Succession Planning Question 9: Are you investing in innovation and R&D?
If you were looking for a business to buy, would you rather invest in one that’s on a par with its competitors, or one that’s at the head of the pack? All things being equal, you’d go for the leader, right? So when it comes time to sell your own business, how well you can differentiate yours from the other manufacturing shops will not only accelerate the sales process, but will also increase your asking price.
That’s why now is the time to take a long, hard look at your business and ask yourself how you would answer these questions from a prospective buyer: “What is it about your business that makes you different from the others? And why should I consider buying your business instead of another?”
If you find it difficult to answer these questions, you need to rethink your commitment to R&D and innovation.
On the other hand, if you consistently invest in ways to make your processes more efficient and cost-effective, you have a leg up on competitors that don’t do so – assuming you have the data to back you up. Let’s say you’ve replaced stand-alone machines with robotically assisted work cells or entire flexible manufacturing systems. You’ve significantly reduced your labor and overall cost-per-part, while substantially improving throughput, part quality and time-to-market – and you have the before and after statistics to prove it.
However, while automating your process to cut costs and improve performance may help you be more competitive, a buyer is looking for even more points of differentiation. That’s where innovation comes in. For example, as you work to make your process as efficient as possible, you may come up with new and better methods for making a part that leads to a saleable product. Let’s say you develop a unique workholding device. It not only improves your own part production, but you can also market the it to other shops.
Naturally, you should secure your rights to such a product, and having a portfolio of patents goes a long way toward differentiating your shop from the ones down the street.
What this all comes down to is establishing a culture of innovative thinking, and funding research and development of new processes, products and techniques. This investment will not only set you apart from other CNC shops, it will make your company more valuable to both your customers and any prospective buyers.
So far we’ve explored nine important questions to ask yourself when preparing for the eventual sale of your business. We have one more to address: What’s next?