Company Culture and Company Value: Any Correlation?
What exactly is company culture? For some it’s a fancy buzz word used to talk about in job interviews, and for others it’s a built-in value proposition for the business.
Your company’s culture definitely adds value to the organization.
Think about it like this- would you buy a home for market value if the bathroom and kitchen were outdated, the back porch was falling, there’s some mold in the basement, the bedrooms are far away from the rest of the house, and the dining room doesn’t welcome your future dinner guests?
Of course, you love the property, the foundation is solid, and the walls are stable. Taxes seem high, but all in all, you’re wanting to make an offer. Would you bid lower because of some cosmetic changes and updates that need to be made?
If you said “no, I’d bid at market price”, we should talk about some other things.
What are some positive attributes of a company with a valuable culture? Let’s break down a few that we immediately notice when performing our due diligence on a company.
- Attitudes of administrative staff– We love to walk into your business unannounced and feel either welcomed or pushed away. An outsider to your organization should feel welcomed even if it’s a cold calling salesperson dropping in. Why? Because salespeople are professional networkers. They distribute their opinions among their contacts and will remember the mood expressed upon them when visiting your facility. A positive response to a cold caller, even if it’s a smiling person at the front desk saying, “I am glad you stopped by”. A smile at the front desk means your company values relationships, and that value trickles down.
- Attitudes of mid-level managers– When we sit down with your leadership team, we love to do it outside of the facility. These are typically the ones who open right up and talk about if their ideas are heard and what their career path looks like. A really great culture means that your mid-managers feel appreciated, are rewarded for ideas, and are empowered to lead their teams with an ample budget and can manage both up and down stream effectively. That manager’s subordinates should then feel empowered by the boss to openly discuss the ideas of their staff.
- Attitudes of the sales force– When we ride along with your sales team, we are listening for words like “the company definitely listens to me” and “I feel supported with training and marketing support”. If we hear that, it means that R&D comes from sales, and that the company listens to what the customer is asking for. A great culture will typically reward its salespeople for both performance and relationships, with emphasis on relationships.
- Lack of silos– Imagine driving through the country and seeing grain silos on the farms along the highway. Each silo holds its own stock and isn’t concerned with the silo next to it. That’s what happens in companies as they grow and age. You end up with one person who knows everything about one topic, and before you know it, that person retires or exits, and you have no idea what he/she knew. Additionally, he/she didn’t share information with others or document anything. Happens all…the…time. How do effective organizations avoid this? Cross-training. A great culture has cross-trained staffers in several areas of the business and can easily collaborate on multi-functional projects. The value here is in how well teams work together, or if cross-training is required. It also demonstrates how well the new staff will fit in with the legacy folks.
- Employee Benefits- You don’t have to be Google, or put a pool table in the breakroom, but if you’re offering your employees some amazing benefits then you have built some good value. Do you subsidize healthcare? Maybe your retirement plan is top notch? Or do you offer “paternity time” when a new dad has a baby? Possibly you allow your employees to donate to a charity of their choice instead of pushing United Way every year AND match their contribution? Do you have in-house daycare, offer assistance, or pay off your employees’ student debt? These are all value-adds during a sale.
- Employee safety and security– If your employees feel safe before, during, and after work, you’ve created a culture of safety and empathy. Safety doesn’t mean you have a handbook or signs all over or host training. It means you have a culture which does not tolerate inappropriate behavior. If disrespect occurs, you have a distinct method of handling it. Believe it or not, security isn’t something enough business owners think about- but a new buyer will.
If you’re looking to sell your business, then you’ve got to be aware of these issues which dramatically affect the final negotiated sales price. We are looking for it, your investors want to see it, and your employees need to know they are cared for after the sale. If you’re buying another business to expand, they’ve got to be aligned with your values. If they aren’t, we can negotiate.
Company culture means more to many when investing than the foundation itself. To discuss this concept more, please reach out!
The Vend Advisors Team