Remember the Wizard? His brand seemed so upscale, so hip. The all-powerful Oz had a great thing going until Toto yanked on that curtain. But even then you had to admire the guy’s ingenuity—he created lots of buzz about Emerald City just by branding it correctly.
At Hummingbird, we believe that branding should add more than a little gold dust to your company sign. It should add true value, help build your company, take you places. We recently caught up with business value expert Mike Leannah to get his take on the interplay between branding and building business value.
Mike, your LinkedIn profile describes you as a Certified Exit Planner. Can you tell us more about what you do?
I work with businesses on continuity and pre-planning for transition while helping owners identify value drivers to increase the value of their business. Most business owners think their company is worth more than it is. If you want $10 million and your company is worth $5 million, obviously, what we need to do is increase the value with strategies for business growth. Because value to business owners is different than value to potential buyers or lenders, I educate owners about transferable value.
What do you mean by transferable value?
Transferable value is the value that someone else can put on your business. I’ve purchased a lot of companies and I usually go into it thinking, What can I do with this company? Where can I take it? How does it fit within my business strategy?
I’ve seen big companies with transferable values of zero. Even if the owner is making $4–$6 million a year, it’s not transferable if they don’t have a CFO, a management team or good branding. The company might be just the CEO and his wife and I’ll have to ask, When you two leave, what will be left?
I teach business owners to step away from the business and work ON the business instead of IN the business—set up procedures and systems so someone else can take those things and scale it, geographically, vertically or horizontally.
You have to have the right management team, the right policies, the right procedures in place, generating cash. I teach business owners to step away from the business and work ON the business instead of IN the business—set up procedures and systems so someone else can take those things and scale it, geographically, vertically or horizontally.
Can you give us an example of creating transferable value?
Sure. I owned a concrete company, and I bought it with an exit plan in mind. All I had to do was work backward—install the brand, get policies and procedures in place and make sure we were presenting ourselves as professionals. Perception is reality. I got our employees to think professionally with internal branding, with trucks, uniforms, hats and gear, to encourage a mindset that made them feel like a part of a pro team.
When I bought the business, we were a residential company with 12 employees. Then we took it to 200 employees doing commercial projects, and then to specialized construction. I rebranded the company every step of the way, making it more professional with better procedures and staff because my customer base was changing as we grew.
How does branding come into the picture?
Branding is important in positioning a company to get maximum value, yet it’s overlooked most of the time. Most business owners understand the value of financial, operational, sales and HR, but many forget about pulling it all together with the package of branding.
Brand is not only the face of the company, it IS the company. It’s the values, the heart, the soul of the company. If the employees are not aligned with the values, vision and strategy of the owner, then transferable value will be impacted.
That’s interesting—branding is so often thought of as something external.
Right. But I look at it internally as well as externally. Branding gets the right people in the right place in the company, which allows you to do the right job, which gives you the right branding. It’s a snowball effect. And if you have the right people, they’ll attract more of the right people. Everybody wants to work for a positive, progressive, growing company. They want to be on a winning team.
The culture of the company has a huge impact on valuation. Within operations, teams are the culture. A third party may think, they’ve got a great culture, they’ve got the right people in place, the right values. I can take that and I can scale it. And therefore it creates value for that potential buyer.
What branding mistakes do you see businesses making?
Outdated logos and web design—a website that’s eight years old looks tired. Then people wonder what you’re doing with procedures, what you’re doing to take care of the current customer base. All those questions come into mind if you don’t keep up with your branding.
People don’t realize that employees are a huge part of your brand.
People don’t realize that employees are a huge part of your brand. They’re the ones with the connection to the customer, so you have to remember what’s acceptable to your customer base, even in terms of appearance. Look at UPS employees; they’re all dressed the same, and you can talk to a UPS driver and they all seem to be nice. They see a problem on the street, and if they can help, they will. That’s a brand. That has value.
How can lack of branding affect value?
A lack of branding will devalue your company. When I look at a business I look at the total package. If they’re missing a piece, I can guarantee you their branding is probably missing too. If the financials are lousy, their branding is lousy. If they don’t have a management team in place, their branding is lacking. It tells me there’s another area where I’m going to have to spend money to get a return out of that acquisition.
How does brand story help build business value?
People like stories. You can make it short but it starts the relationship. When I called on project managers or general contractors, I’d start out with my story: Here’s where we’re going, here’s what we’re doing, and here’s how you can be a part of it. Oh, and I’d like to help you with your story, too.
Your story is a value driver that helps communicate your transferable value. Without your story, people will think you’re just another concrete company, or whatever. Someone thinking about buying your company is no different than your customer; they like to hear your story because they can relate to it; it’s personal.
Any parting thoughts for us?
Along with financials, operations, sales and HR, branding is one of the Big Five in a business. You build your reputation and the value of your business with solid branding. It can be something as everyday as the condition of an employee’s company truck—if it’s clean, that means they take care of their job, that they take care of the customer. That creates an image, sends a message, allows you to charge a premium for professional work. If you build the brand, you build business value. Perception is reality.