Corporate Culture: The Sleeper in a Company’s Valuation Equation

MATH ON TV
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I recently heard a story of a woman who bought a CPA firm.  In essence, she believed she was paying for the client list of the seller.  She had the seller sign a non-compete agreement to protect the customers.  She also agreed to keep the two tenured employees onboard as part of the seller’s request.  For the buyer, life was good for about six months.

Soon thereafter the first employee decides to leave the business and informs the clients she will be starting her own bookkeeping practice.  The clients move with the employee.  The other employee sees this and soon follows the same plan leaving the buyer short $100K a year in fees.

Litigation later, the buyer loses the cases and is required to pay the defendants’ fees.  Oh by the way, did I tell you one of the employees was wife to the seller?

There are so many life lessons here, so let’s focus on the overarching one.

When you are thinking of buying an existing business, be very clear in your own mind that you are not buying the revenue, assets and profits.  You are buying the culture and the relationships.

The culture tells you if there are good financial controls in place, leadership is honorable and respected, employees are valued and motivated to stay, customers feel a sense of loyalty to a company that has given them more than they paid for.  Culture tells you if you are buying a transactional versus transformational business.

When buying a business, you are also buying the relationships.  There is no certainty the customers will return post close.  Frankly, there is no certainty the customer list even represents repeat customers to the seller.  While it is not possible to know the relationship with every customer, it is necessary when establishing a good price to know the relationship with the top customers and a sampling of the mid-size and smaller customers.

Want to know the price you should pay for a business, find out the company culture.  It is the sleeper element in the valuation equation.

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People Take Care of People…Period.

Thanks to Social Media, we are seeing just how communal and supportive people are to one another.  Our most basic needs to be socially and emotionally connected are being met in a broad and sweeping way.  It is an amazing new frontier we are experiencing and the business world is catching on in droves.  You have heard the saying “our employees are our most important resource”, yet not as many employees felt that way.  Thankfully, the tides are starting to change…ahh….how good it is and what a glorious change it will be when fully realized.

People ARE the most important resource, people ARE the most important asset, and people ARE the most important gift you will ever get in life.  They are the like water, and air to us…we cannot live without their connection.  Why…because people take care of people….period.

As a leader of an organization, rethink the paradigm.  Your employees should be first in the care chain.  When you take care of your employees first, they will see your customer as their customer and take care of them accordingly.  People will do more when they are in love and they will be naturally inspired to make a difference with others.  When your employees take care of the customers, they will show their love, care and support in return and take care of your business and your shareholders/owners.

Rethink the Paradigm:  Employees then Customers then Shareholders.  Your organizations may be successful but you won’t know just how much you are leaving on the table until you realize this paradigm.

As the leader of You, take care of yourself first.  Fully love yourself first and then you may love and help others.  When you love yourself fully you expect more, learn and grow more, and give and care more.  Caring and giving more are the best things you can do for yourself, others and your company.  Finding out what gifts you are meant to leave, what messages you are meant to share, and what lessons you are meant to teach are the greatest things you can do for others and your company.  When you take care of yourself and then others, it becomes a natural extension to take care of the world including its resources and peace.  Only the most self-actualized and enriched people live this way and aspire for a world of peace and possibilities.

Rethink the Paradigm.  You then Others then the World.  Are you awesome already…taking good care of your health, heart, mind, soul, family and friends, employer, leader, co-workers, community, and earth?  If you are not yet, just imagine how awesome you could be?

People take care of People.  When we understand this fully and emotionally, our new reality will be far greater than anything we could imagine.

Today’s Project:  Show kindness to yourself, to someone who has made it challenging for you in the business community (your boss, your employee, your customer) and do something earth friendly today.  It takes time to see the change so do it again tomorrow and the following day.  Know this: You are changing the direction of your life, the lives of others and the world.  Now that is Awesome!

I would like to hear from you…you matter to me.  What do you think of this interpretation of People taking care of People?  Share your comments below and share with others if you feel so inspired.