Have you ever been curious about how to build a buyable business? If so, you’re in for an excellent episode today with Steve.
Steve Preda’s mission is to help build self-managing, fast-growing, and high-profit businesses. Since 2002, he has helped more than 250 entrepreneurial organizations become more valuable and sellable by serving as a mergers and acquisitions (M&A) advisor, a leadership team coach, EOS Implementer and a Pinnacle Business Guide.
He has spent more than 20 years helping business owners prepare their businesses for sale, finding buyers and investors for them, and coaching CEOs and leadership teams to build a buyable business.
If you want to turn your good business into a great one, this episode is for you. Today, Steve Preda talks to us about making your business buyable even if you don’t want to sell it.
Here are three reasons why you should listen to the complete Episode:
- Steve provides insight into why you should build a buyable business.
- He offers insight into how to make your business viable through his framework.
- Discover the power in empowering your team.
Who is Steve Preda
- Steve was born in Budapest, Hungary and nine years ago moved to the US.
- His passion is working with entrepreneurs, helping them grow their businesses by making them more profitable and structured.
- He is the author of three books on entrepreneurship and selling businesses.
- Apart from being a regular blogger and podcast host, Steve delivers workshops and keynotes to entrepreneurial audiences around the US.
The world of M&A
- Mergers and acquisitions in America are referred to as investment banking.
- It’s about helping entrepreneurs figure out how to turn their businesses into sellable commodities.
- Helping business owners to position their business, find investors that are the right fit, and negotiate the transaction.
Be prepared to be viable
- To be a viable organization in the long term, it has to grow.
- If it doesn’t grow, it’s not able to attract great people, protect its market share, or innovate and find new markets.
- Entrepreneurship is hard work, so you might as well create a business that has enduring value.
- Whether you want to sell it or leave it to your family, a business of value carries your legacy into the future.
Relocating to the US
- Steve started his business in 2002 and he managed to grow it quickly.
- In 2008, they were on track for their best year when the financial crisis happened.
- The business managed to recover, but in 2011, it was hit by the Eurozone currency crisis.
- This was the second crisis in a row and he wasn’t going to wait for the third, so he and his wife decided to move to the US.
Realizing he didn’t have a sellable business
- As Steve was preparing to relocate, he was contacted by a private equity fund manager interested in buying his business.
- He jumped at the opportunity and told him to make an offer.
- He realized that he didn’t have a sellable business when he received the offer.
- This was a very humbling experience, Steve admits.
Transforming his business
- Steve decided not to sell and to commit to making his business viable.
- He had to systemize his business, empower his team through delegation and have an execution process in place.
- Within 12 months, he made his business viable and the buyer came back, wrote him a nice check, and sold his business.
What do buyers of businesses buy?
- They buy an organization that can create profit in the future.
- The less risk involved in buying those future profits is created, the more valuable the business.
- The business’s value is the sum of the net present value of the future profits that the business will originate.
- Buyers want a well-oiled machine that is not dependent on one individual.
Being the expert
- As a business owner, the natural thing is to be the center of your company. This was the case for Steve when his business was not sellable.
- It’s like a baby that you have nurtured and there is an emotional connection as the owner.
- While it’s difficult to relinquish control, it’s counterproductive when a business is dependent on one individual.
Empowering his team
- His circumstances forced Steve to cut the umbilical cord.
- As soon as he started empowering his team and giving them room to make their own decisions, they thrived.
- The team appreciated the opportunity for growth.
- Empowering his team and watching them bloom was an enriching process.
A self-managing business
- The first step is figuring out whether you want to do it and why you want to do it.
- It becomes a priority if you have a genuine reason behind it.
- Look at what your ideal life is when growing the business; you may want to work in the business but not run it.
- After some soul searching, you can use the business to get you to where you want to be.
The viability assessment
- Steve has a viability assessment that involves 40 questions, giving you a cross-section of different challenges you’re facing.
- There are six factors to the viability assessment where you’ll get a detailed x-ray of all factors.
- Working on the factor that is the lowest hanging fruit is a good starting point.
- It may be tough to face up to the weaknesses in the business, but it provides the opportunity for improvement.
The seven management concepts
- This has emerged over the last ten years from different thought leaders.
- Steve believes that if you implement this framework, your business will become viable.
- The seven concepts include your culture, structure, vision, strategy, execution, processes, and alignment.
Alignment is ongoing
- Alignment is not a one-off thing, it must be done all the time.
- Regularly, you need to make sure that your team is aligned with your vision and purpose.
- The more you empower your team and ensure that they understand the vision and strategy, the more they can make decisions without you.
- This makes it easier to create momentum where you are no longer needed as they can run things for you.
The valuation difference
- In his book, Steve contrasts two companies sold around the same time.
- One of them was a niche player, very profitable, had a 70-year-old founder who ran it, but there was no team, no systems, and processes, and their books were not in order.
- The other business was in a much more commoditized market but was well organized, had systems, processes, and a leadership team independent of the founders.
- The first company only sold for three and a half times the profit whereas the second company mentioned, sold for six times the profit.
- Although it can be difficult, becoming irrelevant in your business is a good thing.
- When you build a buyable business, it should run like a well-oiled machine, where a team is empowered to take care of everything.
How does Steve want to be remembered?
- Steve would like to be remembered for being a good father, husband and mentor. That those he had relationships with, personally and professionally, enjoyed the time spent together and that they grew in the process.
3 Powerful Quotes from this Episode
06:25 – “Because an organization that doesn’t grow is not able to attract great people, it’s not able to protect its market share, it’s not able to innovate and find new markets. So my belief is that if someone is already working in a business, you might as well create a business that represents value and which has a future.”
14:35 – “And basically your buyers, they don’t want a headache, they’re not investing in your company because they want to run your business or worry about the future of your business. No, they want a well-oiled machine.”
32:36 – “As you empower your team, the more they understand your vision and your strategy, the more they can make their own decisions without you. And they can create that momentum where you no longer need to be there because they are going to run it for you.”
About Steve Preda
Steve has assisted more than 250 companies and business owners and shares many of their stories in his new book “Buyable: Your Guide to Building a Self-Managing, Fast-Growing and High-Profit Business.” He also shares the story of how he made his own business buyable.
Throughout his career, he has been fascinated by how buyable businesses are created. Some of his clients intuitively got it and built companies others wanted to buy, whereas many struggled with owning a business that found no willing investors. In several instances, his team would find only a single interested buyer to close a deal, while at other times, more than a hundred bidders were not enough to finalize a transaction. What made these businesses unbuyable?
Steve Preda’s extensive experience spans over 20 years, first as an M&A advisor and later as a business coach and a curious student of management principles, led him to build a buyable business.
Connect with Steve
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