How to tell how well a business is really doing

How to tell how well a business is really doing

How can you quickly tell how well a business is really doing?

Just observe the Owner…

90% of communication is non-verbal. The owner will quickly tell you everything you want to know – all you have to do is listen to and observe them.

Unless the owner is an extraordinary poker player (or insane), you can tell the state of a business by the state of its owner.

In poker, a ‘tell’ is a subtle but detectable behaviour or reaction players exhibit consciously or subconsciously, allowing skilled opponents to judge the strength of a player’s hand. But ‘tells’ are not unique to the game of poker and are a useful tool for an observant party in any negotiation. Sometimes business buyers can get much more information if they consciously observe and know how to read the signs.

If the owner is excited and bursting with energy, enthusiasm and optimism, logical and right on top of their game, then their business is more likely to be focussed, vibrant, progressive and thriving. With the business performing strongly and looking very attractive, care will be needed to assess how capable the buyer would be at filling the shoes of such an effective owner. Soliciting the owner’s help after the sale will be critical to maintaining momentum in the business.

However, if the owner is jumping all over the place, easily distracted and constantly darting from topic to topic without completing any sentence or thread, then the business could be in shambles, disorganised and dabbling in many things without being really good at anything. Buyers will have to work hard to pin the owner down to find out exactly what the business does and why, and how well it does it. In cases like this, finding areas of sustainable competitive advantage may be more difficult. However if it exists, applying some focus and discipline may make the world of difference to the business and be well worth the buyer’s effort!

If the owner is fidgety, nervous, on edge, agitated, disorganised, stressed out and constantly getting calls and messages, the business is highly likely to be the same.

On the other hand, if the owner is too lethargic or apathetic, disengaged and lacking ambition, then the business may be directionless and underperforming. The owner’s demeanour will most probably have flowed through to the staff who may lack drive and motivation and be underperforming along with the rest of the business. Now that may not be a bad thing, as an underperforming business may be exactly what the buyer is looking for…

You will have seen businesses for sale due to the owner’s ill health. In our experience, the ill health of the owner can sometimes reflect the ill health of the business. Businesses under stress generally put their owners under stress.

Conversely, a business that is performing badly may put pressure on its owner and drag them into the same hole. Then you have to ask why the business was performing badly in the first place? In many situations, lack lustre performance and a dysfunctional workplace are often a direct reflection of the owner’s personality and attitude towards the business.

It doesn’t really matter which is the cause and which is the effect. The point is that the owner and the business tend to reflect each other – and this can be a glaring tell for any prospective buyer to look out for. Understanding the business owner is just as important for any buyer as understanding the business itself.

Please feel welcome to add your comments and/or share with your colleagues.

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