A significant source of value in a business is its talent. Given the current labor market, it has become an increasingly important component in many deals.
One aspect of a strong team is good communications with key team members and not just assuming that they understand what's going on or that they understand the direction of the business, says Gray, Gray & Gray Strategic Business Planning Director Bryan Pearce.
"Communications are really critical," Pearce says. "You hear stories of people that have left a business and the CEO may have said, Well, why did that individual leave? And then when they actually have a follow-up interview or question there was something that could have easily been addressed."
To counter this, he says more companies are dropping exit interviews — because they're too late to effectively bring somebody back — in favor of "stay" interviews through which employees are asked what's going well, what could be done better, their career aspirations. It's a way to better craft the role of that particular team member so that they want to stay rather than asking them why they left.
Compensation is also in the spotlight right now as people are able to command a higher premium, in many cases, if they leave. He says he's also seeing companies adding stay bonuses or incentives. As the employee stays longer with the organization, there's a payoff down the road. So, having good communications and an open conversation around compensation is important.
Employee ownership is another means of keeping teams together.
"This is not a new thing by any means, but it is important in many companies to have people stay because they feel they have a piece of the action and a future and the stake in the business," Pearce says. "Looking more creatively at how you can do that, and obviously that comes with the vesting schedule, typically, that gets people to stay for at least three or four years, which hopefully will get us through this current situation that we're in."
While people issues can sometimes be hard to measure, Pearce says one factor buyers weigh is employee turnover.
"It does really demonstrate value if you have people that stay for a period of time, as long as they are good contributors to the business," he says.
Additionally, being able to attract talent from larger companies into a midsized company that help it to scale is also going to add value as well.
"A company that I sit on the advisory board, we've had very good luck bringing in that next level of management to help the company grow by bringing people in from large brand-name businesses that are looking for something where they have the opportunity to contribute and create more value in a more medium-sized environment rather than being a number in a large company, and I think that really appeals to a number of very talented people," he says.
Pearce spoke on the Smart Business Dealmakers Network's DealTalk program about strategic business planning and building value in your organization. Hit play to catch the full discussion.