The Value Workshop is calling; development is always worthwhile

Are you considering selling your business or do you plan to buy? Are you sure that the business to be sold really is commercially viable? What kinds of factors ultimately determine the monetary value of a company? Many people in North Karelia are thinking about these kinds of things. We are living in the midst of a boom in changes in ownership. Business Joensuu and Pohjois-Karjalan Yrittäjät recognise the growing need that businesses have for services. Combining resources with insight gave businesses a unique learning environment - the Value Workshop and an electronic value analysis application.

In an index of owner changes released in March this year, North Karelia was among the top three, along with Central Finland, and South Savo. The regions that are most eager for changes in ownership are united by a higher-than-average age among entrepreneurs.

When demand rises, the supply of service providers needs to be strengthened. So said Business Joensuu and Pohjois-Karjalan Yrittäjät. The Jatkis project was built to make it easier to buy and sell businesses.

“Services needed for changing ownership had been largely the responsibility of companies dedicated to regional development, and the resources were somewhat modest, considering the need. Jatkis brought more forces, and above all, new strength to collaboration among the actors”, says Jouko Piirainen, a business specialist at Business Joensuu.

Jan Kontiainen, project director of the Jatkis project recalls that the flood of customers to Jatkis was amazing, when the project began 1.5 years ago:

“I worked with Jouko to ease the backlog of companies, noting that a systematic approach was definitely needed for this service.”

Turning a mystery into value

According to Kontiainen, one of the long-standing problems in situations involving a change in ownership has been that the value of the company remains a mystery for both the seller and the buyer. Piirainen nods in agreement, noting how delicate a matter a change in ownership can be for both sides. Emotions can easily outnumber facts.

The two took an analytical approach to finding a solution to the ownership change service. With Piirainen’s lengthy experience an agenda was created to help a company participating in the Value Workshop to visualise its situation. The check-list includes, among other things, the facilities of the company, machinery and fixtures, investments, personnel, and clientele.

“When issues are examined with guidance, analytically, while sharing thoughts with other entrepreneurs taking part in the value workshop, insights emerge.”

Kontiainen, for his part, produced a calculation chart for value analysis. With the help of numbers, the business activities of a company can be dissected right down to the core. In the Value Workshops already held this year the analysis of the issues and incorruptible numbers have given several entrepreneurs eureka moments. The most profitable customers and the most productive business activities have been somewhere other than where the entrepreneur thought they would be.

“Analysing one’s own business activities is extremely important. The process teaches what development targets a company has and how different matters and measures will affect the value of the business. The goal is to get the company into good enough shape to be sold and to follow up to ensure that it will stay that way”, Piirainen says.

Bringing new enthusiasm into development

It is rare for a company to be sold very soon after it is put on the market. It is best to prepare to wait for months to find a buyer. That is another reason why Piirainen and Kontiainen recommend planning ahead.

Sometimes plans can change, as in the case of entrepreneur Jari Kaltiainen who took part in the Value Workshop in its early days. Kaltiainen’s business cluster included Jalosteel Oy and Lieksan Terähuolto Oy. Jalosteel operates both in Joensuu and Lieksa. The company manufactures floor drains and basins made of stainless steel and acid-resisting steel and operates as a contract manufacturer of sheet metal. Kaltiainen’s companies employ a total of 22 people.

“The cluster of companies appeared to have grown so big that the options were either to downsize or to seek a new surge in growth. The primary idea was to relinquish one of the two companies”, Kaltiainen says.

Instead of trying to sell the company, Kaltiainen chose the path of development. The company invested half a million euros in a new fibre laser line. The first fibre laser of its kind in the Nordic Countries will come to Lieksa. High technology boosts quality significantly. The investment has led Jalosteel to recruit more employees. Kaltiainen praises the Value Workshop’s understandable approach to the matter. The entrepreneur says that Value Workshop has given him plenty of new inspiration.

An entrepreneur’s learning environment

Instead of using paper printouts, the value analysis is created digitally on line. During the ongoing pilot phase, the service has been constantly developed also based on feedback from participants in the Value Workshops. The value analysis is part of Business Joensuu’s ownership change service, and as such is also a suitable path for companies to start utilising Business Joensuu’s other corporate development services. Jouko Piirainen is especially pleased that the value analysis programme can be utilised by all corporate development organisations in the region.

“Skills in changing ownership will improve throughout the region and working methods and tools will become more integrated throughout the region.”

Another cause for satisfaction is that the Jatkis project financed by ESR will be extended through the end of 2021. Business coach Hanna Koponen was recruited to serve as Jan Kontiainen’s partner. Koponen, who had previously served as Finance Manager at Finnvera, knows about ownership changes and the financial instruments involved.

Five Value Workshops were held before the summer and more are coming. Applications for the workshops are constantly coming in and they are arranged in different parts of the region. Participation is free of charge.

“Jatkis brought more forces, and above all, new strength to collaboration among the actors”

Yield of the value workshops

  • Stronger understanding of a company’s future direction
  • Emergence of new ideas and alternatives
  • Development of understanding of the producers of a company’s value
  • Readiness to constantly update value analysis
  • The workshop gives rise to material for corporate sale negotiations, funding negotiations, and as appendices for applications for investment and other things
  • Eight value workshop groups, about 30 workshops held
  • More than 33 companies have visited the workshops
  • Each company participates primarily in four workshops, after which the different phases of the value analysis have been examined

 

Text: Sirkka-Liisa Aaltonen, Viestintä Ässä Oy