Building Business Value Techniques!

If you permanently left your company today, would it continue with little effect on cash flow?  If so, would you consider this a transferable value? Transferable value is a driver that is critical for business growth.

A company management team is instrumental in growing cash flow and business value.  When a business has the capabilities of having little disruption with its cash flow when an owner leaves, you have a valuable transferable value.  A key component of building transferable value is Next-Level Managers. Usually they are experienced working for larger companies. They know how to grow companies and know how to attract people with experience and the skill to help run a company.   This level of management will demand more money, perhaps ownership as a condition of employment.

Next level management (NLM) and future changes!

  1. To attract NLM, it involves training and coaching for the existing management. When adding NLM it may involve replacing current managers who underperform.
  2. The decision to replace existing management is difficult and hard for many owners, as current management members have been loyal to the company. However, they may be moved to another position with the same type of responsibility.  They are good employees, but NLM do a much better job in the management position.
  3. Engage management consultants and outside resources to create more growth. NLM work well with these professionals.
  4. Owners provide leadership and motivation for management. Owners should design plans that provide strong incentives to management to remain with the company beyond the owner’s exit.
  5. Motivate employees to perform at higher levels, create a culture.
  6. Financial incentives designed to grow cash flow or business value is more likely to achieve the value or cash flow necessary to support the owners’ exit goals and value growth of the company.
  7. Top management must stay in the business when owners leave, or they don’t have a transferable value and will not achieve the goals when the owner exits. Incentive benefit plans help keep top management employees involved after the exit of the owner.
  8. The use of a “non-qualified deferred compensation plan” or NQDC Plan which involves a benefit formula and vesting schedule, highly motivates management to stay on.
  9. When you cobble the benefit formula to a performance benchmark it is possible to increase cash flow and profitability for the company.
  10. The vesting schedule in the benefit it makes it hard for the top management person to leave. They will leave too much on the table. The vesting schedule give the employer the benefit of keeping a top level management.  The employee benefits as the company can offer a richer benefit knowing the reward the employee receives is tied into the company’s profitability.
  11. The appeal of incentive plans for key employees (management) is understandable: To create transferable value, someone other than the owner must be similarly motivated to grow value and the cash flow necessary to achieve the owner’s exit goals and continue the company beyond the owner’s exit.

Operating Systems That Enhance The Transferable Value Of A Company!

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