August 2021 Volume 3

OPERATIONS & MANAGEMENT

Having the proper level of processes and systems that result in improved quality and less rework will result in more dollars flowing to the bottom line not to mention satisfied customers who will buy more product. I once helped a very atypical law firm. The activity level in that firm with files continually moving through attorney offices reminded me of a process manufacturer. They had grown rapidly, and they were losing control. Clients were upset and it was costing money for overtime due to confusion and rework. We addressed their process issues as part of an overall Strategic Value Acceleration. Once completed, like a manufacturing company, their operating results and profitability dramatically improved. Strong Strategic Value meant a much greater bottom line. 3. Creates Owner Options As was illustrated in the story at the start of this article, strong Strategic Value creates multiple options for owners and their companies. In that story, the owners opted to stay in the business on a less than full-time basis while maintaining their ownership and their paychecks. They eventually sold part ownership in the business to the manager they had hired to run operations and then a few years later sold the entire company to an outside buyer at a “Gotta Have” multiple. Because of the way a company with strong Strategic Value operates an owner can choose to stay very involved in their business for as long as they wish, they can stay partially involved, or they can choose to spend months on the beach in Hawaii collecting checks and talking to the leadership teammembers as necessary.They can sell all or part of the business to outside buyers, they can sell to an employee group, or they can sell it or pass it down to the next generation of the family. They have created all of these options by creating a company with strong Strategic Value. A client of mine owned a long-established manufacturing company in the Midwest. He had taken over the family business many years before, eventually, he grew weary of running the company, of the winter weather, and the long commutes. He knew that he wanted to spend time down south in a warmer climate but didn’t see a clear path to that end. He also didn’t think he could get the price he wanted for the company. He agreed that his best option was to accelerate the company’s Strategic Value. Within two years of beginning the process, he had improved all four pillars of Strategic Value. His company was making more money, he had a COO in charge of day-to-day operations, and he bought that place in Florida that he always wanted. His original plans to stay in Florida for only short periods of time changed. He was able to stay there most of the year while communicating as needed with his COO. No sale yet but we know that when he is ready to sell, the company will be ready as well.

4. Value Insurance The final benefit is something many owners don’t think of and some don’t even want to discuss. Many owners, successfully running their companies, don’t think about what might happen to the company, their employees, and their family’s future. Unfortunately, they will end up at the same place at the same time. If the owner of the company is so important to the company that it would have a hard time surviving without, he or she, the value of the company will drop immediately should the owner die or be unable to do their job. I have personally seen unfortunate situations where owners have unexpectedly died or become incapacitated. The day after the tragic event, the heirs’ phone begins to ring with potential buyers. Buyers who will attempt to purchase the business at a bargain price. Unfortunately, the heirs may not have a choice. In companies with strong Strategic Value, everyone may feel bad about what happened to the owner, but the company will continue to operate. The value of the company will maintain itself allowing the heirs time to determine what to do with the company. That’s because it is operating as a “real” company not dependent on the owner. The heirs, because of strong Strategic Value, have options too. They can sell it, or they can decide to keep it with a family or non-family leader. Strategic Value enables them time tomake a good decision. In future FIA Magazine issues, I will be discussing each of the Strategic Value pillars and their components in more detail. However, you don’t have to wait. You can start your Strategic Value acceleration journey by visiting www.chiefvalueofficers.com and taking the no cost or obligation Strategic Value Assessment to obtain your current CVO score. ■

Joel Strom is the Founder and CVO at Chief Value Officers. He is also a Managing Director of the Value Creation Advisory Practice at CKS Advisors, investment bankers focused on maximizing value. He can be reached at joel@joelstrom.com

FIA MAGAZINE | AUGUST 2021 53