Your new plan for a successful exit strategy.
By John J. Kimmel
Do you know how much your company is worth? Is the number high enough that you could exit today and still leave something behind for your family? Could you double the company’s value in three to five years? Could you triple it, or increase its value even more?
Most of the factors that influence the value of your company are within your control. Unfortunately, many petroleum marketers don’t start focusing on these elements until it’s time to sell the company, and then it is simply too late. Consequently, if their company isn’t worth as much as they hoped for—or needed—they are forced to make tough decisions. It doesn’t have to be that way.
The strategies below will help give you a clear path to a successful exit. The more time you have, the more impact these ideas will have on the value of your business long term. But even if you have to exit at the end of this calendar year and only have six months to implement these methods, they will still make a difference.
Start With a Strategic Plan
Before we start on individual items, we need to decide where we are going and what it will take to get there. If it were November or December, I would tell you to do a real annual strategic plan. But if you are reading this now, I would suggest drawing up a plan that goes from now until the end of 2025, as anything shorter than that means you will be back in the planning stage in too short a time. Almost without exception, you should bring in a third-party expert to help you with strategic planning.
There are many qualified options, our firm included, that can bring out the best in your team and set up the systems you will need to stay on track and hit the goals that will get you to your desired destination. There are also very inexpensive software solutions that can capture the information generated in your planning session and keep it in a format that is interactive for your entire team.
Improve Your Sales
Notice I did not say increase your sales, but rather improve them. There are many factors that go into selling the perfect mix of products to the perfect set of customers.
If I asked you to tell me how much profit each of your customers generated, would you be able to tell me? If we are going to improve your sales, the first thing we need to do is define who your best customer is. There are so many variables, but generally consider: what sector they are in; what products they buy; how often they take delivery, and in what quantities? Odds are, you already have a few different types of great customers. We want to focus our growth on those companies before we focus on anyone else, because we know we are already successful at that kind of business.
The next step is to improve your sales team. According to research, as many as 92% of salespeople have never been trained to sell. They have been trained on the products but not on how to sell them. It is no wonder that among all the salespeople our company has trained, the lowest increase we have seen in year-over-year sales is 22%. Most of those salespeople are industry vets, not rookies. So, training makes a difference. Training will also allow you to maximize the profit you make from your customers. If the only strategy the salesperson has to get the order is to lower the price … well, you get the picture.
Examine Your Costs
We work in an industry that runs on profit measured in pennies. If you are only making pennies, then you better not spend any money that you don’t need to spend, especially if you want to increase the value of your company.
There are many different types of costs that can eat up your profit, starting with your people. One of the most valuable exercises you can do is to right-size your staff. While some companies run skeleton crews, barely able to get all the work done every day, most suffer from being over-staffed. Here is something to consider: According to Gallup, the average American worker wastes 3 hours and 31 minutes per day. How much more could your staff do if they worked an extra three hours per day?
We recently completed a project with a company where every single department claimed they were understaffed and needed to hire extra help. After a thorough analysis, we determined that the organization should trim its payroll by a whopping 40%. Today, with systems in place to reward diligent workers, the company can reward individuals and still save a ton of money on payroll.
There are a lot of other places to save money on everything from office supplies to truck maintenance to software providers. A common place companies lose value is through bad financing. If there is a better loan available than the one you have, take the time to explore your options. It could yield positive results. Overall, doing a deep dive into your costs can result in putting a lot more money to the bottom line.
Acquisitions and Divestitures
Even if you don’t want to exit in the foreseeable future, increasing the value of your company will give you the ability to borrow more money when you need to expand. Many in our industry have increased their company value exclusively through acquisitions. It could be that acquiring certain companies will have a dramatic effect on your company’s value.
For some, the other side of this equation could be even more powerful—divesting. There may be a division of your company that you need to sell. Maybe you are great at lubricants, but your retail division is draining the life (and value) out of your company. Maybe you need to keep your retail and sell your propane. You get the idea. Just because your company has always done something does not mean it needs to continue doing it.
Define Your Path
It is impossible to plot a course if you don’t know where you are starting. Having clean, accurate books is critical if you want to maximize your company’s value. Once you have books that are accurate, you can project where you will be if you stay on your current course or where you will go if you alter course. Like strategic planning, this may require an expert’s help. Very few accountants or even CPAs have the expertise to do this correctly, so you need to make sure whomever does this work knows what he or she is doing.
John J. Kimmel is the author of Selling with Power. Kimmel provides custom solutions to increase the effectiveness and profitability of sales teams for petroleum marketers all over the United States. Visit www.johnjkimmel.com.
