Business Owner Resources

One common element of the partnership process that all founders ask about is the valuation of their company. Every founder has thought about what their business is worth and who would be the right partner, whether it be a growth equity firm (minority investment), private equity or a large strategic acquirer. And each buyer will have a different view on valuation, depending on how they think about value creation for the business and what each party brings to the table. In this article, we’d like to share some common valuation methods with the caveat that valuations typically rely on multiple factors that are non-financial.

Where Do We Start? EBITDA.

When valuing your business, PE firms rely on clear and concise financial statements. We understand that not all businesses have or need audited financials and we welcome that! Being able to show a clean income statement and balance sheet provides PE firms a baseline to start their work and to derive “EBITDA”, the market standard for valuations. EBITDA is earnings before interest, taxes and depreciation/amortization and removes the “noise” from financial statements to allow for your business to be compared to its peers in the market. Here is a great article on EBITDA.

How Much Is My Business Worth?

There are many methods of valuing a business, but we can simplify these specific processes down to two primary methods: intrinsic valuations and market comparables.

Intrinsic Valuations

An intrinsic valuation is a model that projects the future performance of a business. This model covers any future growth projects, expansion ideas, and M&A as discussed between the founder and the investor. This model is built by taking the financials provided by the business, projecting the growth of the various product and service lines, measuring cash flows, and creating a capital structure that works for the founders and stakeholders.

One question we like to ask is, “If you had $10 million tomorrow, how would you use that toward your business?” We want to understand your vision and back you in the next phase of growth. This includes your understanding of industry trends, headwinds and tailwinds.

Market Comparables

A private equity firm uses the market comparables method when they pull similar transactions from the market space, industry or niche that your business resides in. This provides all members of the potential partnership with an understanding how these deals work and how they fit into your industry.

Georgia Oak is constantly meeting with investment bankers to assess the market. Every industry has its own unique valuation range, and this allows us to see how your company stands within that. 

At Georgia Oak, the focus of these models is set more on growth and less on highly leveraged deals. We want to hear your story, and we want to know where you see growth opportunities for your business. Our job is to then latch onto those opportunities and work with you to expand on them. 

Our Process in a Nutshell

What Does Georgia Oak Look for When Valuing a Business?

Walking into a meeting, we like to hear a strong founder’s vision, followed by, “I want to take care of Jim and Alice in the office.” You want to ensure these people are supported and prepared to help run the business. That tells us that you, the founder, see the importance of these employees in the pursuit of your legacy. 

Most importantly, Georgia Oak understands that there’s much more at stake during the partnership process than financial incentive. For many founders, these moments can be incredibly emotional and impactful on their and their families’ lives, which is why Georgia Oak places heavy emphasis on the importance of relationship building with all of our partners. 

If you’re interested in hearing more about why we value relationship building, please contact us.

Making the decision to sell your business is not an easy one. Knowing when and why you should sell can be even harder to justify, because there’s no cut-and-dried reason or moment of clarity to indicate when it’s time. 

While most business owners don’t wake up one day saying, “I’m ready to sell,” there are a few common instances that can bring about the need to sell a business. As a founder, the ability to recognize these reasons to sell can be critical in making an informed decision about where to take your company next. 

With this in mind, we’ve compiled a list of common reasons we’ve seen founders give as the sellers of their businesses below.

Professional Reasons

From gaps in operations to perfect timing, many founders discover a need to sell within the operations of the business itself. The most common of these discoveries include:

1. Company Performance

When considering a sale, one of the first things a founder should consider is the current state of the market and the performance of your business within it. When a sale is properly aligned with a company’s peak performance and a healthy, flourishing market, the founder is then able to sell their company for its maximum value.

2. Additional Capital

Feeling stuck? No avenues for sustainable growth? No bandwidth for value creation? Bringing a trusted partner into the mix can give you more access to capital and add more networks to your own, giving way for greater growth.

3. Future Planning

The partner themselves could also serve as the added skill needed on your team to help propel your business to the next level. With the added value of a partner that supports your vision for the company, tasks like succession planning and discussing the future happen more naturally.

Personal Reasons

Beyond the purely business-oriented reasons to sell, many founders encounter personal situations that prompt a need or want to sell. Common personal grounds for a sale often include:

1. Health concerns

2. Family matters

3. Retirement

As aforementioned, reality is rarely as simple as picking a single reason to sell. Every founder’s situation is different, and there are often a combination of reasons (possibly listed above) that drive the sale of a business. 

However, an uninformed sale provoked by a sudden personal or professional situation can lead to poorly done and/or rushed transactions. We highly recommend founders stay knowledgeable and prepared regarding the future of their business for this reason. 

Selling with a Flexible Partner

After making the decision to sell your business, the next step is discussing how you want to sell. A critical point for all founders to keep in mind is that, with the right partner for you, selling does not equal losing all control over your company.

When working with a partner like Georgia Oak, founders have the ability to choose how and when they want to sell. Rather than feeling locked into a single fund with strict bylaws and guidelines, our various sources of capital support our partners in ways others cannot. This gives us the freedom to work with founders in minority and majority equity deals. With this increased flexibility and support, founders have the insurance that their partner (Georgia Oak) will meet their goals.

For more information, check out our explanation of Minority vs. Majority Deals.

Last month, we began our conversation about the importance of filling out your company’s C-Suite the RIGHT way, with the RIGHT leaders. This month we’re taking a deeper dive on an often-overlooked corner of the C-Suite: The Chief Financial Officer.

Why Hire a CFO?

Hiring a financial leader for the organization can be a daunting concept for any business owner. Most entrepreneurs have grown accustomed to wearing many hats (sometimes all the hats). Those founders who have a financial background or education themselves may find it difficult to justify the cost  - or perceived lack of control  - that comes with letting someone else take the reins of the organization’s financial strategy. Business owners with less financial insight may feel even more insecure about the transition to working with a CFO.

But, as discussed in previous articles, leaders must consider the highest and best use of their own time within the business. By fulfilling all roles at once, the CEO or founder may not only be spread too thin, they may also be working outside their core strengths—and therefore not providing the most value to their customers or the business in any arena. As Ed Watson of New Bridge Consulting Group writes for Nasdaq.com:

“While many CEOs focus on activities such as managing strategy, product management, client acquisitions and cash burn rate, they must also fundraise, manage their investors and their board. The CEOs in many early-stage companies may be doubling as both the CEO and CFO.”

 

A strong CFO oversees the nuts and bolts of the organization’s finances, as well as helping manage the relationships with investors and the board. The CFO heads up consistent, regular reviews of business activities, with an eye to both profitability and alignment with the company’s current priorities. The CFO provides support and accountability for business units that may be siloed from one another or have not yet adapted to the business’s pace of growth. A strong CFO can support a creative, entrepreneurial CEO while ensuring financial decisions and strategies are tethered to economic reality.

Within the PE environment, the CFO’s role becomes even more critical—as decisions must often be made more quickly and with increased financial accountability to investors.

The CFO in Private Equity Environments: 5 Keys to Success

OBJECTIVITY

In businesses with PE ownership, the CFO is often an “outsider,” someone hired into the role during or as part of the transformation. Unlike internal leaders who have helped grow the business from a seedling, the perspective from outside the business (and often the industry) allows the CFO to view the business objectively. This means she may be able to challenge blind spots, circumvent sacred cows, and ask fresh questions that haven’t occurred to the longtime employees busy keeping the operation afloat.

ENGAGEMENT & PEOPLE LEADERSHIP

Objectivity is important but should never be confused with apathy or emotional distance. According to Ankur Argawal, et al, at McKinsey & Company, the transformational CFO must be able to quickly glean essential information and spot potential leaders. This means developing credibility and trust with the organization’s employees, in order to gather reliable information as well as cultivate buy-in for change. Despite negative stereotypes to the contrary, this undertaking requires genuine caring for the business and its people, high emotional intelligence, and other soft skills.

QUICK ASSESSMENT SKILLS

Financial leaders in PE portfolio companies rarely have time to grow into their roles, or to carefully craft and plan long-term interventions. Whether the company is hemorrhaging cash or gearing up for the next level of growth, the financial strategy has many stakeholders and a pressing sense of urgency. The CFO must be able to quickly assess where the highest-impact, fixable financial issues are, and react quickly.

BIG PICTURE THINKING

The PE environment requires a CFO who can quickly understand the needs and concerns of all the business’s stakeholders: from the CEO to the front-line employees, and from the end-user customers to the high-stakes investors. These perspectives must be taken as a whole to form a full picture of the organization’s current and future finances.

HIGH IMPACT DECISIONS

By quickly assessing the situation and creating big-picture context, the CFO can see opportunities for the business to make changes that have a large, immediate impact on viability and growth. He can also develop sound financial strategies, metrics and measures to improve decision-making all across the company. According to Argawal, et al, at McKinsey & Company:

“The final priority for the new CFO in a PE-owned company is to keep the overall transformation on track. That includes defining key performance indicators and monitoring metrics in ways that are robust but not overwhelming… With a good handle on the finance function and a clear understanding of primary levers for value creation, the CFO can be a challenger and influencer within the portfolio company."

The CFO in a COVID World: Evolving Roles

According to surveys by CFO.com, chief financial executives in February 2020 tended to divide their time evenly between four types of leadership roles: corporate strategist, change agent, producer (overseeing transactional processes), and guardian (control and compliance). By May 2020, the COVID-19 pandemic had shifted the balance, so that substantially more of the CFO’s time was dedicated to strategy (+13.1%) and change agency (+5.6%).

"When finance executives were asked which important skill they had leveraged because of the coronavirus crisis, the most-cited answer was business strategy, chosen by 34% of the executives, followed by operations management (29%). Data analytics and innovation/entrepreneurship were tied as the third-most-cited top skills drawn on during the pandemic, at 10%."

It’s too early to tell how much these new professional priorities will revert when the pandemic crisis passes. It is clear, however, that many aspects of a CFO’s job will be forever changed as more companies make remote working a permanent part of workplace culture.

Finding the Best CFO for Your Organization 

As the workforce evolves over the next decade, experts predict workers of all types will need increasing ability to manage cognitive complexity, social and emotional skills, as well as technological savvy. According to the shipping and maritime trade publication, Splash: “Finance professionals with industry-specific soft skills are set to be in demand and in short supply.”

It’s never too soon to start considering what your business needs in this pivotal leadership role, and flexibility around industry knowledge or experience is an advantage. Remember that a CFO with the skills outlined above can quickly learn the industry-specific knowledge needed to support your business; while an industry expert without the critical strategic and leadership skills is unlikely to develop them in time to be useful to your team’s transformation.

SHOULD YOU START WITH A CONTROLLER?

If your business primarily needs leadership over its internal finances, accounting and reporting, a controller may be the logical next step, either before or instead of a CFO. If, however, you need a strategic partner to make financial decisions and interface publicly on behalf of the company, the CFO role may be an essential one. Some businesses need both, others have only one or the other.

COULD A VIRTUAL CFO BE RIGHT FOR YOU?

If your business needs higher-level financial leadership, but you don’t yet have the budget or ability to commit to a full-time executive, a virtual CFO (vCFO) or outsourced executive (CXO) can be an optimal solution.

Virtual CFOs perform many of the duties of a full-time CFO, but on a part-time basis. Like a freelance bookkeeper or accountant, a vCFO serves multiple clients, performing key duties on an as-needed or retainer basis. VCFOs may have long-term relationships with their clients, sustaining them until a full-time hire is needed. Sometimes the vCFO becomes the full-time CFO when the business can sustain the position.

CXO: SHOULD YOU OUTSOURCE?

Like the CFO, an outsourced CXO is not a full-time employee of the business and generally works on a contract basis. Sometimes the executive is recruited by the business or a placement firm, other times they may be installed by agreement with the PE firm or other major investors. The outsourced executives may be virtual or housed within the company, and often work full-time for a certain period of time – during a transition or merger, for example – until a permanent replacement is found.

Georgia Oak can assist with locating operational partners and executives to meet your company’s needs during the transformation and beyond.

Why Minority Equity Makes Sense Right Now

We have spoken with a number of business owners recently who have expressed an interest in Minority Equity. We think this makes all the sense in the world.

Why?

Many owners do not think now is the right environment to consider a sale, or simply may be years away from an exit. However, there are a few good reasons to consider a Minority Equity investment:

1. Invest in your growth by bolstering your corporate team, expanding new markets, or executing an acquisition
2. Take chips off the table to provide personal diversification
3. Gain a partner with alignment of goals and skills to bring to the table

It is interesting to see large, sophisticated companies pursuing this strategy. Recently, U.S. Foods, the 2nd largest food distributor in the U.S. with over $25bn in revenue, closed on a sizable Preferred Equity investment from KKR. U.S. Foods did this to “further fortify [their] balance sheet during the current difficult environment”. Could U.S. Foods have brought on more debt, presumably at a cheaper cost? Probably. But their calculus was that it would be prudent to not strain their cash flows and covenants and that equity would provide more flexibility and a value-additive, long-term partner in KKR.

While U.S. Foods is quite a bit larger than Georgia Oak’s target partner size, we think the rationale for Minority Equity to be even more pronounced in the middle market. While banks do have vastly better balance sheets than they did in the Great Recession, we have already seen a general tightening of credit appetite levels. Personal guarantees will be of increasing importance, which can further expose an owner’s personal financial stability.

Putting our cards on the table - why is Georgia Oak interested in doing this?                 

It’s very common for great companies to not be for sale, so this allows us an opportunity to lock arms with some of Georgia’s best. In addition, we see this as a way of de-risking our investment - we benefit from the continuity of an owner or management team that wants to stay in place with a high degree of alignment.

GETTING ON THE SAME PAGE FOR A SUCCESSFUL FAMILY BUSINESS TRANSITION

Family Feelings

Selling a family business can be one of the most important decisions family owners face in their lifetimes. In addition to finding the ideal buyer who will continue growing the business with minimal disruptions for employees and customers, family considerations can make the process more complicated emotionally.

Statistics show that up to 30% of family-owned businesses do not survive into a third generation. Sensitive family dynamics often prevent family members from openly discussing who will take over the business when the time comes. Formal succession plans are rare, and family members often rely on unspoken assumptions for the future. However, as decades pass and new generations appear, some family members may not really desire to work in the business. Others may want to continue their current roles or expand their responsibilities.

Failing to address differing agendas and objectives among the main players can lead to bitter family quarrels. Disagreements within family businesses are common. (If you've experienced this, you're not alone!) One study found at least 40% of family businesses reported conflicts over the preceding 12 months (usually over different visions or varying competence levels among family members). While non-family businesses often have boundaries and structures to handle such conflicts, these boundaries are less common among relatives. Preparing to sell the business can bring long-simmering internal conflicts out in the open.

While the sale of each family business is unique, there are several steps family owners can take to make the process easier.

Planning Ahead

Business owners are often so consumed by the daily challenges of building their business that it can be difficult to think about how they will transition the enterprise when the time comes. Even if there are other family members who could eventually take charge, owners should begin planning for those transitions as far in advance as possible. Solid preparation provides more time to consider multiple scenarios, including a partial or full sale. Being on the same page internally will make the sale process go more smoothly.

Tax and estate consequences are a major consideration in selling a family-owned company. Financial advisors can help determine the best way to structure potential transactions to minimize taxes on the sale while maximizing returns. They can also provide guidance on how to reduce estate taxes for the sellers and their heirs. For example, if family members contribute capital to the company, that investment is treated differently from a parent providing stock as a gift. Similarly, selling to a family member will have different estate consequences than selling to an outside buyer.

Reviewing your corporate governance procedures can also be helpful in preparing for a sale. Family businesses often function under less formal processes than other enterprises. Consider ways to better document your procedures, your client relationships, and similar data that potential buyers want to review.

Choosing the Right Timing

The best-case scenario is that family members communicate early and often about their aspirations for the business and their ideal timeline. Owners can make preparations well in advance of their eventual retirement or in the event of an unforeseen medical emergency that would force them to step down.

Timing is also affected when family members would like to continue working in the business but are not yet ready to serve as executive-level leaders. The family must decide whether they want to hire an outside executive to keep the business going while retaining ownership and letting family members mature. Or they may decide this is the best time to sell all or part of the business. They may pursue a mixture of both strategies. For example, if one sibling wants to keep running the company after the managing owner exits and another wants to sell, they could bring in an outside investor. The third party would provide funds to buy out the second sibling (in exchange for an ownership stake) while the first sibling works alongside the new investors to continue growing the business.

Reaching Family Consensus

Once the principals have agreed on the need and timetable to sell the business, it is advantageous to hold a meeting to discuss the options. The meeting should include not only the current owners but also any family members who work in key positions within the business. Those who work in the business will have a different perspective than passive owners. Getting the necessary decision-makers on board early will help in determining the best path to take.

Encourage everyone at the meeting to be open and honest about their feelings about a company sale and their expectations from the process. Often parents and children bring different viewpoints to the situation, or siblings may disagree over the proper steps forward. It is better to bring those opinions out in the open up front; otherwise, hidden agendas may bring conflict during the sale process. Many potential deals have been derailed when repressed family pressures arise after an offer is on the table.

Possible agenda items include:

• Does the next generation have the interest or skills required to manage the business? Do the main players have a need to cash out? Does the business need capital or added strategic executives to continue growing?
• What valuation do we expect for the business? Family members who are not close to the industry may have unrealistic expectations about the potential sale price. Gaining a realistic picture of  your business is really worth will help set common expectations for all the players.
• What are your must-haves for the sale? Do you want a buyer who will maintain your brand? Must they keep your current employees? Will they support the same charities you currently do? Identifying your non-negotiable conditions goes a long way toward ensuring an optimal outcome.
• Encourage everyone to be patient while the sales process plays out. Once the decision is made, most owners will be ready to sell and move forward with the decided path. However, it takes time to find the best fit in a buyer and the right conditions to meet your goals.

It may take multiple meetings for family members to reach consensus, and to see their business through the lens of a buyer. Getting everything out in the open at the beginning helps stakeholders find the best solution for all parties, and keep the peace at the next family dinner.

Unfortunately, far too many of the stories that circulate about private equity are of businesses run into the ground with business owners left out to dry. For founders, these stories can really leave a bad taste in your mouth. 

To fully understand why private equity has gained the reputation it holds today, we need to acknowledge that there is a reason these stories were written in the first place. When improperly used, the traditional private equity model can give way to a number of obstacles for businesses to struggle with, like the following:

1. Aggressive cost cutting. With their investors top of mind, the PE firm’s priorities can become muddled, allowing financial decisions to lead the way rather than long-term value creation for your business.

2. Loss of culture and legacy. Some PE firms hold the belief that they are more capable of running the business than the founder of that business. As a result, they will wipe current management clean and bring in their own operators.

3. Short investment horizons and quick sales. The wrong team will not be deeply committed to your vision or the long-term health of your business.

While these stories have heavily tainted the image of private equity for some, what you’ve just heard only represents one approach to the practice. The right partner for your business will share the founder’s goals and commit themselves to doing everything in their power to see that you accomplish them.

As a grounded, value-centric team, Georgia Oak has built the following model to counter these detrimental practices. With this model in place, we aim to provide businesses like yours with as much support, guidance and success as possible:

Future-Focused

You’ve put years of hard work into your legacy. Rather than tossing it aside, the right private equity partner will sit with you for however long it takes to understand the effort you have put in and incorporate it into a sustainable plan for the years to come.

With this in mind, we set our sights on the future, focusing on long-term value creation for your business. With the support of our underlying investors, many of which are family offices, our team is prepared for the long haul.

We recognize that it will take time and energy to ensure continued success and sustainability for your business. While traditional private equity investment windows last three to five years, our philosophy is to stick with at least five to eight. 

Empowering Your Employees

Your employees are key to driving long-term success. Coming in to work day in and day out, their contributions are invaluable to the success of your business. In order for any partnership to thrive, those people need to feel valued and supported from all sides. Our goal is to ensure each of your employees are equipped with the tools and support they need to maximize their impact on the business. 

There’s more to a deal than what’s at the surface level. Your business got to where it is today thanks to the deeper levels of culture and humanity that define your legacy. With our Southeastern focus, our community-minded team embraces this culture in developing strategy.

Committed to Collaboration

Executing your vision takes time, and any private equity firm should be prepared to sit and work with you for however long it takes. We’re not the team that comes in pretending they know how to run your business– in fact, we prefer your involvement in our partnership. 

As we enter each deal, we lock arms with founders and commit ourselves to your vision and legacy. Rather than marching around and directing orders, exit plan in mind, we’ll sit shotgun. We work collaboratively with you, utilizing your knowledge and expertise to drive the partnership forward. 

Georgia Oak is committed to providing a stellar experience throughout the duration of all of our partnerships. For more information on how we differ from traditional private equity, please refer to the graphic below.

As a business owner, finding the right partner to take the next step with can be tricky—how do you find someone who honestly shares the same passion for your business, love for your people and vision for the future? 

Not all private equity firms are created equal, but if you find the right partner, they can help you:

• Ensure satisfaction and security for your valued employees

• Preserve the hard work you put into building your legacy

• Maximize your positive impact as a business

• Set up a sustainable and successful future for your business

In all our years of work with founders, we’ve found a few key shared values that have propelled our experiences to valuable, rewarding partnerships. Below are some of the key ways in which we feel we align well with founder and family-owned business.

People First

Each of our partners' companies rests on a delicate system of trusted friends, supportive family, and years of hard work. This structure provides the needed support and fuel for each business to thrive, and each individual plays a key role in bringing that success to fruition. 

Rather than wiping it clean, we aim to enhance that system. Through countless hours of discussing, meeting, and getting to know the people that bring your business to life, only then are we able to reach our goal of supporting your legacy.

Legacy Matters

A legacy is more than your business’s age. It’s your story, brimming with lively characters, thrilling tales and countless good memories. These legacies are what bring your business to life. Georgia Oak understands the value of long standing traditions passed through generations - hence, our slogan: Grow Your Legacy. We’re southern locals - we share the desire to preserve and uphold the legacies founders worked so hard to build. As the storytellers, our team works to preserve the liveliness and impact of your company's legacy and pave the way for a promising future.

Local Impact

Your business plays a key role in your community’s delicate ecosystem. With proper guidance, the impact of these companies can greatly benefit their hometown. In our years of work with founders, we have found methods of maximizing this impact to be of service to all aspects of their communities. From job creation to local volunteering, our team strives to give back through our work.

The Big One: Passion

Founders and family business owners share a fervent passion for what they do, which is what makes the partnership process so inspiring. We put our hearts and souls into everything we do for your legacy, from the first introduction to well past close date. To put it simply, we love our business because we love supporting other businesses, and we know we’ve struck gold when we find a partner that shares that level of passion.

Selling even a part of the legacy founders worked tirelessly for can be scary for many and emotional for most. Finding a partner aligned with your company's motivations, culture, and values can make this process easier – exciting, even. 

Watch how these values came to life with our investment in Sailfish Boats.

At Georgia Oak, we’re committed to enhancing your business and helping founders grow their legacies to their fullest potential. If you find we’re a good fit for your next step, please reach out to Spencer at spencer@georgiaoakpartners.com.

Acquisitions have time and again proven to be excellent avenues of growth for a business. However, as a founder, preparing your business for buying another company can be a daunting task when attempted alone. The fear of a culture mismatch, working with a whole new group of employees, lack of capital, or integration risks are often enough to keep many business owners from taking that next step.

Luckily, with the right information and ample support from trusted management and advisors, planning an acquisition strategy is easy – and, in our opinion, fun. With ample M&A expertise and experience under our belts, our team is designed to fuel our partners’ acquisition strategies.

While there’s no set guidelines on how to develop an acquisition strategy, there are a few key components every founder should be prepared with:

Your Business

Conducting an internal review of the business is a key first step before pursuing an acquisition. Take a look at your company’s performance in the last 3 years; do you have the right team in place to run the day-to-day business while you assess acquisitions?

Though the numbers tend to vary, we’ve found that businesses with $20 million+ in revenue and/or 8–20% EBITDA margins are typically in a comfortable position to make an acquisition.

Another common benchmark used to evaluate a business’s operational performance for an acquisition is the strength of the management team. Here’s what we look for in a “strong management team”: the business should have…

●       A CEO who has built a strong management team and has a vision

●       A CFO or strategic controller who can assess a target’s financial profile and identify areas of value

We recognize that many growing companies may not have a sophisticated controller. However, once a business starts to hit key financial goals, a CEO who knows the market, a CFO who is comfortable consolidating financials and building a pro forma of a combined business, and an operations manager with integration experience are critical to fueling an acquisition strategy.

The Market

Once the business begins to hit desired financial marks, industry studies will be your friend in developing a strategy and identifying key players and potential targets. Understanding how many options you have and how fragmented your market is will fuel that strategy and the decisions your business makes.

M&A typically makes sense in highly fragmented industries. In these industries, one or two key players may occupy 20-30% of the market. The remaining percentage should consist of many smaller players ($4-5 million in revenue) that bring unique value to the markets they serve.

Fueling an Acquisition with Georgia Oak

Deciding to make an acquisition is a huge milestone for any business. Whether you’re increasing your product line or spreading your product to more markets, an acquisition could have a massive impact on the growth of your company. Taking a big step does come with risks and obstacles, however. These gray areas are where a partner might make sense.

Many founders hold off on acquisitions to avoid potential misalignment between the culture of the two businesses. This is a valid concern – the culture of a buying company is incredibly important to the success of a merger or acquisition. However, with the support of trusted management and advisors who are aligned with a founder’s vision for a merger and have the ability to execute on that integration, the risk of a clashing of cultures is heavily mitigated.

One of the most common obstacles businesses face in developing a strategy is a lack of capital to make the acquisition. In addition to providing the needed capital to support a business’s acquisition strategy, advisors like Georgia Oak provide years of institutional M&A knowledge to guide the process and inform the strategy.

Bringing a trusted expert advisor onboard for an acquisition can increase the impact of its benefits, mitigate potential risks, and answer pertinent questions.

By Dean Ditmar

I started my eight-year tenure at General Electric (GE) Plastics in 1997 as a Regional Sales Manager. Just two years prior, GE had introduced Six Sigma, the Motorola-inspired methodology for eliminating 99.99966% of defects in the manufacturing process. Although this process focuses on defects in manufacturing, it also opened my view to the importance of the people involved in the process—and how team dynamics could impact the customer experience.

I graduated college thinking I would be a mechanical engineer, but I felt a calling toward the “people side” of business pretty early on. Marrying the technical and the intangible seemed like the perfect challenge—a way to help two different sides of an organization by serving as a translator of sorts.

A few years into my tenure at GE Plastics, I became a certified black belt supporting "At the Customer, For the Customer" Six Sigma projects for a large region in the Southwest. Leading a team of six technical development managers, we supported over $40 million in revenue, including key accounts such as Dell, 3M, and Nokia. It was exciting. I was learning and growing—making mistakes and course-correcting as I went. But I dare say I made more than 3.4 defects per million decisions I made as a young leader.

Emphasizing process and perfection are admirable goals, but what I learned living through that time is that motivating people to believe and engage in change is even more crucial. Balancing these two forces has given me a great baseline and perspective on my approach to engaging with people and working through complex business issues.

Fast forward almost 25 years, everything I have learned along the way influences the work I do with Georgia Oak now—taking what serves individuals and organizations best and leaving the rest for the history books. One of my charges as an Operating Partner is to work alongside the management team at Georgia Oak’s partner company Sailfish Boats, a manufacturer of fiberglass recreational fishing boats. As we look at the pandemic-induced challenges all manufacturers face, some common themes are emerging, and hard-won lessons are crystalizing.

All Issues are People Issues

People and supply chains dominate most of the discussions I have these days. On the people side, the challenge is finding and retaining team members to support our core operations and accelerate our growth initiatives. We are seeing widespread shortages on the supply chain side—from simple items like nuts and bolts to complex parts like engines. These shortages and delays drive up prices and hamper our ability to respond to our customers, causing extended delays and lead times.

But when it comes down to it, our supply chain issues could be answered overnight, and that still wouldn’t solve all of our challenges. Trade requires people, and all issues are ultimately people issues. The real challenge is getting the right people in the right roles to keep the organization running efficiently.

While we certainly engage in more traditional routes of recruiting through digital platforms, networks, and executive search firms, depending on the roles we need to fill, we are also finding that we have to be faster and more responsive in our approaches to be successful. Our ability to construct competitive salary structures, differentiate with health benefits and other perks, and have a positive growth culture all contribute to our ability to compete in a tight labor market.

We are also making sure our current employees know about new job opportunities. We do this by posting every job in a highly visible area at the plant and encouraging managers to discuss these job openings with employees, as they could be opportunities to promote from within. Most notably, we are starting to see a greater influx of employee referrals that are helping us fill key positions. Also, it doesn’t hurt to have employees working with people they know and trust.

Mental Safety is Just as Important as Physical Safety

Surviving and thriving through the pandemic has been about creating a work environment with health and safety at the forefront. Manufacturing facilities simply don’t afford the same remote working flexibility as many industries today can, so it is doubly important that we communicate that the health and safety of our employees and families come first. We must give employees confidence that they can safely come to work.

We were proactive in letting people stay home due to illness with paid leave or get the necessary testing and treatments to help drive their confidence. Although we did have plant employees that contracted COVID-19, we were fortunate that we did not identify any positive COVID-19 cases from the work environment. We were very aggressive in our contact tracing and sent home employees based on exposure. We continue good discipline and use CDC guidelines throughout the manufacturing facility today, which is especially critical as new variants emerge and case volumes fluctuate. Overcoming these challenges together as a team has helped strengthen our culture and improve employee morale.

In light of the employee shortage and challenges in hiring, retaining existing employees has never been more essential. I’ve heard others say, “The best way to recruit is the keep the ones you’ve got.” The ability to look in the mirror and create a culture and work environment to achieve this is critical for bottom-line results.

I really feel employee satisfaction goes way beyond compensation or physical safety measures with today’s employees. Listening, engaging, and adapting to employees’ needs are critical measures for developing a stronger culture that fosters retention. Making people feel empowered and part of a team is a potent recipe for success and growth.

Regularly talking to each employee one-on-one, both on professional and personal levels, creates more connection, trust, and loyalty to the company and its leaders. If you create “belief” in how your employees engage in their jobs, you are making progress in driving long-term retention.

Your Best Employees Will Value Your Ability to Make Tough People Decisions

The level of engagement from leadership outlined above can also help you understand and address concerns of underperforming or poor culture fit employees more rapidly. Practicing discipline around this is a growing issue for all manufacturing operations today because many are already shorthanded. After going through the expense and long hiring cycle of finding an employee, it can be tough to admit that they may not be the right fit for your company culture or the job. However, the long-term damage of keeping mis-hires is much greater than cutting ties sooner—both for the employee and the business. 

It is essential, though, not to immediately write off mis-hires as only the employee’s fault. Having good onboarding discipline and empowering your management team to be accountable for new employees will help quickly identify any issues, wherever they may be.

At the end of the day, you’re building a team, and those who don’t buy into the culture can and will drag down those trying with all their might to forge ahead. Retaining your top performers is as much about making tough decisions about mis-hires as it is about directly supporting and properly compensating those you wish to keep and promote.

I am passionate in my belief that customer satisfaction starts with employee satisfaction. No good employee wants to work alongside someone who doesn’t carry their weight or brings a negative attitude to the job.

We Can’t Six Sigma Our Way Out of a Pandemic

As much as we may try, there is no such thing as eliminating all defects from the process of managing a business. Some things, like global pandemics, will always be out of our control. But with the benefit of experience, we can see each day as an opportunity to better serve our employees, customers, and communities.

C-Suite Leadership: Essential for the Next Level

The process of transitioning from shouldering the entire burden of leadership to relying on a more robust team can be one of the most challenging aspects of owning a business. It is a natural roadblock in the pursuit of growth. Georgia Oak brings to the table a team of experienced executives and operating partners who can support the current leadership, foster growth and assist in hiring the right leaders for the future.

The C-Suite: Where to Start

As you move into the process of filling out the leadership team, the answers to a few key questions will guide your search process. As your partner in growth, Georgia Oak can help you assess the answers to these questions objectively and select your new leadership team accordingly.

What position(s) should be the first priority for hiring?

As you consider which positions to fill first, consider honestly your own strengths and challenges as the business owner. What is the highest and best use of your time in terms of providing value to the company? Where are your strengths irreplaceable? Which roles might play less to your strengths and be an opportunity for strong, complementary leadership?

How will the company benefit from this position?

Before searching for the perfect candidate, consider how your company’s growth will benefit from the executive role you are filling. We can help you create a list of needs and goals for the position, with an eye to how those goals fit in with your company’s growth strategy. This not only helps you prioritize which positions to fill first, it can serve as a starting point for creating job descriptions and hiring criteria.

What type of leadership style do you have? What leadership style is needed?

Diversity of leadership style and thought is important when fleshing out the executive team. For example, if you prefer to focus on the big picture and tend toward an “abandoning” (or laissez-faire) style of people management, the company might benefit from another strong leader who is more facilitative and able to pay attention to the details of employees’ day-to-day needs and activities.

How can a new leadership role create balance?

A key benefit of adding to the executive team is to create new perspectives within the company. Every leader has blind spots, and new additions to the team should be vested to challenge and influence the current leadership’s approach and direction, while respecting the company’s creative and philosophical roots. Despite differences in style, leaders should be able to constructively agree on the overall vision for the company and philosophy of management. We can help you assess your needs in depth and hire leaders who will challenge assumptions, while providing collaborative support.

Should you hire or outsource?

Hiring a full-time C-Suite executive is a long-term investment, which can involve substantial compensation packages (sometimes including equity incentives) and even building the organizational structure around key individuals. If your company is not ready for that level of commitment or hasn’t yet found the perfect match, outsourcing may be an option. Many key leadership functions can be performed on a contract or temporary basis by motivated, experienced professional executives. Outsourced leaders can be housed within your company full-time during times of transition or utilized on an as-needed basis.

Diversity breeds innovation and growth

The executive team is an ideal place to build diversity into the culture of your company. According to Ilit Raz, founder of Joonko, in Forbes: “There’s strong evidence that the companies which intentionally invest in diversity are more innovative, yielding elevated business performance. Having a more diverse team makes for more diverse viewpoints in product development, sales and marketing processes, management, and other business situations.”

Creating Sustainable Value

At Georgia Oak, we believe the days of “financial engineering” have come and gone.  As with everything we do, our focus is on cultivating stability to foster smart growth to transform your vision into a long-term legacy. We believe companies live and die by the people involved, from the front lines to the C-Suite and everywhere in between.

As you consider the best strategy for filling out your leadership team, let us help fill in the gaps with guidance, resources and people to help your company realize its full potential. Our team of seasoned operational and financial executives are experts in working with management teams in the development and execution in:

• Strategy
• Operations
• Corporate Finance
• Mergers and Acquisitions
• Sales and Marketing Strategy and Execution
• Culture, Recruiting and Retention

Leadership for Your Legacy

As a business owner, you have poured your heart and soul into bringing your ideas to fruition. Bringing on new executives to grow your company can be a daunting exercise in trust, as well as an exciting way to expand your potential. We never lose sight of what that trust means, and how important it is to have the right people leading your company into the future.

More often than not, there is a lone, passionate CEO or owner leading the company he or she founded, wearing many hats (and drinking lots of coffee to keep up). Naturally, this creates gaps in leadership or bandwidth. Our expertise and support help tailor a leadership plan to meet your company’s specific culture and growth needs, allowing you (the business owner) to do what you do best.

Links & Resources

• Leadership Styles: Facilitating, Micromanaging or Abandoning

• Building a Strong Enterprise through Diverse Workforce  

• The Future of the Workforce