When is the best time to bring in THA?

todd herman web

I'm part of a group of various professionals who work with small-to-midsize business (SMB) owners.

Every so often, an owner may share with a trusted advisor they want to sell their business.

  • The good part? They're sharing this with someone who can muster the resources to help them prepare it for sale to get a good price for their financial investment and years of hard work.
  • The bad part? This desire is often driven by something the owner has recently read, heard, or seen – for example, changes being considered to the Federal tax laws or regulations – and wants to close the sale in 6 months.

An owner typically thinks their business is more ready to sell than it really is. The business advisors see it differently and would advise the owner to spend 2-3 years working ON the business to improve it, if the owner wants to get top dollar for what is likely their largest personal asset.

Seeing Things Differently

Why would the advisors see things so differently from the business owner? There are two main reasons:

  • Third Party Objectivity
    • Perhaps the owner wanting to sell has talked with another person who has successfully sold their business. Even if that former owner specifically shared how much time and effort was invested getting the business ready for sale, the owner may not have homed in on the "behind the scenes" cleanup and improvement process, and jumped straight to the deal negotiations and closing.
    • Trusted advisors can bring an outside, objective perspective to the owner, to help them understand how an unbiased buyer will evaluate the business.
  • "I've Seen This Movie Before"
    • Unless a business owner is a "serial entrepreneur" – one who has previously built and successfully sold one or more business – the owner will go through the sale process once and only once.
    • Business advisors – especially CPAs, fractional CFOs, attorneys, and investment advisors – will have been through this process multiple times and know the factors different types of buyers are looking for in a business. A person seeking to buy and run a business will look at a different set of factors than a private equity group wanting to buy a business similar to those already in its portfolio.

Advisors to SMB owners will almost always recommend the owner invest the necessary time and effort to work ON the business and prepare it for sale.

"At What Point Should We Bring in THA?"

Owners, executives, and managers of companies may wonder, "At what point should we bring in Todd Herman Associates (THA)?"

The answer is ... almost always "sooner"!

Companies typically talk with THA when a specific issue is so painful it can no longer be excused or ignored.

  • A niche manufacturing and services company being was run by spreadsheets, until this approach could no longer scale.
  • A manufacturer of a highly specialized product making decisions without tracking or valuing production accurately.
  • A specialty distributor with over $8 million invested in more than 4,500 items in stock, yet did not have an inventory tracking system.

Of the three examples listed, the first one engaged us, the second one chose to sell the business rather than take the fairly straightforward steps to fix their production issues, and the third one concluded that having accurate inventory was not worth the annual subscription cost of a reasonably priced operations and accounting system.

Sometimes though, companies talk with THA before an issue becomes too painful to be ignored. We have had two excellent examples over the past three years of companies engaging us at just the right time.

Example 1 – A Mid-Sized Distributor

A rapidly growing mid-sized distributor knew it needed to replace its antiquated Enterprise Resource Planning (ERP) System. Our recommended approach? First, perform a Business Process Review (BPR) involving representatives from all functions and branches, and then embark on the system selection and implementation.

By going through the BPR first, the executives learned the different processes used by the branches and could start nudging them towards a standard way of handling things, and managers learned what their peers were doing and could adopt "best practices" to their branch. The documentation produced during the BPR clearly described the current state processes and listed the features and functionality required to address existing shortcomings.

After the BPR project, the consensus was clear – "We need a new ERP system to take us where we want to go, and we're willing to put in the work to do the selection and implementation right!"

Example 2 – A Non-Profit Serving Certain Health Care Professionals

The leadership of a non-profit providing a very specific set of functions and services for certain health care practitioners – similar to the American Institute of CPA's (AICPA), though in a different profession – knew its finance and accounting area was not performing tasks efficiently, and thus had little hope meeting its Board of Directors expectations to significantly improve reporting of its financial and operational results and challenges.

We were engaged to review the finance and accounting area for process and technology improvements. While we found a few quick fixes, most of the improvements would come from a project already underway – migrating their operations from a kludgy hosted solution and a series of homegrown Access applications to a more robust hosted solution appropriate to their industry.

We had a number of medium-term recommendations, though, including laying out a roadmap to achieve the desired reporting, selecting, and implementing a new financial suite.

"Sooner" Yields Better Results Than "Later"

These two companies did it right – conducting a "current state" review of the relevant processes BEFORE embarking on the larger and more substantive projects. Both worked ON the business by assessing needs to scope out necessary improvements, allowing them to knowledgeably make those long-term investments.

So, if you think THA might be able to help improve your business, please contact me sooner rather than later – because the best results for the client come from "sooner."

Sincerely yours,


Todd L. Herman