higher value (higher multiple) firm.
This is what I mean by “buying low and selling high”
Have patience and reinvest
If you get caught up in the hype and sell out early, it will be the buyer who is getting the better deal.
“Finish Big” by Bo Burlingham is a great book on this topic, and the title says it all.
If you build your business, organically or otherwise, and reinvest your retained earnings, you will be able to scale and sell high when the timing is right.
Or pass on your business to the next generation.
Have patience, enjoy the ride, and build the life you want to live.
How to build organically?
I was talking with Shanna Scordo, Earth Craft Landscaping, PA, who lives in a rural area.
We discussed the best two ways for her to grow:
- Start up a new division to sell new services to her existing target market. We discussed the idea of swimming pools and other off shoots.
- Expand geographically. Start up a branch in a nearby market. An hour away there is a larger and wealthier population.
(Note: To learn more about geographic expansion, join us for our upcoming masterclass on Building Branches. The early bird ends in 7 days!)
Your challenge: Develop a concrete growth plan by breaking it down into 5 steps
Five is a magic number when it comes to planning. Its an easy way to make big plans more tangible.
For example, I spoke recently with Ivan Katz, Great Lakes Landscape Design near Detroit (and winner of our 2023 Mighty Oak).
He has a seven year BHAG. He wanted help figuring it out and getting past his head trash that was holding him back.
We broke down his big vision into five easy pieces, which makes the plan much easier to grasp, share and implement.
You can do the same with your own vision for growth.
- Get clear on the outcome,
- Make the path easy to understand by others,
- and get going!
Go get em!
Regards, Jeffrey Scott!
P.S. Join us for Building Branches, and get more insight on how to grow the value of your business. Go here: early bird discount.
Email us about our “4 for 3” ticket special!