Multi-Unit Franchisee Magazine Issue III, 2012 | Page 84

ExitStrategies By Dean Zuccarello

Outsourcing To Add Value
Using third parties to enhance valuation

D

uring the initial stages of an exit strategy engagement with our clients, we spend considerable time
gaining a full understanding of the client’s business.
One component of developing this strong grasp of
the client’s specific situation is uncovering situations that can
enhance the overall profitability of the client’s company. This
process is critical in assessing the “true” value of the business,
which is one of the valuable services we provide our clients.
Typically, our areas of focus will include the investigation
of issues such as temporary impacts to the business (e.g., road
construction), facets of the business that have not yet matured
(e.g., new unit development), and corporate overhead structure to ensure that any excess owner-specific compensation
and benefits are removed.
In 22 years representing restaurant and franchise clients,
we have found a wide disparity in the manner that our client
companies operate, and we have noted
the impact this can have on the profitability of their businesses. Because companies do not typically share information
with their competitors, best practices
for managing a business are often proprietary for each company. Even with
franchise businesses, it is rare to see a
sharing of operational information that
facilitates the blending of best practice
methodologies.
Most entrepreneurial companies
tend to operate their businesses with
very little change over the years. They
adopt an organizational method and
established way of doing things, and
tend not to vary much over time. By
taking a fresh approach and examining
a few key areas of the business, we have
found that many clients can uncover a
wealth of benefits.
So why are we discussing this in an article about exit strategies? Simply stated: so that we may enhance the overall profitability of and value for our client companies. The types of
adjustments referenced earlier are common for a valuation/
assessment process. However, implementing some best management practices can not only enhance the value of a company when it is seeking an exit, but can also provide additional
operating and financial benefits in the interim.

cent versus their previous in-house operations—savings that
are typically larger and realized more quickly than those generated
by internal process improvement initiatives.
And, according to David Oden, president of InfoSync Services
(the leading provider of comprehensive outsourced accounting, payroll, and operational reporting services to multi-unit
restaurant companies), the benefits go well beyond cost savings:
“Through outsourcing, business owners are able to achieve
immediate measurable improvements in their company’s G&A
costs, financial systems, controls, administrative processes,
and reporting, all without large capital investments. But the
greatest benefit is the hardest to measure—the freedom of
business owners and their executive teams to focus on business operations without the distraction of also managing the
day-to-day activities of a financial administrative organization.
The financial team of the business spends more time focusing on enhancing results and less time
on processing data. This sharper focus
on operations leads to bottom-line improvements that will further enhance
the value of your business.”
Outsourcing financial functions offers other strategic advantages as well.
Thinking of selling a certain concept
or certain geographic locations of your
multi-unit business? Outsourcing provides a variable cost structure per location, per month that will immediately
allow you to right-size your accounting and payroll processing costs for the
concepts or locations of your business
that you retain. This works for growing companies as well. The ability to
increase the scalability of administrative
functions overnight is a huge advantage
to those firms growing by “leaps and
bounds,” usually through acquisition.
Outsourcing financial functions can also be an excellent
way to provide a financial safety net by providing checks and
balances by an independent third party.
Finally, using an outsourced financial service allows a company t