BY SUSAN ROSE
All too often we hear about small business owners who are shackled to their companies, day in and day out, and never manage to break free. It’s not unusual for our industry because the majority of companies are small, with only a handful of vehicles and few staff. And because the industry has such a low barrier of entry—you can literally start with one car and no employees, and not much capital is required—there are more and more operators every year competing for your clients.
One of the classic mistakes that business owners make is getting caught up in the present and not having a game plan for where they want to be next year or even 20 years. Did you go into business to be a slave to your company, or do you want to build a brand that you can later sell to the next generation of owners? Being an entrepreneur means you have the vision of where your company can go, but you can’t do that if you don’t have a plan and aren’t growing predictably and dependably so that your business stands on its own—without you as the only glue holding it all together.
How do you nurture a strong company that doesn’t rely solely on you? Andi Gray of Strategy Leaders and Joe Ironi of Global Alliance shared their thoughts during their seminar, Where Is Your Business Growing?, at the 2015 Chauffeur Driven Show.
“You may have grown because people like you, but it doesn’t mean you have the actual business skills to run a business, and that could mean that you’re competing with people who think that you have to compete on price, without factoring in profit. You’re only going to grow if you reinvest that profit and think big,” says Ironi.
Expand Your Team
Most companies initially thrive by word of mouth and the passion of the owner, but you have other people at your disposal: Your employees! We tend to think of our chauffeurs, reservationists, and other office staff only in an operational capacity, but they are talking to your customers every day. With the right training, they could be your best salespeople.
“If you’re not doing sales training with them, then they will be inept, or will fall into some habits that may or may not be good. Most people coming in at that level don’t have the skills to do sales. Set up practice time for your staff—let them work with each other using real-life examples,” says Gray.
Of course, you may need to hire a salesperson, but make sure that the right person is doing the hiring. You’re not looking for the same qualities in a salesperson that you are in a chauffeur: You want someone who is going to be professional, but willing to ruffle a few feathers and have the tenacity to break through some barriers in order to connect with the right people to make the sale.
Up Your Marketing
It’s important to understand the difference between sales and marketing. Marketing is what you do to support your sales efforts. Most operators don’t have a huge budget dedicated to it so you have to be resourceful in the ways that you brand your company and how you connect with customers.
“In my experience, I don’t necessarily see [social media] as effective for our corporate customers, but with retail, it could be necessary,” says Ironi. “We started a blog on our site to help with SEO so now we get a lot of incoming leads, but you have to look at other ways of marketing yourself. Certainly getting involved in your industry, associations, doing volunteer work, and different avenues where you become a known player in your community will be very effective. It’s such a ‘noisy’ marketplace that you have to find the best ways to direct your marketing budget.”
Speaking of your website, Gray recommends putting your phone number on every page and including your address in your contact information. “Customers still want to do business with people they know and like, even if you are marketing yourself as an international company and you’re based in Timbuktu. Not having an address on your site, to me, is a red flag,” she says.
Acquire Another Company
Now is a great time for acquisitions. The cost of capital is still very low, and there are quite a few owners who will be retiring over the next decade and looking to monetize their business, according to Gray. By taking over a competitor, you could instantly create volume, grow your staff and fleet, and have access to an expanded base of customers.
This gives you the ability to add management staff, get funding from the bank, afford more mistakes (by taking risks), and invest in technology—all of the things that are going to contribute to the long-term success of your business," says Gray.
Do Your Due Diligence
Don’t get hung up on the seller’s valuation of the company. What’s the company worth to you? Do you want the customer list, the vehicles, the employees, or just the brand? How does the company complement what you already offer, and how does it enhance it moving forward?
Of course this also means checking the company’s financials well before you decide on the deal. It goes beyond just looking at the company’s P&L and balance sheets. Are there liens on the company? Do they have a lot of legacy debt? You don’t want successor liability. It may not make sense to buy the corporate entity when you can buy pieces of the organization.
Make sure you have an attorney who is well-versed in mergers and acquisitions, and that the other side is represented as well. The agreement must be in place before anything gets started. And if you don’t like it, walk away from it. You have to live with it, so don’t be so vested in it that you don’t have a way to stop the deal at any time.
Understand What You’re Buying
“If you’re a 30-car company and you’re buying a two-car company whose customers are loyal because the owner is behind the wheel, it could be a difficult situation,” says Ironi. “Those who are used to that personal service may not feel like they’re getting it with a bigger company. You don’t want them to feel like they are just another number.”
That’s why it helps to understand what type of acquisition you are doing. While many customers won’t care what’s happening behind the scenes, relationships with certain staff members do matter. Admins who are booking service for their corporate bosses will be accostomed to working with particular reservationists. A client may be concerned that he can’t request his favorite chauffeur. A longtime customer might not be keen on adopting your online reservations system when he’s used to email. These are all things you need to plan in order to prevent losing that customer.
It Won’t Go as Planned
When Ironi acquired a competitor’s company, he expected that they would be able to consolidate offices and bank those savings; however, It didn’t work that way. Because the new company was growing so quickly, they had to set up an additional office anyway.
Real estate isn’t the only thing to think about. You also have to consider the growing pains during the transition: Who will handle the merging of bank accounts and accounting? What staff member will visit with customers and find out what their needs are, and then circle back on a regular basis? Who will manage the IT? Who will work with the employees so that they feel that they have a company that will stand behind them and one they want to be a part of? How are you going to mentor those people into your culture so it’s one seamless unit?
“Most acquisitions don’t pan out the way that the owners expected; they under-deliver. You need a strong playbook post-acquisition. You need to think about as much on the back-end the day you take over as most of do when trying to run the financials on the front-end pre-acquisition,” says Gray. Most of all, be patient.
Consider Alternative Arrangements
“You can get creative with stock—you don’t have to buy the company all at once. You can put it in escrow and pay it down over time. That also gives the seller some security in they haven’t just given away the entire business—although you obviously have to write exit strategies for both of you—but it also protects you from having to come up with a massive amount of money right in the beginning,” says Gray.
Instead of purchasing the company outright, have you considered merging with another company and taking on a business partner? Having a partner can lighten the load, and studies have shown that having a second owner can increase long-term growth and longevity of the company.
Look Outside the Industry
A lot of opportunity exists to connect with companies in vertical industries that complement your offerings or expose you to additional customers who need your services. Other operators have purchased or merged with bridal shops; wedding, event, or meeting planners; caterers; taxi bases; funeral homes; and destination management companies. Think beyond the confines of chauffeured transportation.
Prepare Your Exit Strategy
If nothing else, the driving factor should be to grow your business enough that it runs itself without you, and that is achieved when you—the entrepreneur—put the right people, things, and plans in place to do so. You have to know what you want out of your business and when you plan on getting out.
“It’s probably best to figure out where you want to end up and work your way toward that,” says Ironi. “I’ve always heard that successful people set goals and try to figure out ways to reach those goals, but in our business, a lot of times it’s like the large dog walking its owner rather than the other way around.”
Secure Your Financials
Long before you consider selling, you should have a valuation done of your company. It will give you a good idea of where you stand so you can work on making your company more attractive to buyers in the future. However, that valuation is just a starting point; you still have to get a buyer to agree to it.
Work on building equity by leaving cash in the business every year. Not only will it help you to weather the rough periods, it also forces you to be disciplined and becomes part of the funding pool in case you need to sell. If you take that money out every year, then you have nothing to show. This is when you should be working with your accountant on business planning rather than just tax planning.
Have a Timeline
Your personal financials matter as well, especially if the business is your source of income or you’re relying on its sale to fund your retirement. Building your timeline is something that happens over time, not just in the last year before you plan to retire or move on.
“You have to consider how you are setting yourself up in your personal life because if you still have a mortgage and some debt, you may not be able to afford to get out. Have a realistic goal—be prepared ahead of time,” says Ironi.
“About 60 percent of owners expect to sell the business to their children or another owner, but the reality is only about 20 percent manage to do it. You have to have a game plan. The most overlooked avenue in selling the business is employees. They have vested interest—more than anyone else—in seeing the business continue after you’ve moved on,” says Gray.
Get rid of the mindset that your employees don’t know how to run the business. They already are! Maybe they don’t know how to talk to the bank or drive sales, but those are learnable skills. If you don’t trust them with your company, then why do you employ them?
If you are constantly putting out fires after years in business, then it’s a sign that you have some work to do. Ideally, your established company should be able to operate without you, in the hands of your trusted management team, while you spend your time growing the business to meet your strategic vision. The opportunities to grow are all around you, but you can’t do that without the right tools.
“Too many business owners think that they may never see an opportunity like that again, when the reality is that opportunities come along all the time,” says Gray. “It’s hard to make the best decision about ‘the right moment’ or ‘the right opportunity’ if you don’t know where you’re going.” [CD0316]