Jack was thinking it was time to sell his commercial appraisal firm. He’s had a good run since he opened the doors in 1988. Consolidation of firms is happening now, so Jack is hopeful. As an appraiser, he knows his firm is worth exactly what a buyer determines, not his math. Multiple of earnings? Probably not, unless he has strong 3 P’s – People, Process and Product.
In the People bucket, Jack is happy knowing he has honest, competent and a few specialized appraisers on staff. The Process bucket is Jack’s biggest challenge. He has a friendly command-and-control style management that’s worked well for years. However, it’s a huge detriment to his business valuation. He just hasn’t realized it yet.
A good test of proper process is to see what happens when Jack goes on vacation for a month with no office communication. Would revenue be sustained, clients happy and nothing bad happen? In order for this to occur, many things need to be documented and his employees empowered with authority.
A huge part of the Process and Product buckets is technology. A smart buyer would sit down with Jack’s appraisers and ask them how they complete a report at his office. Questions would likely lead to a highlighting of Jack’s hodgepodge of dated software and hardware, less-than-perfect teamwork office culture and micromanagement (or no management).
Jack has a comp database, but no viable and consistently used report writing software. The office lacks any web-based appraisal workflow automation. Much of the manual bidding and workflow processes have their genesis from a 1988 Excel file. Jack once purchased a report writing solution, but never really gave it his focus and gave up. He’s always been “swamped” cranking out appraisals. He now knows it’s time to take off his technician hat and work “on” his business not “in” his business.
The street value of Jack’s client list has been diminished in the AMC and post Dodd Frank world. On the other hand, he has pretty consistent reoccurring diversified revenue based on established local investor relationships, government agencies and legal contacts. But he still does a lot of lender work.
Jack is excited about his challenge to enhance the value of his appraisal firm he has loved for decades. Just closing the doors is not an option. Jack knows it will take a mindset change to enhance the value of his firm before he sells it. Tighten up financial documentation, update technology, coach staff on new office culture, create marketing and sales roles. Updating his 1990’s-looking web site to match his perfect client, his avatar.
He’s now planning on revamping his report presentation (Product), streamlining the extraneous (trimmed 15 pages so far), using Fiverr for awesome new logo, updating his 1980’s boilerplate, selecting a fresh modern font and much more discussion of the subject’s fit to the local market. There’s lots to do.
To improve his People, Process and Product, Jack knows it will take an entrepreneurial spirit. Creating a vision and then implementing it. Jack has given himself a 36-month window. Jack is up for the challenge. New purpose. New focus. He’s excited.