The Big Idea with Ron Davis
Get Your Big Picture Into Focus Now
If you had just one really great idea you could share with the alarm industry, what would it be?
This month's BIG IDEA comes from Ron Davis, President of Davis Mergers & Acquisitions Group.
"Pretend you are going to get ready to sell your property and perform your own due diligence on your company, and in so doing, you’ll start to reveal both the weaknesses and strengths of your company."
T SEEMS LIKE the first part of January each year is a perfect time to start thinking about what it is we hope to accomplish during the coming year, and perhaps for a longer-term view looking at several years.
The Big Idea column usually starts off with an idea generated by an industry icon that I’ve interviewed and asked about their take on offering a “great idea” for the security industry. However, with the mindset of kicking off the year by reexamining your short- and long-term goals, I’d like to use this space to put forth what I consider to be a “great idea” that you can use.
DO YOUR DUE DILIGENCE SOONER THAN LATER
The concept of this idea came to me in bits and spurts over the past few years while helping alarm dealers sell their businesses. I’ve found that usually around the time a sale is about to be completed, this sentiment is vocalized by a substantial number of sellers who are now seeing their company in a new light: “If I knew as much about my business back when I started looking to sell, I might not have gone through the process!”
You see, the sale of a business necessitates the owner (who else?) gathering up mounds and mounds of information in order to provide a buyer the insight and information they need to complete the purchase acquisition. This is typically what is needed for “due diligence,” the process that gives a buyer a complete picture of the company they are buying — sales numbers, accounting, documentation, legal issues, employee information, growth curves, attrition figures, etc.
So here’s my great idea for your January plans: pretend you are going to get ready to sell your property and perform your own due diligence on your company, and in so doing, you’ll start to reveal both the weaknesses and strengths of your company. Then, you will be able to devise your own roadmap for planning future success.
It’s kind of like being in the middle of the ocean without knowing where you are, before you can plan to reach a destination. After taking the time and effort to perform the due diligence, you will know exactly where your ship is and can thus set a course and navigate exactly where you are going. By the way, this is one of the methods that very successful people use in business goal setting.
KNOWING THE NUMBERS WILL UNEARTH POTENTIAL PROBEMS
In addition to learning where you are, right now, you will learn things that can be a tipoff to problems down the line. Attrition is one of those problems. And while you may be building up for a massive sales drive, if a larger portion than you anticipated is going out the back door through attrition, then you could be in serious trouble.
Also, when you start doing your own due diligence you will ascertain that every file has a completed, original contract. At some point, you’re going to need this. You might as well start on it, right now. Due diligence will also tell you about acquisition costs, which may differ, substantially, from what you may think they are. Finally, you’ll be able to learn whether or not your margins are where you think they are. If not, this would be a pretty good time to fix that.
A due diligence checklist (typically about five pages long) is something that you may find in some books somewhere, but I’d be happy to send you a copy of one that is used extensively in our industry. Just contact me and I will be happy to get it out to you.
Believe me, this is an idea that works, but only if you work to make it happen.
Ron Davis is Security Sales & Integration's "What's the Big Idea?" columnist and contributing market analyst. He is president of Davis Group, a full-service consulting firm serving the security industry, which also includes GraybeardsRus. He has 35 years of industry experience, including founding Security Associates International in the 1980s.