What Are “Curb Appeal” projects?
In the real estate business quick ways to increase value are known as “curb appeal” or “house staging” projects. They’re designed to make a positive first impression. If you’re planning on exiting the business in about six months or less you’ll complete many of our “Curb Appeal” projects by then. Curb Appeal projects are fast, cheap and low-risk.
But Then There’s “Renovation” Projects
On the other hand, Renovation projects can push value far higher though they take longer, can cost more, be riskier and often demand more creativity.
Forbes and Class VI Partners address these sort of projects from the perspective of why you want to complete them and what successfully doing that looks like. Both in this Curb Appeal article and our Renovation article, we take a different approach — we describe the specific steps you should take in order to enhance company value.
Now, Meet Your Curb Appeal Checklist
- Hire an outstanding website designer and refresh your print collateral. (And if you don’t have any, get some).
- Seek intellectual property protections (trademarks, patents, etc.). Document steps to protect trade secrets. Confirm your IP rights in cases where employees, contractors or clients contributed to creating it (especially software code).
- Beat the PR drum: solicit customer testimonials, industry speaking engagements, trade press coverage.
- Survey employees to quantify the level of morale and act on suggestions on improving processes, the work environment, customer service, etc.
- Speaking of which, survey your customers to determine how happy they are and act on their suggestions for improvements.
- Resolve outstanding/potential legal disputes and tax liabilities. Clean up the tangles of red tape and taxes that apply to your business. Document your right to do business and your history of tax payments in the states where you operate.
- Obtain non-compete/non-disclosure agreements from all, or at least key, employees. (Before considering non-compete agreements, check with counsel — many states now restrict their use and the Fed is contemplating the same.)
- Terminate ineffective employees, some of whom may be — yes — “sacred cows.”
- Update corporate records: minutes; tax and regulatory filings; shareholder agreements; environmental clearances, etc.
- Separate your personal expenses, debts, and assets from those of the business. (This is important.)
- Buy out passive or unproductive small shareholders. They complicate and can obstruct your exit plans.
- “Right-size” your organization chart by reducing your direct reports to about five. Do the same for the people who report to you.
- Clean up aged A/R and A/P. Buyers heavily discount the value of old receivables and they’ll reduce the value of your business dollar-for-dollar on overdue payables.
- Adjust net working capital (NWC) so that a future owner of the business doesn’t suffer cash flow gaps while waiting to get paid for the costs of delivering its service or product. See Investopedia for more detail. How to adjust NWC can be complex so don’t hesitate to ask us about it.
- Revisit key employment and stock option agreements. Private equity and venture players like to see key managers incentivized by owning equity. On the other hand, strategic buyers don’t care much about minority equity distributions.
- In a related activity, incentivize key employees to cooperate with efforts to sell the the company.
- Resolve loan covenant (and any other) contractual breaches.
- Tweak your IT system to deliver timely “management dashboard” or KPI data relevant to running the business. Examples: you can produce a history of sales and profitability by client over the prior three years; you have a constantly updated probability-weighted sales pipeline; etc.
- Clean the place up: paint, organize, and repair (especially bathrooms!).
- Convert from cash to accrual accounting. Have your books “compiled” by an outside CPA if your sales are under $10 million. For sales between $10 million and $20 million, get your books “reviewed.” Over $20 million, you need an audit.
- Sell devalued/obsolete inventory (or put yourself at the mercy of the buyer’s valuation).
- In general, expect your company’s every activity over the last three years to come under scrutiny.
While the number of projects above may appear daunting, each one is discrete, and completing it will almost certainly return far more in value than what you invest. That said, not all projects listed above will be relevant to your unique business. To chat about those projects, contact us to chat. Maybe we can toss out some useful ideas.