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Creating Value for Your Business When Your Best Assets are People

Aug 17, 2020 by Stephanie Carlin 0 Comments

Creating Value for Your Business When Your Best Assets are People

For owners of closely held, service-based businesses contemplating the total or fractional sales of their companies, attracting and retaining key employees is critical to creating and sustaining value for the long term. A service-based business faces the unique challenge of proving its continuing viability to a potential buyer since its assets are people. A business that can keep its best employees during and following a transaction will be much more likely to keep its customers, thus retaining its value.

The competition for talent is heating up as the economy recovers from the great recession. This is especially true with professional service industries, including construction, architecture and engineering. It’s the employees’ collective expertise; skills, relationships and knowledge that help create value for your business. Your workforce is essentially your product.

So how do you attract employees and keep them with your company to ensure the viability and build the value of your business? Establish a plan to actively build and demonstrate the value of your company through key employee attraction and retention strategies.

First, you have to attract and hire the right people. Then you must give them incentive to stay. Often the promises of competitive compensation and retirement plans are simply not enough. Equity incentives can enable you to provide your most valued employees with equity positions similar to what they might receive if they worked for a publicly traded company. A variety of alternative forms of real or synthetic equity can be used, including stock options, restricted stock, phantom stock or stock appreciation rights.

Developing incentive plans that are based on shifting employee behavior and providing incentives that are meaningful from the employee’s perspective will create a line of sight for the employee. Employees need to understand the linkage of what they do, how it drives company value, and the impact it has on their incentive. Business owners should remember to be creative and stay consistent with strategies and rewards that are currently in place. We recommend seeking expert counsel to ensure your reward system best fits your long term goals.

In addition to incentives, operational changes are also key to building and sustaining value for your company. As a business owner, gradually phase yourself out of your company’s day-to-day operations in order to position it as a successful, independently functioning enterprise. Give your best employees more responsibility and hold them accountable for their business decisions. You will find that making management accountable will help create a sense of ownership for the company’s success and therefore, an increased sense of loyalty from these key stakeholders. The right combination of corporate responsibility and benefits can be the key to attracting and retaining highly valuable employees.

There are also often overlooked factors that greatly contribute to employee attraction and retention, including company reputation, the nature of the work, individual job titles, working conditions, location and the company’s culture.

Business owners are inundated with the day to day activity of running a successful company which can make it difficult to objectively evaluate all of the necessary factors to ensure employee attraction and retention. That’s why it’s important to work with a trusted advisor to develop a realistic and personalized plan to attract and retain key employees. If your company is rich with these intangible assets, take the proper steps now to strengthen your business, ensure its long term viability and ultimately increase its marketplace value.

Stephanie Carlin is a Vice President at Prairie Capital Advisors, Inc. She can be contacted at 785.560.3510 or by email: scarlin@prairiecap.com.

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Topics: Provide A Stake in the Outcome®, Employee Engagement, Financial Literacy, Teamwork, engagement, Conference, 2020, sponsor

Written by Stephanie Carlin

Stephanie Carlin, Vice President at Prairie Capital Advisors, has performed hundreds of valuations for a variety of clients in a very diverse range of industries including manufacturing, retail, wholesale, service, real estate, and oil and gas. She has experience in providing valuation analysis for Federal gift and estate tax matters, buy/sell arrangements, divorce, succession planning, and Employee Stock Ownership Plan (ESOP) purposes, specializing in Family Limited Partnerships, Litigation Support, and Exit Planning.

About The Great Game of Business

Our approach to running a company was developed to help close one of the biggest gaps in business: the gap between managers and employees. We call our open-book approach The Great Game of Business. What lies at the heart of The Game is a very simple proposition: The best, most efficient, most profitable way to operate a business is to give everybody in the company a voice in saying how the company is run and a stake in the outcome. Let us teach you how to develop a culture of ownership, where employees think, act and feel like owners.