My check engine light is on… Is that important?

March 15, 2017

By Martha Sullivan, CPA, CVA/ABV, CM&AA, CEPA
Partner, Succession Planning Practice Leader

As silly as it seems, sometimes we ignore the obvious warning signals in our lives. For example, the young man who ignored the warning light on the dash of his new used car, delayed going to the auto shop one day too long, and suddenly found things getting disastrously warm under the hood. Or ignoring that confusing email from the insurance company about the policy on said car. Two little things. Taken separately, the two warning lights seem like small annoyances, but when joined together make for a sad situation and extraordinarily expensive life lesson.

How many of these warning signals do we see and ignore every day in our businesses? My guess is the answer is plenty. It’s likely far more than we realize or would want to admit. As business leaders and owners can become consumed with what we have to do – to get the next sale, the order out the door, the cash in the door – to the point we miss the signals of the important things needing our attention.

It can be easy to rationalize or ignore the signs. Cash is tight because that’s just the way our biggest client treats us. Employees leave us because, well, he was a slacker anyway. We can’t do anything about sales and pricing because it’s so competitive out there. Profits suck because it’s competitive out there. Bugger, I’m late for that meeting!

Meanwhile, the business is left to its own inertia – possibly as a diamond in the rough or conversely as a lump of coal sitting higher up on the heap. The value of the business is left to chance. When it comes time to transition the business to the next party, it may or may not hold interest to a buyer or member of the family.

There are steps you can take though to avoid this, including:

  • Recognize your business is and should always be viewed as being “for sale,” even if it is preordained to be handed down to the next generation.
  • Build systems to help you identify and monitor the warning lights important to your business and do so on a consistent basis.
  • Critically analyze your business as an objective buyer would. Setting emotion aside, would you invest in the business? What is driving or undermining its value?
  • Commit to working on those drivers that enhance the value of the business. After all, it is likely the biggest asset in your portfolio.
  • Put together a team of outside advisors to help you. Bring them together to share what’s on your mind so they can better collaborate. Engage them to hold you accountable to working on your business, not just in it.

As the young man in our story learned, it is important to take care of the engine running the car. Next time, no doubt, he will pull over and work on the vehicle that gets him where he needs to go. The question is, will you?

For more information or assistance on business transition strategy, call 888-556-0123, email info@honkamp.com or submit our online form.

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