Creating a business of value

By William J. Heestand, CLU, AIF

Who wants to turn around one day after working 30 years to find the business you poured your blood, sweat and tears into isn’t worth what you thought it was?

After having both bought my father’s insurance business 30 years ago and then recently selling that business to an employee, I’ve found there are several things you can do to make sure your business is one potential buyers will value.

Spend the money to document your business First, spend money on the business end of your business. That means not just having a bunch of file cabinets with paper files in it. It means having clear data about your clients and your business financials. It’s expensive to do, but it’s key. When somebody wants to buy your business, you must prove what you have.

Employ everybody under an employment agreement. That doesn’t mean a non-compete agreement, because those are not enforceable. You can’t prevent somebody from doing a business they’re trained or licensed to do. You can, however, have them agree to not solicit your clients or employees for a certain number of years after they leave. This prevents them from walking out of your business and starting a competing business with your clients and with your employees right next door to you the day after they stop working for you.

Hire sooner and before you think you can afford it. If you want a scalable business, you must be able to multiply yourself. Think of it in a factory metaphor. Does a factory operate with just an owner? Of course not. People work in the factories to operate and maintain the machines. If you start treating what you do like a business, you’ll find you’ll be much more successful.

Hire people smarter than you. While it’s tempting to be the smartest person in the room, it’s counterproductive to the business. If you’re trying to keep up with your employees, your business will grow more valuable, and you’ll have a better time of things. In the latter part of my career, every ultra-successful business I encountered at conferences was packed with talent.

Those things, and more, allow you to transfer client responsibilities to key people, which again expands your ability to do more. Because if you’re doing what you’re uniquely capable of doing, then you’ve got to have other people taking care of some of the other details in your business. Again back to the factory metaphor, if you have only yourself running all the machines, you can’t produce that much. If you can’t produce much, your business isn’t worth as much.

See more from Bill Heestand in the following videos:

•  7 ideas to help build a marketable practice
• Why your risk decreases when you give advice as a fiduciary

Learn more about buying a business in the video “7 key things you should know when buying a financial services practice.”

William J. Heestand, CLU, AIF, recently sold the business, the Heestand Company in Portland, Oregon, which specialized in employee benefits, retirement plans and life insurance. He’s a past MDRT member and Top of the Table qualifier. His father, Robert P. Heestand, also was an MDRT member.