#17: 10 Disastrous Strategies

After sharing my top tips with you last week, I wanted to draw on this some more in a bit more depth. Upon writing this article, I sought input which left me profoundly depressed – I ended up with over 100 things not to do or avoid! So to draw myself back from the edge of the precipice, I reduced this down to the 10 which were cited most often. I hesitate to say “read ‘em and weep”, but here we go:

1. In terms of staff engagement it is really important, as part of persuading them to take responsibility and accountability to tasks, that they are focussed on outcomes and not activities. Easier said than done, but very important. “Busyness” doesn’t mean success.
2. Making decisions on sub-optimal management information is not going to help. Make sure you MI is timely, meaningful and relevant. Furthermore, make sure you understand the financial drivers in your business, in particular your gross and net margins and your breakeven point.
3. Have you shared your vision in a way that your staff feel part of it? If you haven’t, they aren’t on the same bus as you are.  Telling them stories often helps – become a storyteller.
4. Businesses without a “Plan B “often fail.  Make sure you have a risk register, with countermeasures to eliminate the main risk in your business.
5. Cash was, is, and will remain king. Make sure your expansion can be supported by either long-term capital, working capital, or both. Without cash, your days are numbered. An expansive order book is no use if you cannot pay your bills.
6. Bringing in senior people to share the load is understandable, but ensure that a) they operate from the same code of conduct as you do, b) they genuinely hare your vision, c) they can do what the claim they can do and d) you have reporting mechanisms to verify this.
7. You are expanding the business in a controlled manner and not spreading yourself too thin (think Ansoff matrix!)
8. Avoid concentration risk – it’s great if you have a significant predictable revenue stream each month from one client, but what if your key sponsor leaves (back to Plan B!)?
9. Don’t let costs expand to keep pace with revenue growth – in the euphoria that accompanies expansion it’s easy to overlook this.
10. Don’t lose sight of your core values – they should be enduring and if you lose them you are building your house on sand, in biblical terms.

So, plenty to think about, but important you don’t become complacent…

For more information on strategies and advice, make sure you keep up to date with my expect articles or contact me through my website. I am always happy to help.

#16: Top Tips

This week, I wanted to share some of my top tips on how to run your business successfully, which I have learnt throughout my career and continue to follow.

One of the key attributes of people who succeed in growing their business is that they refuse to admit defeat. Making wrong decisions and mistakes happens to us all – it’s how you deal with them, learn from them, and move on that counts!

I’ve been reflecting about some of the lessons learned (often relearned!) by my clients, and myself, and so I thought I would share a few of them with you. By the way, these are all genuinely prompted by experiences of people I have worked with, so they are very real indeed!

1. Do try to ensure you have a diversified book of business – too many eggs in one basket is dangerous, however secure you think it may be as a source of ongoing work.
2. Do review your personal branding (or even better get someone else to review it!). It’s amazing how little “disconnects” can sneak in between different places where you interact with your marketplace.
3. Surround yourself with quality – business partners, staff, associates, and service providers. You may find it a false economy not to do so.
4. Be careful whom you trust and take in to your confidence. Failure to do so can cause financial and personal hurt.
5. Develop your own criteria for business assignments, and have the courage to walk away if they are not all met. Mine are a) only take on interesting work, b) only work with/for people I like, c) make money but not be greedy and d) have fun. Works for me!
6. Get better at spotting timewasters – I have heard them called “energy vampires”! i.e. people who take up your valuable time but have no intention of ever retaining your services or buying your product.
7. Be more selfish with your time, and be on the alert for people who will try to access your product, or more likely service, without paying for it. Make sure you have a policy in terms of when the meter starts running.
8. Be careful when hiring staff, or associates, that they will fit in to the business. Once you have satisfied yourself with their technical competence and skills, make sure that they will fit in terms of team culture. If not, think about how you, your existing team, and the new hire will need to adapt your respective behaviours to make it work.
9. In today’s market everybody is increasingly cost-conscious, but that does not mean you necessarily have to drop your prices. Rather than concede, think if there is a way that your product lends itself to trading time and not money.
10. Finally, take time to review the network you currently have. Is it the right people, and are there enough (or too many!) of them? If necessary create a framework for the trusted network you need to flourish in your business, and then set about making it happen. It may be that organised networking events is not right or not enough for you.

So, there you have it. I hope there is something here that resonates with you and your business. If you want to explore any of these (and the stories behind them!) please feel free to contact me.

#15: Future for the Founder

This links up quite nicely with the previous issue of Choices. As we have discovered, a business achieving sustainable profitable growth offers choices to its owner or owners, as it is operating from a position of comparative strength. Let us consider the implications of some of these choices for the founder, which could be paraphrased as “move on or move out”.

The first one might be acquisitions that could be made to achieve a step-change in growth as opposed to being satisfied with organic growth. My business partner Stephen Furner is something of a guru in this space. He looks a lot at acquisition drivers, which could include the need to widen your product or service offering, and/or to enter proven markets at home or abroad, in order to stay ahead of the competition.

“Your company will benefit from speed of access to new products and services, broader skill sets, and established customer/client bases. This approach can avoid a huge drain on cash resources for a company attempting to achieve growth by way of organic development, particularly in overseas markets”.

The other two key components to an acquisition strategy are getting ready to acquire and getting it right!

As Stephen says in terms of getting ready:

“You have to be well prepared for the process, with a capable management team and scalable technology that can absorb the target company with minimum disruption. Your business plan will have identified areas for potential growth and your second step is to make a full, ‘acquisition search’. Hiring a non-executive director or business adviser at this stage will minimise your early costs, provide expert guidance in the process and prevent you from making poor decisions.

Your acquisition plan will need to state the amount of funding available to acquire a target company and you must arrange access to finance before you start the process.

Ask yourself whether the target company will add value to your business through wider offering and markets. Ensure that market growth is sustainable and fits with your business model. Make sure the target has a product or service that differentiates itself from the competition. You should always ask why the company is for sale. Check for healthy profit and loss and cash flow indicators, and quality of customer base, including the level of concentration with major customers.

Research external factors in target markets so that you are aware of potential disruptions. Confirm that the target has a strong second-tier management in place, especially if you cannot tie in the owner to an earn-out deal or a service contract.”

And he is always at pains to stress the importance of getting it right:

“When you have identified your targets, you can approach them, discuss the possibly of an acquisition and establish a sound valuation. From there the detailed buying process can start. You will need to hire a commercially-minded solicitor to guide the legal process.

Acquisition is just the start, so don’t delay planning your implementation strategy with your new asset until after the deal is done. You need to be ready to hit the ground running.”

Another choice the founder has is the reverse strategy i.e. exit. It’s vital to get this right after all the hard work that he or she has put into building up the business so it is potentially attractive to a buyer. The most common exit route is a trade sale, so let’s focus on that.

A few key aspects to reflect on:

1. Careful planning is essential – allow up to 5 years to groom the business for sale.
2. Your key objectives would be:
   a. To find three or more buyers willing and capable of bidding for the company at about the same time.
   b. To organise and present the business in such a way that the transfer of ownership is smooth and relatively quick.
   c. To be able to turn down unacceptable offers.
3. Always have a “Plan B” i.e. what will you do if there are no appropriate buyers?
4. Make sure you get advice early, starting with a reality check on planning for a sale, as it is not easy to sell a small company. This should include how attractive is your company to a potential buyer, and can it be made more attractive, and what will the mindset of a potential buyer be in terms of expectations, valuations etc.
5. Ensure that throughout the process you always maintain the momentum and trajectory of the business and don’t get distracted by the sale process.
6. Make sure you have assessed the value destroyers (get rid of these) and value enhancers (protect these) in your business.
7. Surround yourself with quality advisers (a non-executive director perhaps, plus a corporate finance firm, accountant, tax adviser and solicitor)

In summary, you need to be as meticulous in planning for a successful sale as you were at the outset planning for a business capable of sustainable profitable growth.

One alternative to a trade sale is succession planning, where the theory is you withdraw from the business gracefully at a time of your choosing, leaving it in capable hands. You probably need to allow at least 18 months to build a well-balanced management team capable of stepping up to board responsibilities when you move on. You may have to make some hard choices as the people who have helped you to grow the business may not be the best people to run it after your departure.

If you put in place a sound management performance system, with key indicators that your team are meeting the demands of the business, you can test them out before you hand over the reins, as you will have established a process whereby there is no need for you to micromanage or interfere unnecessarily.

The final option to consider is franchising. This is a tricky option and far from straightforward, but it could represent a financially attractive option for taking your business to the next (and a significantly different) level.

It is vital that you seek professional advice for the outset, as this is such a specialist area. One of the key issues is that your operating model is moving from being a pure business to being a training and support organisation for a group of independent bosses.

Some questions to ask yourself:

1. Are you fully satisfied that you can consider the performance of the business to be “proven”?
2. Have you the wherewithal to make the necessary investment to operate as the franchisor e.g. creating a central infrastructure, legal costs, creating handbooks, manuals and plans, establishing training and monitoring programmes, creating marketing and sales collateral etc.?
3. Have you the management skills to act as franchisor?
4. How will you protect your brand?
5. How will you find and recruit franchisees?

A couple of people I have worked with had eminently “franchisable” businesses, and tested their respective models by arranging pilots with “warm” contacts. They also undertook a great deal of research, interviewing other franchisors so that they were genuinely going into the franchise world “eyes wide open”.

So, there is plenty for a successful owner to consider in terms of next steps.

#14: Choices

Now that you know how to assess the financial strength and stability of your business, which we covered in my previous article, you may now find yourself facing a series of choices you need to confront as your business continues to develop and grow. A business achieving sustainable profitable growth offers choices to its owner or owners, as it is operating from a position of comparative strength. Choices could include:

• Positioning the business for eventual sale
• Going on the acquisition trail in order to achieve a “step-change” in growth.
• Raising equity or debt on more attractive terms
• Entering into joint ventures or strategic alliances on more advantageous terms and conditions

You have created choices because you have probably worked on (as opposed to in) your business (see this article on prerequisites of sustainable profit growth), and managed to bring about strategic change whilst achieving and maintaining a significant degree of balance between five key components, which are the standing blocks to your existing and ongoing prosperity:

1. You have aligned your staff in a way that they share the same picture as you do of the strategic direction of the business. In other words, you are all on the same bus! To do this you have probably kept it simple, referenced it repeatedly and consistently, and tested their understanding and that of other stakeholders.
2. A key part of the alignment is the leadership approach; you have adapted your behaviour to relate better to your staff, and enable them to take ownership of the growth, changes and challenges they face.
3. Another key part of the alignment is a common understanding of the required customer experience through sales and after-sales. The understanding in turn is probably derived from clear sales and delivery processes which are followed consistently by all, so that the customer experience can be repeated time after time with the same results.
4. You have devised a methodology to assess both how the business is doing and how the staff are doing, and link the two aspects as a performance management strategy. So, you are measuring business progress with KPI’s and balanced scorecards, and measuring people processes with a thought-through approach encompassing  a) performance management, b) reward and recognition, and c) training and development, which will be key components in reinforcing employee engagement.
5. Finally, as a result of the 4 approaches set out above, you have created a positive culture, whereby your staff are motivated and energised to make the right things happen in the right order, and in the right way. Culture drives strategy, but it can equally destroy it. But through your leadership, you have created a culture which is an enabler, not a destroyer.

There may have been other factors at work, but I think the above five, applied in “synch”, are quite often the ones that create a business environment where you can indeed begin to make choices.

In my next article, we shall consider the implications of some of these choices, and how these will have a direct impact of the future of the business and the founder, or founders, themselves.