I had a discussion with one of my new colleagues yesterday and he spoke about the importance our transportation management software plays in creating value and equity for the owner(s) of the business. He shared some metrics with me from another sector of software that were quite startling to me.
There are a few ways to value a business. The best methods take into a account several factors beyond just the revenues/profits and assets of a business. I always find it interesting that after selling the business, the owner is retained for a year or two to help with the transition.
On one hand, I guess that is a form of protection for the buyer in that it prevents the former owner from opening a competing business, but that is usually handled in a non-compete clause as a condition of the sale.
The two primary reasons are:
- They want the former owner there to make sure that the employees stay, and the customers are retained during the transition. That is important.
- They need the owner to show them how the business is run.
But I have always felt that the owner and buyer might be just fine moving forward separately the moment the business is sold.
For the owner, I can imagine that it’s not quite the same working for someone else as it is running your own gig. For the buyer it must be disconcerting to know that the owner is there while you are still trying assert control and manage the asset you just bought.
My colleague told me that in the financial services industry companies are valued significantly higher if they have a database asset of customers in a CRM Software system than they are if the data is dispersed amongst several different applications and locations – papers, files, QuickBooks, Excel spreadsheets, emails.
So, it’s the ‘bringing it all together’, centralizing all the data all in one location that can drive value for the business.
Sometimes I try to figure out all the applications and tools that would required to supplant our transportation management software system. I enjoy it because it drives home the point of how much value our software can be to a business.
First, you would need some sort of database to store the information.
You would then need an application or tool to keep track of all the interactions you have had with your customers
You would need a financial system where you can track your transactions with your customers.
You may have some important documents stored in a filing system.
You will also need Excel to manage some of the other data you have in the business – your assets, partnership lists etc.
But having everything in separate areas, distributed and not connected can slow down your operations, increase your labour costs and make it very difficult to scale.
It is for that reason I have long felt that the biggest benefit of Tailwind’s online ‘All-in-One’ software system is its ability to bring all of this together into one centralized database AROUND WHICH a team of people can work together. This system gives everyone an ongoing snapshot of the business, at any given time, helping them to synchronize their activities with customers, with partners and with one another.
So, when someone steps up to buy the business they are not only buying the customer relationships and their revenues and profits, but they are also buying a ‘whole methodology for the running of the business.’ They are buying, for lack of a better word – the ‘Synchronicity’ of the business!
I have worked in six companies in my working life and I can remember clearly the ones that had some sort of ‘hub’ that drove an operating ethos, and a couple that seemed to run on the thoughts and whims of the owner.
And sadly, if you build the business entirely around a person, or a group of people, and not the customer, then you don’t own the business, they do.
If you own a business – a small trucking company, or a freight brokerage, it is important to understand that in building the data asset around which your people work, that you are building the equity in your business, and the laying the foundations for your exit from the business some day.
Buyers will then see the value of the business, and once you sell, at that moment you will be free to pursue those other dreams and activities you have always wanted to do, and not be weighed down by someone else’s business – that used to be yours – that isn’t that much fun anymore.
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