List Of Things To Do Now

Like most of you, I have a perpetual list of things to do. Also, like many others, I suspect, my list seems longer at the end of each day than the beginning. Therefore, I’m NOT here to suggest ways to improve your life by managing your personal list. This column has a different focus.

Most owner operators, at some point, will want or need to raise capital, whether via a complete sale or solicitation of debt or equity. There’s a long list of things which should or must occur to be successful in that capital-raising exercise, but the list -- and process -- can be shortened somewhat by taking some steps in advance. It is a marvelous fringe benefit that most of these things turn out to be helpful even if you, Mr/Ms Operator, never sell your business or raise outside capital.

I was reminded of this list through two recent conversations -- one with a very successful former client who is forever contemplating bringing in outside investors, and the other with FohBoh member Jim Parish, who has given good advice to operators, entrepreneurs, and investors for many years. (So thanks, Jim, for the germ of this column, even though it wasn’t the point of our discussion!)

In no particular order, then, here’s my list. It’s incomplete, as are all such lists, but I hope it’s useful.

Are your brands really yours? Obviously, this relates to the name of your unit or units, but it also relates to any names of prominent menu items or products, as well as (perhaps) any nicknames which have become associated with your operation. If there are proprietary recipes, menus, or procedures, this should also cover them.

What’s the ownership and corporate structure? Does it make sense for both existing and potential investors in light of liability threats, tax issues, and the appropriate ownership arrangement for the intellectual property in the previous point? Is it sufficiently flexible that new equity or debt capital could be brought in at the most desirable level? (For instance, two rules of thumb, both subject to exceptions depending on the circumstance: lenders generally prefer to be at or near the actual operating level, rather than a holding company, in order to have the strongest claim on cash flow, while many investors will want to be at a holding or “parent” level in order to have ownership of all the existing and potential business value -- brands as well as physical operations.)

What about your contractual agreements -- suppliers, landlords, franchise (if applicable), and anything else of note? First: are they in order, assigned to the proper legal entity, and with the proper board (or other) approvals? [Especially important depending on changes made after the prior paragraph.] Second: do they reflect the current state of the world and market; should any be renegotiated, or extended to provide for a longer term? Finally: do they permit, or prohibit, additional debt or changes in ownership, or have any other limitations on your activities? [Best to know in advance so it can be addressed.]

Think of your employees as a team. Do you need to upgrade at any positions, or to do some coaching? Are you the best coach, or would some outside help be beneficial? Are you in danger of losing key members to another team? Might you need to renegotiate some compensation arrangements? You needn’t think quite like the Yankees (although they did win the Series, didn’t they?) but investments in building a stronger, more skillful team generally pay off in better operations and a higher business value.

What’s the market’s perception of your business? I’ve touched on “goodwill” in prior columns, and this is at the heart of it. Investors and lenders alike draw comfort from brands and operations which have an established base of positive goodwill. Because this can’t be changed overnight, steps which are taken now will have payoff down the road. In a future column here, as well as some other information which I understand is coming up on FohBoh in the next several weeks and months, you’ll learn more specifically about very small investments which can help in (1) figuring out how to measure where you stand today and (2) improving that measure over time.

Who’s your trusted advisor, or better yet board of advisors? There’s an adage that any attorney representing himself has a fool for a client. The same is true of non-attorneys trying to address some of the legal issues I mentioned above, as well as most anyone who takes a Do-It-Yourself approach to all these projects, and the contemplated project of raising capital. Please understand: this does not mean handing the responsibility off to someone else in each case; rather it means having a reliable sounding board (whether one or several) who have your, and the company's, best interests at heart on each topic. This may be an advisor who you’ve retained; it may be a formal board member whose compensation depends on a successful transaction or high business value; or some other, similar arrangement; but it’s worth having someone around who’s been through this process more than you have and who can help to navigate.

That’s it, and I’m sure many of you will have additional suggestions -- all are welcomed!

My next post will be December 25. For that, I’m developing a “wish list”, which I’m sure will be fulfilled at the highest levels, to make sure next year turns out well. Any contributions?