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Weaknesses are found in every company and fixing business weaknesses is the way to add value. A common business saying that “the test of a good company president/ CEO is what happens when they leave” is a good example that leadership is a key to a good company. Some companies may look the same on paper but, one may be way valuable than the other due to a weakness in the other company. The fact that all problems cannot be fixed, mitigating them is the way to go. This fixing and mitigation contributes significant value to a company. Fixing or mitigating weaknesses doe not only improve the value of a company but also increases the chances of identifying the right buyer. Creating a business plan is a sure way to help you identify the weaknesses in your business/ company. The following are common business weaknesses that buyers watch out for and pushes them away from a possible acquisition.
“The One Man Band”
Many companies’ especially small independently owned companies were founded by the owner who happens to be the CEO or president relies on decisions made by one person. With no succession plan in place, no one is ready to take their place in case a need arises….maybe when they hit by the proverbial truck. This is typically a one-man band operation that does not create an attractive and enticing target for acquisition.
Industry Trends
It is a common occurrence for markets to decline, weaken and even lose value over time. Companies that are in these markets should have evolving strategies in place to make drastic changes accordingly. An example of an ” evolved strategy” company is one that initially manufactured Digital Video Disks (DVD’s) and, after realizing the decline in this entertainment product, switched to manufacturing multimedia flash drives. The company will still manufacture DVD’s but the initiative to switch to a growing product indicates the ability to withstand the test of time a factor that can impress will be buyers.
Customer Base Diversity
A company’s customer base is a major concern of most buyers. A company may have appealing numbers in terms of revenue and profitability but, for some companies mostly the small one-man band, a few consistent customers account for most of the figures. Most of these loyal customers have been in this relationship built over years and are seldom transferable. Finding a wide, varied and diverse market is time and resource consuming, but the effort is essential when it comes to selling the company.
There certainly are many other weaknesses that should not be overlooked, but certainly, the time to act on them is now. If you consider selling your company in a few years’ time, start now. Planning ahead will significantly add value to the eventual selling price. Visiting a professional business intermediary is a way to understand other weaknesses and a first step to fixing them as early as now.
Based on one product
Many companies start out with the development, manufacture, and sale of a single product or service. For instance, Apple started by manufacturing a computer the Macintosh LC. The company, however, went on to embrace the development of other products and services like music, phones, and Digital media players. If the company did stick to a single computer, it might have gone out of business a long time ago. The effort to make product developments is an indicator of potential within a company, a selling point to potential buyers.
Workforce Augmentation
There are many successful companies whose success can be attributed experience of its workforce. However, with experience comes time and finally old age settles in. This means that a time will come when this “experienced” workforce will retire. Technology may replace them but the decision has to be implemented. I can bet that no one wants to have a company that has all the resources and equipment but no one trained let alone experienced to operate them.
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