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The presence of effective and fully integrated enterprise software can heighten a buyer’s interest in a business and even result in a better valuation for an LBM dealer. Having a well functioning enterprise resource planning (ERP) system, like owning a large fleet of vehicles or having excess space in current facilities, is a sign that a company is positioned for growth. Of course, the opposite is also true.

Valuing companies is an art as much as a science, and most buyers add their own unique twist to traditional valuation methodologies. One buyer might see outdated systems in the same light as a superannuated fleet, facilities that require maintenance, or other signs of underinvestment. These shortfalls might cause a buyer to decrease the overall EBITDA multiple for the business. Other buyers might value the company with a market EBITDA multiple and then deduct the cost of the new system that they perceive must be implemented after the transaction closes.

Even among acquired companies that have ERP systems, the critical issue might be the extent to which that system can be integrated with the buyer’s own system. Most acquisitive companies prefer to integrate the data and technology assets of newly acquired businesses into their own systems as soon as is practical.

When an LBM company has chosen not to invest in an ERP system, they often do not have a robust fleet scheduling system in place either. Modern fleet software helps optimize the loading of trucks, eliminating wasted labor and fuel. Additionally, these fleet management programs feature GPS tracking of individual trucks. This capability helps companies comply with DOT requirements regarding the hours that drivers travel between rest periods. They also provide a layer of monitoring that prevents employees with company vehicles from using those vehicles for personal driving.

Companies without an ERP system should consider obtaining one, but they must account for the likely cost, time commitment, and disruption of fully implementing that ERP system, whose preimplementation planning takes several months. The total cost of an ERP system will run from the low hundreds of thousands to the low millions, depending on the size and complexity of the company implementing it. Companies with hundreds of millions in revenue and numerous locations will spend many millions of dollars putting an ERP system in place.

Because of the complexity of implementing an ERP system from scratch, companies sometimes take a second look at their existing software. We have encountered companies that were paying for functional modules they had never used. Other companies were using a software system for many years and had never downloaded any of the updates that were included in their hosted subscription plan. (Companies in these situations are likely to have an understaffed IT team as well.) The best intermediate solution for a company in a situation like one of these might be to update and optimize its existing system and attempt to add one or two bolt-on solutions that provide data output, reports, or analysis needed to take the business to the next level.

So, whether your company is looking to deploy its first ERP solution or upgrade an existing one, getting the most out of the software could make your business significantly more successful and attractive to suitors.