Tip of the Spear Ventures

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Mergers & Acquisitions

30 Days to ETA | Day #19 – The ETA Business Valuation

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If you’ve been reading along in this 30 Days to ETA series, you know that in the Day #18 post I discussed how as Acquisition Entrepreneurs one of the paths forward for you could be The ETA Conglomerate. If you love what you do, and in doing so want more love, then it’s natural to want to explore owning more than one business as a part of your Entrepreneurship Through Acquisition journey (You can read the previous post by CLICKING HERE). Part of the ETA difficulty as an entrepreneur is identifying the value you should be willing to pay for a business. So, in today’s 30 Days to ETA post, we’re going to explore how you can create and justify the price you should pay based off of objective versus subjective criteria — The ETA Business Valuation… Enjoy!

30 Days to ETA The ETA Business Valuation

The ETA Business Valuation

At Tip of the Spear Ventures’ Mergers & Acquisitions practice, we’ve analyzed over one-thousand businesses in our screening process. The filters that we employ allow us to accurately, and objectively based on quantitative data, assess a business for potential acquisition. Why do we look at so many?

The reason why we invest time/money/effort into exploring so many different businesses for mergers or acquisitions is because we have a number of filters in place in our search for a business. These filters are by design established to move potential businesses out of the process, as opposed to passing them on or through the process to the next step. Why do we want to filter out organizations sooner, rather than later?

Preparing for The ETA Business Valuation

Buying a business as an Entrepreneur Through Acquisition will find you with a ton of businesses you could explore purchasing. Today, as I write this, there are over 11,000 businesses listed for sale on BizBuySell.com in the geographic-freindly location that we focus on conducting M&A work. With this large quantity of businesses available to explore, you will have to have the mental fortitude, the financial fortitude, and the emotional fortitude to get through this ETA process. It’s imperative before you begin the process that you stop. Let’s do a personal and business assessment to determine the Minimum Viable Acquisition (MVA) Criteria you need before exploring as an Acquisition Entrepreneur.

Minimum Viable Acquisition (MVA) Criteria

Minimum Viable Acquisition (MVA) Criteria focus on what you need a business to consist of at the minimum levels in order to move forward in your due diligence investigation. It’s in this MVA analysis phase where you are identifying if you should move forward and further investigate the organization or discharge them from the process. Whatever your answer is, have you quantify this in an objective manner.

ETA candidates typically ask me why I’m so firm on the objective nature of MVA versus a subjective one. After all, I’ve had several ETA candidates tell me that the concept of “love” as in “I love what I do” is typically a subjective one — not an objective one. While I encourage you to love the business that you’re exploring, I also know that love can cause you to be blind. And it’s exactly in these blindspots that if you allow for subjective decision making to take over, you’ll quickly fall out of love and worse yet end up in the poor house! None of us — and I mean none of us — are going into this Acquisition Entrepreneur initiative with the end goal of arriving at the poor house (Perhaps this is why the focus of nearly every Day #1 through Day #18 here in this ’30 Days to ETA’ series has been focused on end results of selling the business you ultimately acquire for a profit!)

So I ask you to stop, pause, and look at your leadership capabilities. Then, ask yourself the following Minimum Viable Acquisition (MVA) Criteria planning questions:

  1. What do you need cash flow to be?
  2. Will you have enough to finance the Acquisition?
  3. Are your risks managed?
  4. How will you lead your new business?

The ETA Business Valuation meets MVA

You see, the goal for most of us in the ETA space is to acquire a business and grow it to where it’s just a part of our overall net worth, not 80% of it. Many times at this ETA phase, I see entrepreneurs desiring 500k, 1, 5, 10, 15, 20, or even 40 million dollars a year in revenue. Or, like many of my clients, they are bringing in hundreds of thousands of dollars a year in their personal income from the organization that they currently work for — income that needs to be replaced/offset/improved on after the acquisition of a new business.

I was interviewing a candidate for our Entrepreneur in Residence program here at Tip of the Spear Ventures. The candidate was extremely bright, very well educated, and had what I thought was a great aptitude to be one of our owner-operators of a business that we would acquire. What they weren’t great at was seeing that being an owner-operator wasn’t like working for a Fortune 500 company or a consulting firm with built in compensation structure. As the owner of a business, there are times when you acquire one and need to sacrifice your monthly compensation so that you can make payroll for the team you inherit. The candidate couldn’t wrap their head around this, and ultimately went to work for a consulting firm instead.

How to Estimate the Value of a Business

So this is where business value comes back into play. At this point in your ETA process, you will need to have a rough estimate of the value of the company. Now, I’ve created a whole post about business valuations and how businesses are valued. My experience as a Managing Director at Tip of the Spear Ventures and as a value growth expert has led me to draw up detailed assessments of current business values based on EBITDA and industry-specific value multipliers.

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. So if you have a business that is worth five times EBITDA, or 200% of collections, or three times recurring revenue, all of those things are good guidelines to follow to get you close to what you think your business is worth. At this point, I’m not talking about the nitty-gritty of value calculations. I’m just talking about getting together a very rough business value estimate, or assessment.

Determine the Minimum Viable Acquisition (MVA) Criteria You Need

After you evaluate and quantify your personal and business assets, you will need to determine whether or not you have enough money on which to live after you buy the company you are investigating.

If you tell me that the current value of the business you’re exploring is two million dollars, I’ll ask, “How much do you need to reach your goals?” If you tell me you need two hundred thousand dollars a year to reach your goals, I’ll ask “What other assets do you have and what in the business could be potential levers we could improve to achieve that comp level?” If the business doesn’t currently generate that compensation level for the current owner, who is smart and has been running the business for the last 30 years, what makes you think you can jump in the President role and achieve that so as to reach your desired compensation. In other words, you may be in trouble.

Conduct ETA Business Valuation GAP Analysis

After running personal and business assessments, you may find that there is an ETA Business Valuation GAP. In other words, there is a difference between the business valuation of the company you’re looking at and the minimum viable acquisition criteria you actually need to meet your life goals.

That ETA Business Valuation GAP can occur at many different business and personal levels, so it’s time to find it. Now is the time to look for the gaps – before you buy the business on the open market.

SUMMARY

In this ’30 Days to ETA’ post we’ve explored the concept of the ETA Business Valuation and the role it plays in allowing you to search for businesses that are appropriate for your goals. Too small of a business valuation could lead to missing your Acquisition Entrepreneur goals. We’ve discussed the objective versus subjective nature of ETA, one that can keep you from falling haplessly in love — and help you avoid the poor house! I also introduced what I call the Minimum Viable Acquisition (MVA) criteria. This MVA criteria allows you to focus on best-case businesses that are closer to where you ultimately want to get with your goals.

Sam Palazzolo

30 Days to ETA | Day #18 – The ETA Conglomerate

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If you’ve been reading along in this 30 Days to ETA series, you know that in the Day #17 post I discussed how as Acquisition Entrepreneurs we need to have focus on the end with The ETA Exit Plan. While you need to buy your business via Mergers & Acquisitions at the right strike-price, it’s equally important as a part of due diligence to sell the business right as well as a part of your Entrepreneurship Through Acquisition journey (You can read the previous post by CLICKING HERE). But what if you get into this as an entrepreneur and you find out you really enjoy owning a business? I mean, what’s better than owning a single business? Two or more businesses! So, in today’s 30 Days to ETA post, we’re going to explore how you can expand/create an empire by owning multiple companies — The ETA Conglomerate… Enjoy!

30 Days to ETA The ETA Conglomerate

The ETA Conglomerate

As Managing Director at Tip of the Spear Ventures, one of the most amazing things I see during an entrepreneur’s journey in Entrepreneurship Through Acquisition is owners walking away from a buyer’s dream offer. If we’ve spent all of these years building a business to sell it, why wouldn’t we want not to explore taking it? What makes some business owners take the money and run, so to speak? And what causes others to turn down millions of dollars to keep working their fingers to the bone?

Ultimately, I find that some business owners are scared of their lives after leaving. All they’ve known is business, and they don’t know what else to do. That makes their future-after-business-ownership extremely precarious. But it also gives them an advantage: They shouldn’t just own one business… Enter the ETA Conglomerate!

3 Decisions Owners Make as the ETA Conglomerate

Essentially, Acquisition Entrepreneurs will do one of three things in order to excel as The ETA Conglomerate. Two decisions we make can lead to life and prosperity after the business sale. However, one decision could lead down a path of self-destruction before the business acquisition or in life after the business sale.

Here are three decisions we owners typically make when it comes time for The ETA Conglomerate:

  1. Take the money and run! We want more challenges, we need more challenges, but we take the money and run rather than investing those Benjamins in additional businesses where they can make more!
  2. Make an offer but make a calculated decision not to buy at that time. This decision has the potential to be rewarding. Maybe we invest the time and energy into exploring other business for sale, and it becomes so highly efficient that we don’t have to be in the office every day. With a highly functioning business, we find time to relax AND run the company. Or maybe we want more time to save for our ideal retirement goals. Sometimes, we want to spend more time building the business’s value to get a better offer later. Either way we go, we can still get to a sale’s table at another point in our business’s life and take more time to prepare ourselves to leave the business.
  3. Walk away from the Letter of Intent (LOI) prior to Purchase Agreement. This is a dangerous decision we ETAs often make. We perceive value in a company and make the offer we want via LOI. But when it is time to sign on the dotted line, we change our minds. It seems unlikely, but so many of us make this mistake that the Exit Planning Institute has done studies with the results that 80% of companies making below $50 Million in revenue never sell.

Questions That Determine The ETA Conglomerate Path

So you have an ETA Conglomerate Plan that’s been in the works for months, years, or decades? What makes you hesitate just long enough to back out? In my business at Tip of the Spear Ventures, I typically find that the deals that we’ve walk away from a business mergers or acquisitions scenario haven’t been the ones that we’re mentally prepared for. In other words, we get too attached to the company.

Ultimately, though, our answers to two questions tend to determine whether we can achieve The ETA Conglomerate dream:

How Much Money Will I Get?

Money can fix a lot of problems, but it can’t fix everything. I’ve witnessed Acquisition Entrepreneurs with lots of money self-destruct before they ever get to the sale of the business — Just as quickly as businesses with little/no cash flow. When it comes time to acquire businesses (multiple) though, money will be a deciding factor or the deciding factor.

Almost without exception, we Acquisition Entrepreneurs know how much we want for our business and how much we actually need to earn from the sale of our company in the future.  If we’ve planned our business sale for years and worked with professionals to come up with a realistic company valuation, we’ll balk if a buyer offers us significantly less. For instance, we’ll walk away if we’ve valued our company at $5 Million, but an outsider only offers us $1 Million. Alternatively, if we think our company is worth $1 Million and someone offers us $5 Million, we’d likely take that money and run before they change their mind. This scenario is with one business, and diversification or exponential growth/sales figures can be achieved with multiple businesses. So how much money you receive from selling The ETA Conglomerate is a crucial metric/KPI to consider!

What’s the WHY?

As an Entrepreneur Through Acquisition, and you know this all too well by Day #18 in the 30 Days to ETA series, you will face many ups and downs on your journey. Money, while a considerable factor to consider may not be enough to drive every decision you make. I’m going to ask you to dig deep… Deeper than you probably feel comfortable with and ask yourself why you are doing this whole ETA journey for in the first place. Is it to live the lifestyle that you’ve always dreamed of? Is it to provide generational wealth for you/your family? Is it to better your community/state/country?

If you strip away the exterior and are stuck with the interior decisions that you are attempting this ETA climb, you’ll find your WHY.

SUMMARY

So what will we business owners do when we get to the future moment of selling your organization? Will you take the money and run, or will you stay put? In this ETA Conglomerate post we’ve looked at why some Acquisition Entrepreneurs decide to do just that. My answer: Build an empire! If you can take one business and scale it, several businesses will allow you to better diversify and get to your endpoints of money or WHY.

Sam Palazzolo

30 Days to ETA | Day #17 – The ETA Exit Plan

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If you’ve been reading along in this 30 Days to ETA series, you know that in the Day #16 post I discussed how to maximize ETA Deal Flow. You need to analyze a lot of businesses in order to get one to purchase in your journey to Entrepreneurship Through Acquisition (You can read the previous post by CLICKING HERE). But even though you’ve found the perfect business and were fortunate to purchase it, I’m going to encourage you to focus on the end. In today’s 30 Days to ETA post, we’re going to explore how that end-game focus — The ETA Exit Plan — can provide you with all kinds of benefits, especially financial benefits if you do things right… Enjoy!

30 Days to ETA The ETA Exit Plan

The ETA Exit Plan

Entrepreneurs Through Acquisition (ETA) have to have a plan in place for how to get where we want to go — Something I refer to as the ETA Exit Plan. The future sale of your company is your ETA Exit Plan destination. I wish I could tell you that the road from where you are now (Acquisition Entrepreneur) to successfully selling your business in the future with generational wealth (The ETA Exit Plan) is a linear-shortest-distance-between-two-points line. Unfortunately, it rarely is a straight line! Instead, you can anticipate experiencing some type of setback along the way.

I typically refer to these setbacks as roadblocks. Your objective when you come across them, is to get on the other side (Either up/over/under or around) as quickly as possible. Here’s where the ETA Exit Plan gets good — You can anticipate coming up to another roadblock after you clear one, and another after that one, and so on. Not that that is “good” news, but it might come as news to you in general. Most of the Acquisition Entrepreneurs I work with at Tip of the Spear Ventures believe that they will not have to encounter any roadblocks on their ETA journey — WRONG! No matter how much planning you do. No matter how well you execute those plans. There will always be a roadblock along the way to the ETA Exit Plan accomplishment.

Making the ETA Exit Plan

By this point in our series, you should already have a business plan in place and be following that plan to find your future business through Mergers & Acquisitions. You’ve been preparing for this business acquisition since you discovered ETA, so it only makes sense to also focus on the sale of that business not only from day one of ownership, but before you even purchase the business! If you don’t have a business plan, drop everything and do that first. You’re not ready to acquire or consider how you will sell the business. You need to go back to the beginning of your business and identify how you want the end to occur!

How to Prepare for The ETA Exit Plan

No matter how good your original business plan is, you’ll never be able to walk away from this amazing company you’ve developed if you’re not mentally prepared. If you haven’t come to terms with letting someone else buy your business, you might even pass up millions of dollars. At Tip of the Spear Ventures Mergers & Acquisitions practice, we often speak with owners of businesses that tell us the all too often sad story about how they should have sold two-three years ago at triple the price they’re talking with us about selling their business. But there are things you can do now to prepare for the ETA Exit Plan.

What to Include in The ETA Exit Plan

  1. Decide what you’ll do after you sell – Make personal plans to travel, golf, take care of grandkids, spend time on a hobby, or begin another business before you leave this one.
  2. Gather your ETA Professional Team – Let your professional consultants, employees, family members, and friends know what your personal exit goals are so that they can hold you accountable for reaching them.
  3. Establish a Timeline – Decide what age you want to be when you “retire” or sell your company so that you can make appropriate personal and financial plans.
  4. Make a step-by-step Financial Agenda – If you know when you want to sell, you’ll know how much money you need to set back monthly in personal retirement accounts or savings accounts. If you lay out a detailed financial agenda, you’ll have the money you need to enjoy your life of leisure or your next big venture. Any profit from the sale will just be the icing on your financial cake.
  5. Hold your ETA Team Accountable – Just as your ETA Team is holding you accountable, hold them accountable as well. Don’t let anything slip through the cracks that could leave you or your company vulnerable at its time.

Which ETA Business Owner Are You?

You may be a person who constantly develops plans, but you can’t start or implement them. Maybe you’re the person who starts 20 things but can’t finish one thing. Or you might be the person who has his hand in 1001 different things. Whether acting, finishing, or prioritizing is your weakness, I have the same word of caution for you. It’s WAY too risky to jump right into ETA or into the sale of your future without having a plan. Many times, it’s impossible.

Creating the ETA Exit Plan can provide you with timelines, agendas, financial estimates, and accountability. Walking through these contingency scenarios for the time after we leave our business can help us prepare for our next step in life. Additionally, if we’re preparing to leave, we’re stepping back from day-to-day operations. That leads to a business’s self-sustainability and scalability which we previously discussed.

SUMMARY

The best-designed plans don’t do us any good unless we act. So, get the ETA Exit Plan down now as you conduct your search as an Acquisition Entrepreneur and you’ll find it easier when you go to exit the business.

Sam Palazzolo

30 Days to ETA | Day #16 – ETA Deal Flow

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If you’ve been reading along in this 30 Days to ETA series, you know that in the Day #15 post I discussed how to achieve The ETA Business Team. I’ve said it before and I’ll say it again, people are the most important ingredient in your journey to Entrepreneurship Through Acquisition (You can read the previous post by CLICKING HERE). So, even though so far in this series we’ve spent a lot of time talking about strategic initiatives within the business, it’s time we pull up to explore ways in which you can find that business. In today’s 30 Days to ETA post, we’re going to explore how we can create a system where business owners, and those that have a business for sale — Brokers, Attorneys, CPAs, Bankers, etc. — can find you to present the business… Enjoy!

ETA Deal Flow

A few years ago, I helped a client acquire a business. Let’s call this Entrepreneur Through Acquisition Jason. Together, Acquisition Entrepreneur Jason and I created systems, goals, and vision statements. As a part of my consulting, Jason packed his ETA Team bench. An an ETA Team, they wrote and implemented their business plan and detailed marketing plan. Well, guess what? It worked, and it worked well. A key component to their future growth involved Mergers & Acquisitions — An advanced plan, but one where growth can be achieved quickly through mergers or acquisitions than through normal channels to grow the business.

Soon, though, Jason and his team became too busy — What seemed like a good problem to have! Although they revised systems and team roles, and against my counsel, Jason demanded that we stop all Mergers & Acquisitions activity. I remember him saying, “Sam, we’re just too busy with the business that we have. Any Mergers & Acquisitions activity we pursue will be a waste of time and money.” He opted to discontinue all ETA Deal Flow.

Fast forward just two years later, when company sales slowed down. While their business started off well, Jason and the ETA Team was now beating their collective heads against the proverbial wall. Their revenue was stagnant. Every time we met, I’d remind him to begin ETA Deal Flow again… restart it and increase it — It will be worth the spend in time and money. Yet, time and time again Jason refused.

The company ultimately slowed down to where business had become financially painful for Jason and the ETA Team. When we met at this pain point, Jason agreed to restart their ETA Deal Flow. As my physical trainer used to tell me, “No change will happen until the pain associated with staying the same is greater than the pain associated with changing.” The same methodology unfortunately was the same for Jason.

The Mergers & Acquisitions process isn’t complete until all Purchase Agreements are signed, money is exchanged, and you takeover the business. Until then, keep your ETA Deal Flow running!

Sam Palazzolo, Managing Director @ Tip of the Spear Ventures

ETA Deal Flow Marketing Overview

ETA Deal Flow is not a new concept to business owners. Simply put, ETA Deal Flow is showing your potential business sellers and their ETA Professional Team who you want to be, not who you are today. You want your potential sellers to think about you first when they think about selling their business. To show off your Entrepreneurship Through Acquisition skillset you need to do three different things:

  1. Brand Your ETA Deal Flow – Create a logo or visual imagery to identify your ETA company
  2. Advertise – Use media to get that visual image to the potential buyer
  3. Relate to the Public – Get public relations media sources to tell your business acquisition story in a favorable light

ETA Deal Flow Target Market

If you’re like most Acquisition Entrepreneurs, you’re short on time. You may not think you have time to market much less develop an ETA Deal Flow campaign system. Well, that’s the furthest thing from the truth. Every person in the Mergers & Acquisitions markets whether you have a marketing campaign plan in place or not.

So, wouldn’t it be best to create a plan so that you market your search in a similar manner? If you want to show off your culture of kindness, make sure all employees are kind. That’s marketing. Or, hire an agency or a team to create a uniform ETA Deal Flow campaign plan that shows the community how kind you are. However you chose to market, remember that all are a part of your marketing presentation — You are not an Acquisition Entrepreneur in and of yourself.

When Should We Market ETA Deal Flow?

By default then, if everyone is helping with ETA Deal Flow, then we’re searching for businesses to merge or acquire all the time. However, we Acquisition Entrepreneurs should develop formal ETA Deal Flow strategies from day one. We should also refine/modify as we receive input from the market. What we shouldn’t do is stop like Jason! We shouldn’t stop ETA Deal Flow until we have a signed Purchase Agreement contract from a business acquisition. This may cause you to conduct ETA Deal Flow twice as much when times are bad.

Where Should We Market ETA Deal Flow?

It’s easy to see that everyone on your ETA Team markets all the time, but who do we market to? Where do we market? I could easily say that it depends on your national, state, or local location. I could also say that it depends on the type of industry your target business resides in. At its simplest, what works for one ETA may not work for another, even within the same industry or geographic location.

How Much Money Should We Devote to ETA Deal Flow?

Once you’ve established an ETA Deal Flow system, you’ll need to allocate funds to it. If you have a couple million dollars in the bank or can afford to market like Coca Cola, more power to you. Most of us don’t have that luxury when looking at the small business market. Entrepreneurs Through Acquisition often feel like ETA Deal Flow is a waste of time and money because we don’t see immediate results.

I often tell the Entrepreneurs in Residence at Tip of the Spear Ventures that marketing in general is successful only 10% of the time. If we knew what 90% of ETA Deal Flow marketing was going to be wasted, of course we wouldn’t spend time/money on it — But we don’t know!

ETA Deal Flow is a Business Investment

What Entrepreneurs Through Acquisition are actually dealing with in searching for a business, then, is an investment NOT an expense. Even though the quantifiable costs for ETA Deal Flow will not show up on any Profit and Loss Statement as an expense, we’re actually dealing with an investment and the initiative should be considered as such.

Making, implementing, and continuing an ETA Deal Flow campaign is comparable to the laws of sowing and reaping:

  1. We reap what we sow
  2. Reaping happens after sowing
  3. We reap more than we sow

So if we conduct consistent ETA Deal Flow activities, we’re going to sow good seeds, if you will. Those good seeds should become viable leads to businesses for sale. When business owners ultimately decide to sell, we will be in position to reap our ETA Deal Flow rewards. And that’s WHY having an ETA Deal Flow campaign system is important.

SUMMARY

Everything we’ve been talking about in this 30 Days to ETA series now ties together. This post finalizes how to search for a business to buy via ETA Deal Flow.

Sam Palazzolo

30 Days to ETA | Day #15 – The ETA Business Team

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If you’ve been reading along in this 30 Days to ETA series, you know that in the Day #14 post I discussed how to achieve ETA Engagement amongst your future employees. Why? It’s awfully difficult — Impossible! — to achieve happy customers if you have unhappy team members, and happy team members are engaged team members in your journey to Entrepreneurship Through Acquisition (You can read the previous post by CLICKING HERE). But what if there was a way to build the company of your dreams with an ETA Business Team? An awesome ETA Business Team that pulls just as hard as you do towards the business goal of not only acquiring, but building a company in order to sell it for maximum profit. In today’s 30 Days to ETA post, we’re going to explore how we can assemble our dream ETA Business Team of employees and executives, and in doing so how we can cultivate company culture and add employee incentive programs to ensure our ETA Engagement adds to company success… Enjoy!

The ETA Business Team

I shared a career opportunity post on my LInkedIn feed a few months back, searching for a team member to fill an executive position in my company. Sure enough, I had a few candidates present themselves who seemed to fit the position profile. During one of their interviews, I asked the candidate, “Where do you see yourself in a couple of years?” I’ll never forget his reply. With no shame, the young man said, “You know, I’ve always wanted to start my own private equity business. I thought working with you would give me enough information to go out and start my own business one day.”

What? Was I being punked here?? If you’re an ETA business owner, you might consider that answer to lead to an instant “no-hire!” However, I’m curious by nature so I asked the candidate, “Tell me about that answer. What about working here with me will allow you to start your own business?” He said, “I view what you’re doing here Mr. Palazzolo to be best-in-class, and if I was going to go out and attempt to start my own business I know I’d learn the ins/outs of running a business the right way from you.” Flattery will get you far, but not that far with me…

Why is the Grass Greener?

We all know that Entrepreneurship Through Acquisition (ETA) is a tough business model. Perhaps you can look at it and say that it’s not as tough as a Startup Entrepreneur might have it, but it’s tough nonetheless. So in your search for a business and in screening the ETA Business Team, why should you invest all of your time, energy, and money training and equipping what will inevitably be another company’s future employee? The short-answer, we shouldn’t. The long-answer, we should! If we train our ETA Business Team members and they leave to be part of a competitor’s workforce, or even worse, become our competition, we are doing what you probably did to get to the point where you’re exploring Acquisition Entrepreneurship. 

Know that even with the best incentives in place, competing companies will attempt to lure your ETA Business Team members with promises of greener grass. Sometimes, you’ll have to gently prod your employees back in the right direction — Although it’s my best practice to let an employee leave if they’ve made up their mind and they’ve approached me on the topic. By the time your ETA Business Team member gets to you, they’ve probably thought long and hard about their search for/attainment of another opportunity. In other words, they’re already one foot out the door, so let them leave. They will quickly learn that the reason the grass is greener on the other side is because of the enhanced fertilizer being deployed!

Can You Encourage ETA Business Team Loyalty?

If your competitors do happen to catch employees’ eyes with those green pastures a plenty, what can you do to guide your ETA Business Team members gently back to the company? Is a healthy fear of ramifications possible to lead ETA Business Team members in the right direction to back?

While as I previously stated, one foot out the door should be followed by two. However, you may want to consider agreements or restrictions that you can put in place to help keep your ETA Business Team employees from becoming the competitions employees?

  • A Non-Compete Agreement may help keep your employees from working with — or as — your competition.
  • Non-Solicit Agreements prevent your employees from soliciting customers away from you — They also prevent vendors from soliciting your employees.
  • A Confidentiality Agreement keeps ETA Business Team employees from revealing company secrets if they leave or talk to other business owners.
  • Intellectual Property Agreements keep work employees did for a company within that company if the ETA Business Team employee leaves.

We all want to build a strong team of ETA Business Team employees who have our best interests at heart. There’s a fine line between making ETA Business Team employees fearful and establishing healthy protections against employee retribution or employee turnover. Before enforcing any employee agreements, consult with your attorney to protect yourself from any known or unknown business risks — In one instance I can recall, our attorney partner recommended that a noncompete would be worthless and not to initiate. It’s important to keep in mind that not all court jurisdictions honor employer-employee agreements, so check with a legal professional before you implement any of them to be sure they actually protect you.

SUMMARY

ETA Business Team turnover and ETA Engagement (i.e., Employee unhappiness or dissatisfaction) can hurt a company’s operations and value from the future buyer’s perspective. If as a buyer you notice that the organization you’re conducting due diligence on has current employees that don’t want to be at work or have already left via turnover data, why would you want to buy that business? If you decide to buy it, you’ll probably refuse to offer top dollar or valuation multiple for that business. On the other hand, if you discover a business that is treating employees the way you would want to be treated — An ETA Business that offered clearly defined long-term and short-term incentives — you’re willing to pay top dollar.

Sam Palazzolo