5 Key Areas of Focus

1. Build the Team

Most smaller companies are the product of a strong, entrepreneurial founder or family.  Some have successfully replaced the founder(s) with qualified professional management.  Either way, market value is greatly impacted by the depth and quality of the management team. This is especially true through the lens of financial buyers such as private equity funds and family offices. Strategic buyers can be concerned about management depth, but not always.  Reliance on a single key leader will usually be a red flag to potential buyers.  It is always viewed as a risk and negatively impacts value.  Financial buyers often name quality and depth of management as their primary investment criteria.

If the goal is to build value, succession planning and team-building is essential. Most potential buyers must be convinced that the seller can be readily replaced in the near term. The best way to illustrate that is to replace yourself now or have a strategic succession plan in place.

Motivating and retaining top talent is crucial for the sale value of your company. Does your management team have the leadership acumen, skills and drive to continue growing the company when you leave?  A strong and motivated management team demonstrates to buyers that the value of the business is not completely dependent on the company’s owner.

2. Institutionalize the Business

High performance teams develop and follow proven processes and procedures.  I call it institutionalizing the business.  It makes results less dependent on any individual and more reliant on the success of the team being trained who consistently follow standard operating procedures (“SOP”).  For this to be effective the SOP need to be well engineered, repeatable and easily understood.

Employees come and go, but the systems that run the business remain constant.  Having proven, standard processes means your customers, vendors, and employees enjoy the same experience each time they interact with your company.   It also means your company enjoys the benefits of the efficiencies as a direct result.

Focus on positioning your business to rely on properly managed procedures and systems. Using state-of-the art software systems/processes effectively can give your company a competitive advantage, even against your larger competitors.  Ask yourself the question: is my management team up to the task of finding, training, and implementing such systems in our company?

3. Diversify the Customer Base

Many lower middle-market companies have made the mistake of growing revenue by exacerbating customer concentrations or chasing marginally profitable customers and markets. The resulting customer/industry concentrations and reduced profit margins are detrimental to market value and reduce the marketability of the company.

In today’s M&A market, astute buyers focus a great deal of their due diligence on the target’s customer base. They are wary of both individual customer and industry concentrations.  A single or a few large customers amplify risk as does a customer base that serves a single end market.

Buyers typically look for a customer base in which no single client accounts for more than 8-10% of total sales.  A diversified customer base insulates the company from the dramatic impact the loss of a single major customer can have.   It should also serve to protect the company from the pressure on pricing and margins that can be exerted by a single major customer.

Work to diversify the customer base by number, size, industry and geography.

4. Develop Streams of Recurring Revenue

The reason that recurring revenue is a value driver should be evident.  Every business would like to start the month or even the year with a high percentage of their targeted revenue in the bag.

That said, for many businesses; it is difficult to create customer relationships that cannot be undermined by competitors.  Look for strategies that enhance recurring revenue and address competitive intrusion.

• Make customer retention a top initiative
• Offer a compelling customer value proposition
• Consistently beat delivery dates
• Illustrate continuous innovation
• Consistently deliver better quality
• Be the most convenient solution
• Provide the best customer service
• Generate creative offers and pricing

The larger the portion of a company’s revenue that is recurring, stable and likely to continue in the future, the more desirable that company is to prospective buyers.  In addition, multiple revenue streams – the number of different ways the business earns money – can help reduce the risk should any single product or service see a downturn.  Buyers are more willing to pay a premium for businesses that demonstrate predictable earnings.

5. Demonstrate Rapid Growth Potential

Market value is maximized when there is a consistent track record of growth that projects into the future. Prospective financial buyers want to understand the growth story before asking any further questions. A compelling growth opportunity goes a long way toward the development of their investment thesis. It cannot be “pie in the sky”. The recent track record and underlying explanation is foundational.   The story is always enhanced if accompanied by an extremely large addressable market for the product or service, meaning a market with lots of opportunity and room for growth.

Rapid growth-potential hinges on scalability.  Many things need to be in place for a business to be truly scalable.  If rapid growth would require a significant capital expenditure investment, then the story becomes less compelling.  A truly scalable business is one which does not require near term capital expenditures to support the growth plan, and will see profit margins increase as revenues increase.  Profit margins increase because costs do not rise in lockstep with revenue.

The software business model is a classic example of a scalable business.  The cost to deliver the software, once created, can be almost nothing. The additional licensing revenue received increases revenue, profit margin, and cash flow.

There are obviously many issues that can negatively impact market value. Examples would be lack of pricing power, unusual exposure to rapid technology changes and lack of capacity to support growth. The key to growing market value is to focus on the actionable key issues and measuring results. Many of these issues can be dealt with effectively if given enough time and attention. However, if they are not addressed, they will have a negative impact on market value and marketability.

About the Author David Engel

David is a trainer for IdeaTeam1 and a Consulting Partner at Flynn & Company. David brings more than 30 years of corporate transaction and financial advisory experience to clients’ business challenges.

He has an extensive background in developing, defining, and executing M&A strategies, ownership transition of privately-owned businesses, corporate divestitures (including carve-outs), management buy-outs, recapitalizations, business valuations and capital formation.

The post Five Tips to Increase the Value of Your Business appeared first on IdeaTeam1.

In fact, in his book Culture Trumps Everything, Dr. Gustavo Grodnitsky wrote:

“What happens when people who are normally loud and boisterous walk into a church or a library? They lower their voices. Did they suddenly change their biology or their personalities?

Of course not. They simply responded appropriately to cultural expectations of behavior. It seems obvious in this case, but the truth is that culture has a similar impact on virtually everything that every one of us does – every day – without even realizing it. The many cultures that each of us simultaneously belong to have a disproportionate impact on the ways we think, feel and behave. As a result, leaders of organizations both large and small have the opportunity to shape their cultures in ways that foster positive outcomes for all stakeholders – from employees, to senior leaders, to shareholders, to the broader community.”

How would you describe your current organizational culture? Is it one of high collaboration? Is the culture’s vulnerability based on trust about each individual’s strengths and weaknesses? Have people shared with you what you not only bring to the organization, but also what you do that detracts from it?  If not, is your company’s culture holding you back?  You have the opportunity to shape it intentionally in a way that will positively support your organization through optimizing behaviors and determining and living your values.

Behaviors

We all have varying degrees of various behaviors.  Some of us have higher energy levels than others. Some are more assertive, more manageable, more independent, and more social (that’s not being able to go out to a party, but our ability to collaborate with others on teams).  Do we trust or are we more skeptical? Or are we more steadfast in our positions and beliefs than compliant?

These are all important as your company’s organizational culture is partly determined by how each person behaves.  If you are a company composed of highly decisive people, then outcomes might not be the best as you have not taken into account enough information to make good decisions.  On the other hand, if you are a company of low decisive people, then you will pursue so much information that the decision you need to make will never get made.  In both cases the company suffers.

Personality assessments are a good way to determine individual’s behaviors.  Determining what those behaviors are for the myriad of positions that comprise your organization is a good way to create the culture you are seeking.  Desired cultural behaviors such as collaboration, taking initiative, and exhibiting trust can be something is missing here.

For example, a high energy person may not be a good fit for a data entry position and low assertiveness may not be the best behavior for the leader of your organization.  Likewise, someone who is highly social will tend to take a lot of time in small talk at the water cooler.  Each position will have its requirements that can be measured and compared to the candidates or individuals that you are considering.

Values

What are your values? What are your company’s values? Have you taken the time to define what they are?

Values like honesty, integrity, and high customer service are common among companies that have identified their values.  What about vulnerability-based trust, embracing ideological conflict, commitment, accountability, and team-focused results?  What are the values that truly represent your company that need to be identified and expressed?

In his book The Five Dysfunctions of a Team, Patrick Lencioni wrote:

“If team members are making one another uncomfortable at times, if they’re never pushing one another outside of their comfort zones during discussions, then it is extremely likely that they’re not making the best decisions for the organization.”

We’re certainly not advocating fighting within your organization, but are you embracing ideological conflict that has nothing to do with individual personalities and everything to do with what you are attempting to accomplish the best way that you can?

Culture Strategies

Here are three strategies that will help you intentionally design your culture:

1. Get the right people in the right seats

Once you know the behavioral traits of a position you need to fill, you can look for the best candidate to fit the position.  We call this “job fit.” Knowing the behavioral traits of a position, its required energy level, sociability, manageability, and how assertive and accommodating the person needs to be,  then assessments can match candidates to a model that will provide information as to how they “fit” into a position.  Good “job fit” leads to long-term employees and greater personal and professional satisfaction.

2. Help them with their self-awareness and other-awareness

Once you have hired an individual to fill a position, share their assessment with them. If you have one yourself, share it with your team.  Share the team’s assessments.  Help them become more aware of their behaviors and how their behaviors have an impact on the company and its culture.

Another good assessment that we use for team awareness is Strengths Finder by Tom Rath and the Gallup Organization.  With this tool you can determine the strengths of the team and where missing strengths might need to be supplanted by additional team members.

3. Lead them to their full potential

There are a number of workshops that can help your team and its members get to the next level.  We’ve already discussed Lencioni’s The Five Dysfunctions of a Team. Lencioni has developed a wonderful workshop that not only defines what makes up a great team, but also identifies what naturally gets in the way.  It’s the human nature that is affected by your culture that has a similar impact on virtually everything that every one of us does – every day – without even realizing it.

What is your organizational culture?  Is it holding you back? What if you could “shape it in ways that foster positive outcomes for all stakeholders – from employees, to senior leaders, to shareholders, to the broader community?”

What would be the results?

Steve Haber is a trainer and facilitator for IdeaTeam1. He owns The Haber Group, a leadership development company with a successful record for coaching, mentoring and team development through strategically-tailored workshops.

The post Is Your Company’s Organizational Culture Holding You Back? Three Strategies to Help Intentionally Design It appeared first on IdeaTeam1.

A business accelerator is a program that provides companies with guidance and support to further advance their business. Some business accelerators focus on start-ups whereas others focus on companies that are well beyond the start-up phase.

Why a Business Accelerator?

The benefits of a business accelerator are significant for business owners. So often business owners are pulled in multiple managerial directions each day. From an operational standpoint they have little time to focus on building their company.

Not only are business owners responsible for the growth and success of their company, they are also the primary decision-maker in all or most of the following areas: Human Resources, Finance, Accounting, Marketing, Sales, Risk Management, etc.

Business owners are beholden to their clients. Often times we see the majority of a business’s primary revenue from a small percentage of their client base. This increases the need for the business owner to be involved in the day to day operations because they simply could not afford to lose one or more of their largest clients.

In addition to the challenges listed above are other obstacles that can challenge the growth and success of a business. These challenges are external and unpredictable such as the global marketplace, competitive landscape and economic conditions.

Business owners face a myriad of potential distractions that can lead them astray from their purpose and role as CEO or business owner. A business accelerator provides direction and re-energizes business owners to focus on the tasks that provide the greatest impact.

What is the IdeaTeam1 Business Accelerator?

IdeaTeam1 focuses on supporting the entrepreneur, business owner and CEO. IdeaTeam1’s take on a business accelerator is much different than a typical business accelerator because its overall arching theme is to increase business value.

The IdeaTeam1 Business Accelerator is designed to assist CEOs & business owners to realign their focus so that they are spending their time on the areas of their business that will increase the value of their company. This 18-month program has several components that are used to assist the CEO or business owner in making the necessary changes to increase the overall value of their company.

How Does it Work?

Upon acceptance into the IdeaTeam1 Business Accelerator, participants are thoughtfully paired with other CEOs and business owners of non-competing companies to form a peer group known as an IdeaTeam. The participants of each IdeaTeam are chosen based on a comprehensive selection process and strategically placed into an IdeaTeam with other participants that will complement his or her industry, company size and overall goals.

Once an IdeaTeam is formed, they begin an 18-month journey to further advance their businesses. Each IdeaTeam focuses on exploring and dissecting some of the most challenging and invigorating aspects of owning and managing an organization. During the program participants have access to the following:

• Your IdeaTeam Group
  • Exclusive, confidential peer to peer monthly meetings with other CEOs and business owners.
  • Monthly meetings led by a professional facilitator with a proven track record as a business leader.
• IdeaTeam1 University
  • Business Accelerator Roadmap – Class topics are strategically chosen to design a dynamic curriculum that highlights critical elements which will create the greatest impact from a growth and management perspective.
  • Toolbox and resources for your business.
  • Access to our trainers and subject matter experts.
• Private Executive One-on-One Coaching
  • One-on-one coaching by an accomplished Business Leader.
• Business Analytics Reporting
  • Comprehensive financial analytics reporting.
  • One-on-One private meeting with a business strategist to review and discuss your results.

How Can My Company Benefit from a Business Accelerator?

Whether your goal is to grow your business, improve your operations and/or strengthen your management team, you will find clarity, direction and empowerment through IdeaTeam1’s Business Accelerator Program. Our goal is to see our participants and their company reach their full potential.

CEOs and business owners can take some comfort in the support of a business accelerator because they are not alone. You have heard “it is lonely at the top” and that is true, but that feeling can be amplified when you believe you are the only one who is qualified to take care of the majority of tasks that need to be handled within your company.

The Business Accelerator provides a support structure for each business owner. This structure includes a peer to peer monthly forum where business owners come together to share and dissect some of the most challenging issues associated with running and managing a company. This type of forum creates a team format of business owners who will come to know each other in a way that essentially serves as a board of directors. Business owners can bring their issues and challenges to their peer group in a confidential setting to gather input, guidance, and advice. While each business owner may not experience the same day to day work situations, they likely will experience similar management issues. The benefit in learning from a peer to peer group is invaluable. IdeaTeam1 spends a considerable amount of time vetting participants and pairing them with the appropriate IdeaTeam.

Executive one-on-one coaching is with a proven business leader who has essentially been in your shoes. The coaching sessions are private meetings that allow for the business owner to share and discuss items that they may prefer not to divulge in a group setting.

Have you ever really scrutinized your company’s financial analytics? Your company’s financials are very telling. Our team prepares an insightful analytics report for you using your company’s financial information. By reviewing your Business Analytics Report we can work together to identify your business trends and highlight opportunities or potential setbacks.

Is the IdeaTeam1 Business Accelerator Program Right for Me?

Companies looking to overcome challenges in any of the following areas are highly encouraged to apply for this program:

• Grow Sales
• Improve Operational Efficiency
• Strengthen Your Management Team
• Streamline Your Cash Flow Operations
• Manage Company Risk
• Protect Company Assets
• Plan & Prepare for Succession
• Prepare for Business Valuation
• Create & Implement a Strategic Plan
• Enhance the Health of Your Company’s Culture
• Improve Team Cohesion and Dynamics
• Refine Marketplace Presence
• Create Strategic Marketing Plans
• Perfect Financial Planning and Forecasting

Each of the initiatives above will increase the overall value of your business.

How to Assess the Readiness of Your Company:

In order to increase the value of your company we must first assess the current state of some key components associated with the management of your company. You can take a brief and confidential assessment to get started. https://ideateam1.com/business-accelerator-assessment/

For additional information on the next IdeaTeam Group contact Kelly Shough at kshough@ideateam1.com

The post Ready to Move Your Business Forward? Then It’s Time for a Business Accelerator. appeared first on IdeaTeam1.