Business Owner Resource

Get the junk out of the trunk: Now is a great time to reassess your business.

2011-10-26T10:00:00.002-06:00

Every year about this time my wife organizes the house in preparation for the holidays. This includes going through all the stuff we have in our closets, shelves, hampers and trunks. The ritual is fairly painful, because she pulls everything out to reassess usefulness and how each item might fit in our plan for the next year.

Now is the time to get the junk out of your trunk and reassess your direction, tools, products and people. How much baggage does your company carry into every year? Evaluate your business as objectively as possible and get rid of those things that have no place in 2012.

Some areas to look at include:

Your business model

Many businesses and industries have materially changed since early 2008. We hear many people talk about the “new normal”; this may mean that products and services that you have relied on for years are no longer valid going forward. One company I work with has relied on a personal one-to-one service model and has added books and videos to their product offering. This was done to diversify their revenue and reduce the reliance on a business model that requires the principals to be involved with the generation of revenue during an 8:00 to 5:00 business day.

Opportunities

What opportunities have you missed in the past that might have put your company in a different place today? I meet with a number of business owners that discuss the actions they could take that would improve their business, but then go on to say “we discussed these areas 12-18 months ago and just couldn’t find a way to execute.” Does this sound like your company? Many business owners and leadership teams can sit down and plan how to take advantage of new opportunities, but fail to execute. Objectively evaluate your opportunities and develop a plan to get them implemented.

Strengths

When was the last time you and your management team identified your company’s strengths only to find a list that included things like “good customer service” or “good customer relationships”? Evaluate your company from the view point of your customers, partners, competitors and prospects. Does good customer service or good customer relationships set you apart from others in your industry? If not, then look deeper for sustainable areas of differentiation and identify how you can further exploit these strengths for a competitive advantage.

Weaknesses

Deep down we all know what some of our weaknesses are, but in many cases don’t confront them. It is difficult without outside input to develop a complete list of areas in which your business needs to be improved. Take this time to have candid discussions with your customers to learn how your company can improve. There are also some excellent tools and resources to perform a loss analysis, to develop insight into how your company can improve for the future.

People

Do you have the right people in the right places in your company? Many businesses have not strategically evaluated their most important asset… their people. Take a hard look at the direction of your company against the skill sets in your business and identify gaps that your management team can work on in the coming year. It may mean moving people into new roles, implementing training programs to help develop your employees, or hiring new people to supplement your team.

Yourself

As senior leaders we have a tendency of overlooking our own developmental needs. Are you ready to make the changes necessary in the new year to be successful? Just because you have been successful in the past, does not necessarily mean you will be successful doing the same things going forward. Successful leaders are those that can manage in changing environments, retool their company, and operate during times of ambiguity. Take an objective look at yourself and get ready for whatever the future brings.

Look at the junk in your trunk

Take the time to pull your leadership team together and objectively look at these areas as you prepare for 2012. Get an outside facilitator to work with you and your team to help develop the objective thinking and forward look needed to develop the basis of your operating plan for next year. Be prepared to gather additional information from your customers and partners to help guide you through the process. Taking the time to evaluate your business with independent input will help you develop a strong plan.

Larry Turner is CEO of Roundhouse Advisors, Inc. and has over 25 years experience growing, starting up, repositioning, and revitalizing organizations. Roundhouse Advisors is a consulting practice focused on helping businesses increase enterprise value by managing pain, growth and owner exits. Larry is a consultant, public speaker, and the author of two books “Owner Exit Planning: Leave On Your Own Terms” and “Mapping Your Recovery: Grow sales in difficult times”. For additional information visit www.RoundhouseAdvisors.com

“Mapping Your Recovery: Grow sales in difficult times” provides additional information on areas that can positively impact your company.

Business is hard enough without going it alone: Get outside help to boost your business

2011-10-19T09:50:00.002-06:00

Business owners know their company and industry, but still get stuck in the day-to-day business. Often times they hit a plateau and find it difficult to reach the next level of performance. Many of these executives and business owners look inside their organizations for the solution when the answer just simply is not there. They need to be seeking support from someone outside the company.

Professional athletes use coaches to improve their performance because someone from the outside can see things the individual cannot. The coach can observe and communicate what things need to be changed and support that change. Even the best golfers in the world employ coaches to help them improve every part of their game. Business is no different.

Executives and business owners run into new situations every day and have a limited set of reference on how to deal with them. An outside coach can help them put these situations into perspective and support them in adapting to either internal or external situations.

I work with one business owner who is an expert in his field, and wanted to look into his future planning what it would look like. He needed help with developing an exit strategy, ie: sale to an insider, sale to a 3^rd party, or passive ownership; to include increasing sales and adding resources. In our meetings we discuss what is going on in his day-to-day business and progress against our action items. He has found tremendous amount of value by having someone he can talk through the issues and opportunities in his business.

The following are areas to consider if you move forward with a coaching relationship:

Can you take outside advice?

It is not unusual for a business owner or executive to feel inadequate asking for help. The entire organization looks to them for direction and they tend to be very intelligent. If you cannot check your ego at the door however during a coaching relationship, then don’t waste your time looking for help.

One-on-one or Group setting:

There are a number of very good peer advisory group organizations that provide coaching in a group setting. The organizations I know of all are all high quality and the participants tend to do much better than their competitors in areas of business growth, client retention and organizational development. BUT, group settings are not for everyone! If you cannot openly accept input from others in a group setting, and cannot provide balanced support to others you should look to a one-on-one coaching relationship.

Getting Started:

There are a wide range of choices when it comes to business or executive coaching. Prior to meeting with any business coaches perform an inventory of your issues, opportunities, and areas you need help developing. This will give you a starting point when having initial discussions with coaches. Be honest with yourself and assess how you will interact with someone providing feedback. Share this with your coaching prospects during initial meetings.

How to Find a Coach

1.) Ask others that you know about their coaches and solicit recommendations from your network. One of the best ways to find a coach is based on feedback from your network.

2.) An internet search will provide you with a wide range of options. Look for someone local so you can have face-to-face meetings, and not just telephone coaching.

3.) Industry is not important. Don’t get hung up on whether the coach has experience in your industry. They provide the outside look to your industry expertise.

4.) Find out how they operate. Discuss how the meetings work and assess how this matches your style.

5.) Assess the personality of the coach. You will be spending a fair amount of time with your business coach and it is important that you feel comfortable with that person.

6.) Ask for references.

In most cases you will find that coaching for you or your business is very cost effective and can support you and your management team. Understanding if you are the right candidate for coaching is the most important step, followed immediately by your coach’s approach and personality. Most business owners find benefit from most coaching relationships within the first few meetings and measured results within a few months.

My book “Mapping Your Recovery: Grow sales in difficult times” provides additional information on areas that can be positively impacted by outside coaching or consulting www.roundhouseadvisors.com/growsalesbook

Building Your Business Quickly: Acquire a Competitor, Drive More Volume

2011-10-12T09:03:00.001-06:00

We all know that increased sales volume in our businesses can be the cure to a number of problems. What is not readily known are the opportunities to increase sales through acquisition during economic downturns. Sure, many banks have higher standards for lending, but there are ways to get a deal done.

I know a number of companies that have increased their business by integrating volume and operations of other organizations. Here are two areas that I have seen work over the past few years:

Failing competitor

Many companies are not going to make it through to see the end of this recession. Those that do not make it leave their customers and sales people looking for a home. You can proactively approach your competitors with a solution for taking care of their customers and employees, while allowing the owner to keep assets for liquidation.

The approach could be a letter, email or a face to face discussion where you offer to transition their clients to your business, allow the sales people to continue closing business on a straight commission basis, and also allow the other business owner a commission on new business that they may close due to relationships already in place. You never know how your competitors are doing and opening the discussion for them to gracefully transition out of their business may be a good solution for some.

This approach will not be a solution for many, but it never hurts to ask. Make sure your operation can absorb the extra volume and you have sufficient buffer to support the working capital requirements of a quick increase in volume.

Purchase a competitor

Purchasing a competitor’s assets is a great way to increase volume. This option is only available to those companies that are not overburdened by debt, have been able to sustain positive cash flow, and the owners have not over leveraged themselves personally.

Purchasing a competitor allows you to leverage your current infrastructure, increase your volume of product that you can support in your business, and leverage your knowledge in the industry. There is bank debt available to support the right deal and the loan officers like deals where your current company is in good shape, you have industry and business specific knowledge, and your personal finances are clean.

Take advantage of SBA programs to acquire smaller firms as an add-on to your current business. I recently had a conversation with an SBA loan specialist in the Denver area and he informed me that they are funding SBA deals if the situation is right. There are a few industries they are staying away from, but in general they are looking for opportunities to lend.

Summary

It doesn’t cost you anything to ask your competitors if they are interested in transitioning out of their business. If you can get increased volume without having to purchase their business or assets it allows you to leverage the additional volume in your operation. The worst thing that can happen is your competitor tells you “no”.

The next best thing that can happen is you start a discussion on acquiring certain assets of their business. If you have been able to hold on to some positive cash flow, and can show a solid integrated business there is a potential of getting financing to support an acquisition. You will also find that there are a number of banks in the area that are lending, but with different criteria. Check out a number of different lenders. Your opportunity may fit their business model.

Larry Turner is CEO of Roundhouse Advisors, Inc. and has over 25 years experience growing, starting up, repositioning, and revitalizing organizations. Roundhouse Advisors is a consulting practice focused on helping businesses increase enterprise value by managing pain, growth and owner exits. Larry is a consultant, public speaker, and the author of “Owner Exit Planning: Leave On Your Own Terms”. For additional information visit www.RoundhouseAdvisors.com

Growing Sales: Five things you can do today to grow your business

2011-10-05T09:03:00.001-06:00

I meet with many business owners that are frustrated by the lack of sales. During our initial meeting we discuss the activities they are currently undertaking to increase business and the response from many is something like “we cut all our marketing and sales activities to save money”.

Sales result from generating activity and developing new leads in your sales pipeline. Your sales pipeline today needs to be larger than it was before the recession because in most industries the average sales cycle has gotten longer and the average price of products/solutions sold is lower. Driving increased activity at the front end of the sales pipeline will generate more sales. There are five things you can do today at very little cost that will begin to generate the sales you desire:

1.) Sales Focused Organization

In one company that I managed, the sales coordinator would check with manufacturing before accepting an order. This was typical practice, even when our manufacturing organization was below capacity. After seeing this, I spent some time with the sales coordinator and head of manufacturing and we all agreed that nothing starts unless we have an order and to immediately take the order, unless it required out of the ordinary delivery terms.

Don’t lose a chance to secure an order. Putting off the decision to accept an order, can delay the purchase order by approximately two weeks. Dealing with all orders this way may push back a significant number of orders.

We were also able to shift the culture of the entire organization to one that focused on getting new orders in the house. This took place over time, but it required us to be proactive in securing orders, communication to the entire company on a regular basis on how we were doing and our progress against sales goals. Everyone in manufacturing/operations knows that their job depends on securing new orders, so take advantage of that fact and get them involved.

2.) Visit Customers

The largest asset you have in your sales organization is existing customers. The management team should be visiting your top customers. Your sales organization should include visits to current customers in addition to expanding the customer base.

I had an international sales manager who worked for me and who only traveled to one international show in Europe each year. We discussed growing sales through our distributors in Asia and he acknowledged that he had never visited any of them. We setup a two week trip and within a few weeks of his return we started seeing incremental orders from the distributorships he visited. He was amazed, since there was no discussion during his visit of the orders we received. It just happens… you visit your customers, inform them of all the products/services you provide and you are now on the top of their mind.

3.) Make Sales Calls

You obviously expect your sales team to make sales calls, but you expect the management team to join them? You should! It provides your management team with additional information that they in turn bring back to their organization. It all helps to become more customer focused. It also provides your sales team with a step up against the competition. Your sales team will close more deals because of the direct involvement of management. It shows the prospect what kind of company they may be doing business with.

4.) Internet Marketing

The tools to generate more sales activity on the web continue to grow. Search engine optimization (SEO) and local search are great tools, but require a large amount of work and time to generate results. These are great tools to utilize after you put together some activities that will generate more immediate results.

For quick results, I like to use pay-per-click advertising programs with landing pages that are designed to convert visitors to a meeting or purchase. These programs along with drip marketing campaigns and social media efforts are a great way of contacting prospects and generating results. You can pull these programs together yourself, but if you are stretched for time and knowledge, leverage one of the many experts in the field.

5.) Strategic Partnerships

Your customers and prospects are buying products and services that are complementary to your product line from other companies. Understand what these are, who provides them, and how they sell. Approach these firms with the intent of developing a strategic relationship. It may be a distribution/license agreement, a joint sales approach or a revenue sharing agreement based on mutual lead generation.

Work on these items in your business and you will see incremental activity and sales. It is difficult to do them all at once while you are running the day-to-day operation, so pick one and start doing it. Once you have that one activity generating results, and then do the next one. The best way to eat an elephant is one bite at a time and that also pertains to developing incremental activity in your business.

Larry Turner is CEO of Roundhouse Advisors, Inc. and has over 25 years experience growing, starting up, repositioning, and revitalizing organizations. Roundhouse Advisors is a consulting practice focused on helping businesses increase enterprise value by managing pain, growth and owner exits. Larry is a consultant, public speaker, and the author of “Owner Exit Planning: Leave On Your Own Terms”. For additional information visit www.RoundhouseAdvisors.com

Owner Exit Planning: The 7 things you must do before selling your company: part 5

2011-09-28T10:38:00.010-06:00

Editor's note: This is the last of a five-part series on preparing yourself and your company for sale to maximket.

You have prepared your business for sale: increased sales, increased profits, strong management team, improved the value detractors and got your house in order. It is now time to take your business to market and see the results of your efforts.

The process of selling your business is like no other sale you have been involved with in your business career. It is different than buying real estate, different than selling your products and different from selling your home. It can be a complicated process, but not difficult if you have a team pulled together that has been there before.

Many business owners have figured out new business actions in the past, so it is a natural reaction to take this process on by yourself. DON'T...this is the single most important transaction of your career and it pays to have the support of a team that can steer you in the right direction and maximize your results.

Get your team together

Pull together a team of professionals that can help you navigate the process.

Business intermediary - A business intermediary is an individual or organization that can sell your business for you. Manage the process and help you maximize the amount you receive for your business. A business intermediary might be a business broker or investment banking firm. These firms will market your business and manage the process. A general rule of thumb is a business broker works with companies that have a value less than $5 million and an investment banker that will provide an auction like service for companies with values over $5 million (these ranges vary by organization). Find a business intermediary through referral if possible and always check references.

Attorney - You may have a business or personal attorney that has supported your organization for years, but do they have acquisition transaction experience? Some of the more difficult deals that get done are due to an attorney on one side that has not done any/many transactions making issue over items that shouldn't be and miss areas to protect you. Find an attorney that has the transaction experience and in many cases they will partner with you and your trusted attorney.

Accountant/Accounting Firm - Your accounting firm can help you and your attorney structure the deal to help minimize taxes. It is also helpful if your accounting firm has assisted other owners in the sale of their business. They can be very beneficial in assisting during the due diligence process as well as working with you to understand the tax implications of your transaction. In the end it is all about what you take home from the sale of your business.

Financial planner - Hopefully you have worked with a financial planner during the early stages of your planning process to understand how much you need to take home from the sale of your business to fund your lifestyle after selling your business. Now is the time for your financial planner to get involved with managing the proceeds from the sale of your business. They are a key player to help you achieve your lifestyle and legacy goals.

Business consultant - A business consultant can help you in the preparation of your business prior to going to market, but they can also help you through the sales process. Business consultants that have worked transactions can help you manage the due diligence process, answer any questions that arise during the process and can help you work with your other advisors to make the process as enjoyable as possible. Selling your business is very stressful and having someone that you can confide in will help ease the process.

This is the most important transaction of your career, so get the right team together to help manage through the process. Take advantage of their experience in managing the transaction process to increase the chances that you end up with a positive outcome and experience. More in-depth information is available in my book, "Owner Exit Planning: Leave On Your Terms"

Larry Turner is CEO of Roundhouse Advisors, Inc. and has over 25 years experience growing, starting up, repositioning, and revitalizing organizations. Roundhouse Advisors is a consulting practice focused on helping businesses increase enterprise value by managing pain, growth and owner exits. Larry is a consultant, public speaker, and the author of “Owner Exit Planning: Leave On Your Own Terms." For additional information visit www.RoundhouseAdvisors.com

Owner Exit Planning: The 7 Things You Must Do Before Putting Your Company On The Market: Part 4

2011-09-21T08:26:00.001-06:00

This is part four of a five part series on preparing yourself and your company for sale to maximize your outcome.

Preparing your company for sale includes more than just improving the value drivers and fixing the value detractors in your business. It also means getting your overall house in order to be the best product on the market. Business owners are all getting older, and those that missed going to market before the recession hit in 2008 will all be looking for an opportunity to sell their business when the economy improves.

This means that there will be a huge number of businesses going on the market over the next few years, and those that are best prepared will sell faster and get better prices than those companies that are not prepared. Be ready in all areas of your business, and specifically during prospective buyer visits and due diligence.

Visits and due diligence is an opportunity for the buyer to look at your company and all areas of your business. The process is similar to staging your house for sale…those that are staged better sell quicker and at a higher price. That is where “getting your house in order” comes into play in your exit planning process.

Get your house in order

Getting your house in order involves focusing on those last few areas in your business that will be reviewed by a prospective buyer. In many respects, these may be areas of your business that should have been kept up over the years but you never really got to them. They may be general housekeeping, paperwork or legal issues.

You need to present your business in the best light with prospective buyers and the following are some examples of areas that could trip you up:

Some Examples:

Pick up your office – You will be bringing prospective buyers through your facility, so make sure it looks the best possible. This includes cleaning carpets, purge files of old information, organize your production or development facility, and have all employees pick up their areas. Prepare for this process just as you would an important customer visit to your facility. First impressions are important with the buyer.

Clean up legal issues – Take care of any pending or current legal disputes in your business. This can kill a deal or at the very least provide negotiation power to the buyer. This includes making sure all software in your business is properly licensed.

Normalize earnings early – Most privately held businesses legally manage their profits to minimize taxes. Adjust or normalize your earnings well before going to market. The last thing you want is to be in a weak position at the negotiation table, and starting this discussion with talk of adding back profit due to your business practices immediately puts you in a weaker position.

Eliminate baggage – Settle disputes with your employees, customers and suppliers before going to market. These areas will surface during due diligence and could hurt your chances of maximizing the price you receive at the time of sale.

These are only a few areas to review and fix prior to going to taking your company to market. By reviewing those areas in your business that represents risk to an outside buyer, you can be prepared for the due diligence process and maximize the value you receive from the sale of your business. More in-depth information is available in my book, “Owner Exit Planning: Leave On Your Terms.”

Coming up: Managing through the process.

Larry Turner is CEO of Roundhouse Advisors, Inc. and has over 25 years experience growing, starting up, repositioning, and revitalizing organizations. Roundhouse Advisors is a consulting practice focused on helping businesses increase enterprise value by managing pain, growth and owner exits. Larry is a consultant, public speaker, and the author of “Owner Exit Planning: Leave On Your Own Terms”. For additional information visit www.RoundhouseAdvisors.com

Owner Exit Planning: The 7 Things You Must Do Before Putting Your Company On The Market: Part 3

2011-09-14T08:12:00.003-06:00

This is part three of a five part series on preparing yourself and your company for sale to maximize your outcome.

Preparing your company for sale includes more than just improving the value drivers in the business. There are a number of areas a prospective buyer will review during the sales process that are not readily visible when they make the initial offer. These areas will be looked at in depth during due diligence when placing your company on the market for sale.

Due diligence is an opportunity for the buyer to look deep into your company and review all information, processes and structure of the company that was presented during the first part of the sales process. This is where those areas that were neglected over time come back and can negatively impact the price you get for your business. These areas make up the value detractors.

Manage the Value Detractors

The value detractors include areas of your business that are reviewed during due diligence by the buyer and can represent risk to the new owner. Risk comes in many forms and can include too much revenue concentration in only a few customers, aging IT infrastructure, or lack of process in the organization. These are only a few areas that can cost a new buyer additional money after purchasing the business, or can represent risk in the revenue stream.

Most offers are based on a multiple of the free cash flow in the business, and any risk to the revenue can impact the purchase price a prospective buyer is willing to pay for a business. You need to objectively review your operation and identify those areas that a buyer would view as risk to their investment.

Some Examples:

How secure is the revenue in your business with you gone? Many business owners are the key interface with customers, and when gone represents risk to someone else running the business. In this example it is critical that you have already transitioned many of the key sales activities to others in your company, so you can demonstrate your lack of involvement in the day-to-day sales efforts.

Do you have a procedure manual that outlines the processes of your organization, or do key employees have the process in their head? The risk to a buyer in this case is from employees leaving or out for extended periods of time. Focus efforts on developing a procedure manual that outlines the key areas in your business and defines the process flow of your organization. It should be written in a way that would allow a new employee or temp to read a section as it relates the job they are doing and perform that task with some guidance. A buyer will look at the procedure manual as a road map to provide direction in the operation.

Is your IT infrastructure outdated? The buyer will look at this area as an additional investment they will need to make within the first 12 months of purchase. Have your IT infrastructure reviewed approximately 18 months before going to market and update the equipment and software that is outdated. By managing this upgrade far enough in advance of taking your company to market allows you to make smaller monthly investments, as opposed to one large investment. This approach helps you manage your cash flows during the time leading up to your liquidity event.

Too much revenue in too few clients. You have a problem if only a few customers make up 10% t0 15% of your total revenue. This lack of diversity represents risk to the new buyer in the security of the future revenue and cash flow in the business. This is also a difficult item to fix in a short time frame. The only solution is to increase sales with other customers to lessen the impact of the large customers.

Coming up: Ready your business for market by getting your house in order and managing through the process.

Larry Turner is CEO of Roundhouse Advisors, Inc. and has over 25 years experience growing, starting up, repositioning, and revitalizing organizations. Roundhouse Advisors is a consulting practice focused on helping businesses increase enterprise value by managing pain, growth and owner exits. Larry is a consultant, public speaker, and the author of “Owner Exit Planning: Leave On Your Own Terms”. For additional information visit www.RoundhouseAdvisors.com

Owner Exit Planning Part 2: The 7 Things You Must Do Before Putting Your Company On The Market

2011-09-07T08:32:00.002-06:00

This is part two of a five part series on preparing yourself and your company for sale to maximize your outcome.

Once you have worked with your financial planner and understand what is needed to sustain a desired lifestyle after the sale of your business, it is time to start working on your business to get it ready for market. The first area to focus on is the value drivers in your business. The primary value drivers for any business include consistently improving cash flow, increasing top line revenue along with a growth story and a strong management team.

A buyer will be looking at the business from a perspective of past performance and current business structure. The buyer will not value your business based on optimistic future business projections, especially if those projections are based on activities and trends that have not been realized in the past. These dynamics will require you to look at the company differently in the few years prior to putting the business up for sale to provide for the maximum return. The operational actions during that period are different than when you are running the business for your personal needs if you want to maximize your financial outcome at the time of selling your company.

Consistently Improving Cash Flow

Free cash flow is the main measurement for company valuation when it comes time to sell your business. A common measure of free cash flow is Earning Before Interest, Taxes, Depreciation and Amortization (EBITDA), and provides a measurement of company performance without accounting for the items not included in EBITDA.

As an owner looking to sell your company you need to increase EBITDA year over year for the 9 to 36 months prior to selling your company in order to realize the highest value for your company. This may mean managing your company differently over that period of time than you have in the past. Most owners of private companies manage their business to minimize taxes, which means many investments in the business are expensed in the current year and extra expenses in the business may exist to depress earnings.

In an environment of maximizing value, you need to review all business expenses and work with your accountant to properly account for those investments that can be depreciated over a period of time. Review all costs and only incur those that are necessary to run your business.

Growth Story

One of the key areas to steadily improving EBITDA is increasing revenues. A growth story provides background to the prospective buyer on the why and how of the revenue growth. The growth story becomes a basis for the prospective buyer to plan growth going forward, which provides a higher valuation for your company.

We see many companies fall into a stagnant growth mode as the owner and business reaches maturity. This results in a lower valuation of the business, because the new owner needs to recharge the company and find growth opportunities. In these situations many owners can stimulate growth through programs that leverage current company capabilities.

These programs include adjacent growth programs, which may include new products developed for current markets, moving into adjacent market segments with current product offerings, or increasing sales channel capability with your current market and products. Whatever the plan to increase sales you will be best served if you can position those efforts into a credible growth story that can be succinctly conveyed to a prospective buyer and provide a basis for increased company valuation.

Capable Management Team

Most owner-run businesses revolve around the owner making many of the decisions. In these organizations, the company cannot continue without the owner on a daily basis, which can create risk for a new owner. Many buyers are looking for a standalone business with management teams that can run the day-to-day activities after the owner is bought out and has moved on. Key management positions need to be filled with strong individuals with the technical ability to run their function – they should be considered “A” players.

The Value Drivers

There may be other items more specific to your business, but in general these three areas are looked at by an outside organization to develop a price for your company. The value drivers represent those areas that are more readily seen in the process. In our next article we will look at the value detractors that represent risk to a buyer and as a result depress the value of your business at the time of sale.

Coming up: Increasing the value of your business by improving the value detractors, and getting your house in order.

Larry Turner is CEO of Roundhouse Advisors, Inc. and has over 25 years experience growing, starting up, repositioning, and revitalizing organizations. Roundhouse Advisors is a consulting practice focused on helping businesses increase enterprise value by managing pain, growth and owner exits. Larry is a consultant, public speaker, and the author of “Owner Exit Planning: Leave On Your Own Terms”. For additional information visit www.RoundhouseAdvisors.com

Owner Exit Planning: 7 Things You Must Do Before Putting Your Company on the Market

2011-08-31T12:47:00.002-06:00

This is part one of a five part series on preparing yourself and your company for sale to maximize your outcome.

You have worked most of your life at a business that has been a key part of your life and now it is time to sell your company and retire. As an owner of a successful business you are probably thinking that managing your exit will come naturally. This cannot be further from reality…running and growing your business is much different than selling your company for a final exit. There is a need to look at your business and your life differently as you begin preparations to exit.

Over the next five articles we will explore the seven areas you need to do before putting your company on the market. These areas will help you prepare yourself and your company to deal with the sales process, maximize the value of your company, make your company more attractive at the time of sale, and help you develop your personal plan after the sale.

1. Are you ready?

Many business owners I meet find themselves waking up one morning with owner’s fatigue – sick of the business and ready to sell, with no planning or preparation. This makes the exit difficult at best with many of these business owners selling for much less than they want (or need) or getting trapped in their business with no exit horizon in sight. Start your planning as soon as possible – 5 years prior to putting your company on the market is not too soon.

What will you do?

Ask yourself “What will I do with my time after selling my company?” If you are like many business owners the response revolves around some leisure activity that you do not get enough time for today. It might be golf, travel or some outdoor activity…if this is your answer you need to be prepared for some boring times. Most independent business owners have too much drive to totally settle down after selling their business.

After 90 to 120 days of leisure they are ready to get back to something more like work, something with purpose. It is important to understand this and develop a personal plan for your next phase of life. This may include starting another business in an area that appeals to you and looks fun, it could be getting on a company board of directors, or it could even include getting involved with a non-profit organization. Whatever turns you on; you need to start the planning development of these areas while you are still involved with your current business. Diversifying your self-image while still in your business helps you during the sales process and also allows you prepare for the next phase of your life.

Financial Needs

Many business owners do not work with financial planner, but instead feel their business is going to fund retirement. The first step in getting yourself ready is to work with a financial planner that can help you assess what your financial needs will be to support whatever lifestyle you desire after selling your business. Your financial plan will provide you with a target of what you will need when selling your company. This is not the value of your business, but it will give you an idea of the work needed to build your company.

The financial plan is an important part of your planning efforts and should not be skipped. A good financial planner can help you develop a plan that can include philanthropic endeavors, gifts to family members or financing your next business venture. Whatever the direction, it gives you a direction and focus. You have been financing a lifestyle with your business and after selling, you will need to fund your lifestyle out of the proceeds from your business.

Your Business’s Value

Your business is not worth what you think it is. Most business owners believe their business is worth two times the real market value. Many times it is because they lack the knowledge of valuation techniques and in almost all cases it includes some level of emotional value attached to the business. You need to be prepared for offers to come in significantly lower than your expectations, if you have done nothing to prepare your company for sale. Start this process early with a professional that can give you an idea of the market value of your company and work on those areas that will have the biggest impact on increasing the value.

Coming up: Increasing the value of your business by managing the value drivers in your company, improving the value detractors, and getting your house in order.

Larry Turner is CEO of Roundhouse Advisors, Inc. and has over 25 years experience growing, starting up, repositioning, and revitalizing organizations. Roundhouse Advisors is a consulting practice focused on helping businesses increase enterprise value by managing pain, growth and owner exits. Larry is a consultant, public speaker, and the author of “Owner Exit Planning: Leave On Your Own Terms”. For additional information visit www.RoundhouseAdvisors.com

Kick Start Your Business: Without Spending Big Bucks

2011-08-23T15:10:00.001-06:00

Over the past two years, almost every business has experienced a downward trend in their sales, but that does not mean you should stop selling and marketing your business. There are businesses that are increasing sales, building their pipelines and positioning for growth. These businesses will emerge from this economic mess a much stronger company and will dominate their competition.

So how does a company effectively increase sales and the sales pipeline without spending huge amounts of money? It can be done by leveraging what you already have and supplement with some cost effective marketing programs to expand the exposure in your industry and served market. Some of the tactics that can support your growth initiatives include:

Internet marketing

Internet marketing initiatives are a cost effective way to increase your company’s exposure and provide sales leads for your business development organization. The options are wide ranging with two examples being:

- Search Engine Optimization (SEO) – This process positions your web site more favorable to the major search engines and helps move your web site up in the listings when your key words are used in a search. This can be done in-house if you have the resources and knowledge, but most effectively implemented by using an outside organization. There are a large number of things that impact your search engine rankings and they can change over time. Typically, there is an upfront cost to perform an initial process to your web site and then a small monthly fee to continue updates as well as provide content to outside sources, such as blogs, that point back to your web site. This is not an overnight process and will take many months to see big results, so be patient. The work done here also supports your position on Pay Per Click advertising.

- Pay Per Click – This advertising allows you to manage your daily costs associated with advertising. You select the keyword that best represent your company, products and services. Once the keywords are selected, ads are created that will display for your selected keywords. This is a cost effective way to develop leads from your target market.

Sales calls

The business owner and senior leaders should be going on sales calls. I have always found that making sales calls with my business development staff not only gives the sales person a step up in the sales process (they brought the owner or senior leader to visit with the prospect), but is also demonstrates to the organization how important it is to be sales focused. Too often, even in good times, individuals working in the office focus solely on their job and not the customer or supporting sales.

Creating sales focused environments requires internal communication related to how everyone can contribute to the sales process, follow-up through the management staff, and reinforcement by the senior leaders making joint sales calls with the sales organization.

Customer visits

The lifeblood of any organization is your current customers, BUT it is so common that these customers are neglected by senior management unless there is a problem. Be proactive and visit your current customers. This provides direct communication with your customers, identifies areas that you can improve in your company, and gives you an opportunity to convey to your client how important they are to you and your company.

Start by focusing on the top 20% of your customer base, and visit them with the assigned sales associate to have an account review meeting. I have found that this process not only helps protect your current customer base, but also can result in short term sales gains by uncovering unmet needs.

Internal Communication

Communicate with your employees how important sales and customer retention is to the health of your company. Every employee can contribute to your goal of increasing the customer base which may include their focus on supporting the sales organization, the way all your employees support the customer, the turnaround on sales orders, and the ability to implement new service agreements quickly. You will find that increasing the communication internally along with reinforcement through the actions of the senior leaders will provide a more enthusiastic employee base, with many of your employees responding to your request for help.

All of these items are low cost or no cost, and will provide a short term gain in sales, as well as a long term impact to your sales pipeline. These items do not eliminate the need to have the right strategic approach to your business or eliminate any of the other tactics you have implemented to stabilize your business during this goofy economy, but they will provide added sales activity and refocus your employee base on positive activities.

Larry Turner is CEO of Roundhouse Advisors, Inc. and has over 25 years experience growing, starting up, repositioning, and revitalizing organizations. Roundhouse Advisors is a consulting practice focused on helping businesses increase enterprise value by managing pain, growth and owner exits. Larry is consultant, public speaker, and the author of “Owner Exit Planning: Leave On Your Own Terms”. For additional information visit www.RoundhouseAdvisors.com

Managing in Uncertain Times

2011-08-17T10:36:00.000-06:00

Turnaround… Tough Times… Terrible Economy. Call it what you will. In any case it takes a special focus to manage in a down turn economy and be able to emerge positioned to grow. I have managed organizations that required turnaround skills as well as hyper-growth, and there are challenges associated with both. Turnaround management skills require you to improve or stabilize financial results without putting the company in a death spiral.

The best turnaround management includes not only cost cutting, but more importantly increasing or stabilizing revenues. Too many of the companies I have met with in the last two years have waited too long before looking for help and have focused primarily on trying to ride out the storm, only to find out they do not have the cash reserves to make it to the end.

A focus on the following areas is necessary when managing in uncertain economic times and/or a turnaround situation.

Employees – Employees are your most important asset. Your employees have probably gone through at least one round of layoffs and/or seen reductions in their salary/hours. It is difficult in good times to keep employees motivated and even more difficult when they have gone through the turmoil of the last few years. Unmotivated employees can negatively impact customer service, productivity and ultimately profits.

A key area of managing your employee base during this time is communication. In fact, there is no such thing as over communication during difficult times. In the absence of information, your employees will fill the void with what they think is happening, and most times it is untrue and detrimental to moving the company forward.

Customers – Customers are the lifeblood of your business. You cannot risk your top customer’s hearing about any turnaround effort through the grapevine. They can and most likely will hear about any difficult time you are managing from your employees or others in the industry. Be proactive and discuss your situation with key customers. Visit them in person when possible and reassure them that you are focused on emerging a healthier company prepared to serve them well into the future.

This is also the time to review profitability by customer and make the difficult decision of firing those unprofitable or marginally profitable customers. The client meeting is a good opportunity to discuss a price adjustment that brings them in line with your objectives or terminating the relationship.

Partners – Partners may be dealers or Value Added Resellers, joint venture partners, or banking/finance partners. It is necessary that you communicate openly and honestly about your situation along with the recovery plan in place. Be proactive with your partners and present your plan of recovery along with timelines. It is good with this constituency to be very conservative in your recovery plan, so feel comfortable and confident that the company can achieve the results even with any unforeseen issues that may arise.

Leadership – This is the time your company needs you most. Demonstrate confidence in front of your workforce, even if behind closed doors you and your management team are having violent discussions on the recovery plan. Your employees need to see a common front from the management team to confidently follow your leadership and the direction to improve company results.

Leverage the collective strength of your management to provide the focus and direction of the organization. The diversity of skills on your management team is exactly what is needed to prepare for the recovery. Remember, the collective group is smarter than the individual.

Business as usual will never be the same after the economic turmoil of the past few years. Communication and focus on the right areas of your business is necessary to be in the best position as the economy continues to improve. You may be too close to your business to see all the areas that should be addressed, so take advantage of outside help to provide a 360 degree view of your situation and opportunities. This may be your advisory board, contacts in a networking group, or hire an outside consultant to help with your efforts.

Larry Turner is CEO of Roundhouse Advisors, Inc. and has over 25 years experience growing, starting up, repositioning, and revitalizing organizations. Roundhouse Advisors is a consulting practice focused on helping businesses increase enterprise value by managing pain, growth and owner exits. Larry is a consultant, public speaker, and the author of “Owner Exit Planning: Leave On Your Own Terms”. For additional information visit www.RoundhouseAdvisors.com

No Better Time to Prepare Your Company for Sale

2011-08-10T09:21:00.004-06:00

You have built your business, planned on selling it and retiring in the next 12 months, but now the economy has forced you to change your plans. Your company is treading water and the last thing you want to do is think about preparing the business for market, when you feel the need to survive the rest of this year. This is a typical story for many company owners over the past few years. Don’t use the economy as an excuse for putting off your plans to sell the business.

Many of the strategies to increasing the value of a business and get it ready for sale can also be used to manage through the difficult economy. Value creation in a business can be done in good and poor economic times, but it does take more discipline when times are difficult. Focus on these four areas to improve your business, make it more attractive when put on the market and emerge a stronger company once the economy improves:

Assess and upgrade management. – Take a serious look at your management staff and key employees and identify those positions that need to be upgraded. It is an employer’s market and there is strong talent looking for the right opportunity. The new blood is good for driving improvements in your business today and a key to increasing the attractiveness of your business when it goes on the market.
Increasing revenues and cash flows – When it comes time to sell your company, the financial results will be measured compared to your industry’s performance. If your revenue growth/decline is as good or better than the industry, then you have been successful in building the value of your company. - Increasing revenues can be difficult during a tough economy, but you do have the ability to steal away customers from your competitors. Now is the time to get aggressive with programs targeted specifically at this prospect base. Use lower cost marketing programs to make the most of your budget. Some of these programs include PR, telemarketing, pay per click web advertising, search engine optimization and email marketing.
Recurring revenue stream – Find opportunities to generate new revenue and more specifically recurring business. A telemarketing firm that I have worked with in the past started a new program that included a database and 50 hours of telemarketing activity from dedicated callers. It turned out that I was thinking of starting a program, but this program was enough incentive to get me to sign up for their services.. Their intent is that the first 50 hours is successful and will generate additional telemarketing. They promoted this to those already in their database through an email blast – very low cost to run the program and successful.
Get your books in order – Now is the time to cleanup your legal and financial records. Your legal records will be reviewed by potential buyers and any board meeting minutes that are not up-to-date indicate that there may be other issues in your business that need to be addressed.

The last thing a potential buyer wants to hear when at the negotiation table is something having to do with “normalizing” expenses and cash flows because of what the owner took out of the business. Make those changes now, so you do not need to put yourself in a negative position at the negotiation table. These may include adjusting your salary to industry norm for someone running your business, eliminate cross charges with other companies you have setup to fund some of your interests, cut back on.

At some point, the economy will improve and the acquisition of privately held businesses will heat up again. We are all getting older, and the need to transition a business will not go away. When this happens, you can expect to a large number of businesses come onto the market. Those companies that took the time and effort to get prepared will be the companies that will sell first, and at a better price than those that only survived during the past two years. Don’t let the economy be your excuse to be a slave to your company and delay any retirement hopes you may have.

Larry Turner is CEO of Roundhouse Advisors, Inc. and has over 25 years experience growing, starting up, repositioning, and revitalizing organizations. Roundhouse Advisors is a consulting practice focused on helping businesses increase enterprise value by managing pain, growth and owner exits. Larry is consultant, public speaker, and the author of “Owner Exit Planning: Leave On Your Own Terms”. For additional information visit www.RoundhouseAdvisors.com

The Profit Trap: Cost Cutting Your Way To Profits

2011-08-03T13:56:00.002-06:00

Too many companies have relied on cost cutting to hit profit and cash flow targets in the current economy. This strategy without efforts to grow the top line is one that will lead your company into a downward death spiral. Cost cutting can only provide short term gains, with no ability to sustain the results.

Starting efforts to increase sales is a matter of focus and identifying the activities that will result in generating a larger sales pipeline. These efforts can be performed on a tight budget and will provide eye opening information that will help you drive your entire organization. The following areas will get you started on identifying the opportunities and implementing change in your sales teams.

Sales Pipeline

Review your sales pipeline and analyze close rates associated with your activity. The business activity that generated results in the past is not going to drive the same level of sales today. During your analysis, track the number of cold calls made by your sales staff and how many of these result in a follow up meeting. Of the follow up meetings held, how many of these result in demonstrations or deeper discovery meetings? Follow all sales activity until you get to the number of proposals generated and number of sales closed from these proposals.

It is also good to start tracking average sales size and number of sales closed by day / month / quarter. This will help you in understanding the dynamics of your sales process and allow you to focus your sales activity to generate sales needed to grow your top line. By expending the effort to understand your sales pipeline dynamics, you will be in a better position to define what level of activity is needed to operate in our new economy.

Activity

You can expect the sales activity needed today to generate the same amount of sales closed 18 to 24 months ago is going to be a multiple of two to three times your old activity levels. This means that if your sales teams had been 10 cold calls per day to generate your past revenue, then they will most likely need to be focused on 20 to 30 cold calls per day to generate the same level of revenue. Use the information from your sales pipeline analysis to direct your efforts.

You have seen the difference in today’s buying cycle -- .longer sales cycle and the end result is usually a smaller sale. Companies and households are still buying, but at a much more conservative level and more caution when making a decision. Those companies that are increasing their sales activity will get in front of more decision makers and in the end will close more sales.

In addition to using your internal staff to generate activity, I have found outside resources allow you to increase your prospecting activity without the addition of sales headcount. For example, use an outside telemarketing firm to generate appointments for your sales staff. This allows you to leverage your sales team for activities that generate proposals and sales. There are a number of very good telemarketing firms that provide services in small blocks of time. I have used a firm over the past 6 years that is great at setting appointments and charges as little as $1,500 for a 50 hour block of calling time.

Get Started

Your programs do not need to be expensive, and can be as simple as redirecting the activities of your sales organization. Focus on increasing the pipeline to generate more sales activity, which will result in increased sales closed for your organization. By starting with an analysis of your current sales cycle you can understand the new business dynamics and develop a plan for your sales team. Once you have the plan and communicated your expectations, be sure to hold your sales team accountable for generating the activity needed to fill the pipeline.

There are more companies going after fewer dollars, and those that increase activity to meet the new demands of the economy will be those that win more deals. Be one of the companies that emerges from the current recession a much stronger company by building revenues along with your balanced cost cutting efforts.

Larry Turner is CEO of Roundhouse Advisors, Inc. and has over 25 years experience growing, starting up, repositioning, and revitalizing organizations. Roundhouse Advisors is a consulting practice focused on helping businesses increase enterprise value by managing pain, growth and owner exits. Larry is a consultant, public speaker, and the author of “Owner Exit Planning: Leave On Your Own Terms”. For additional information visit www.RoundhouseAdvisors.com

Lessons Learned In a Downturn

2011-07-27T09:55:00.001-06:00

In 2009, the recession was technically over due to some modest growth. As the economy continues to become healthy, it is an excellent time to examine the companies that did more than survive during this recession.

During a recent Rocky Mountain Association for Corporate Growth (ACG) Corporate Executive Series breakfast meeting the subject was discussed by three senior executives that were able to improve their business results during this period, including one company managing through a Chapter 11. Panel participants included Anthony Carroll, CAO, Vicorp Restaurants (Village Inn and Bakers Square restaurants); J.D. Johnson, President, Nogren Americas; John Zimmerman, CFO, Tomkins plc. The panelists shared a great deal of information on specific initiatives to improve financial results during the recession, but there were five overriding strategies that each company employed:

Move quickly

Identify issues in your business and initiate changes quickly. Don’t get caught up in gathering and analyzing data, but rather make changes once trends start to appear. Those companies that react quickly in difficult situations (economy driven or self inflicted situations) are those that will have the best chance of emerging quickly and healthy. Moving quickly means there may be mistakes made, but most can be recovered from as long they are not catastrophic mistakes. A business that is not making mistakes is one that is not moving quickly enough and will most likely be left behind.

Communicate the situation to your employees

Provide your employees a real understanding of the situation and what the goal of the company needs to be in the recovery. Your employees are the most knowledgeable about the detail workings of your business, and they are your best resource in resolving problems.

One company that presented at the ACG meeting solicited input from the employees on how to reduce payroll costs. The employees were briefed on the situation and asked for their recommendation on headcount reductions, reduced work weeks, or reduction in salary. The company ultimately had to use a couple of the options, but the employee base was appraised of the decision and appreciated the opportunity to be a part of the decision process.

Increase frequency of reporting

During difficult times it is necessary to have as transparent an organization as possible. The reporting of key metrics becomes critical and each had reporting stepped up drastically. Once company described the increase in their business as “reporting that was done yearly was now monthly, monthly reporting was now weekly, weekly reporting was daily, and daily reporting was many times each day.” Focus your efforts on the important metrics of your business. It may not be possible to increase all reporting, but those that are drivers for your company need to be reviewed more frequently and by all management that can impact the results.

Communicate to your key customers

Your key customers need to be a part of your communication strategy. The communication needs to be more than just a letter from the president. Your key customers deserve face to face meetings to learn of your progress and in times of economic difficulty how you can partner with them to create a stronger relationship.

Initiate revenue enhancement programs

Even in a recession there are ways to increase revenue. Cost containment is a given, but not a cure-all in a poor economy. Companies that focus solely on cost reductions will lag their competitors and emerge from a recession a weaker company.

All the companies on the panel discussed price increases and promotions. Each had their own way of increasing sales, based on their specific industry. Norgren Americas had a strategy of telegraphing price increases well in advance to condition their customers prior to the increase. Tomkins took advantage of the downturn to exit unprofitable businesses and focus their marketing and sales efforts on industries and businesses with growth potential. Vicorp Restaurants refused to play in their industry’s love of coupons.

Summary

These five strategic actions are not new, and I find that they are reoccurring in many of my articles. It was interesting to hear these three senior executives from very diverse industries talk about the same things that I have experienced firsthand in companies I have run over the past 15 years.

Larry Turner is CEO of Roundhouse Advisors, Inc. and has over 25 years experience growing, starting up, repositioning, and revitalizing organizations. Roundhouse Advisors is a consulting practice focused on helping businesses increase enterprise value by managing pain, growth and owner exits. Larry is a consultant, public speaker, and the author of “Owner Exit Planning: Leave On Your Own Terms”. For additional information visit www.RoundhouseAdvisors.com

Boost Sales with Improved Customer Service

2011-07-20T10:52:00.001-06:00

We have seen some improvement in the economy lately which means it is time differentiate yourself from your competitors, take some market share and begin to emerge a much stronger company. Customer service is an area that may have been cut during difficult times of recent days. As the economy continues to improve, begin to refocus on your customer service plan to create a differentiator from your competitors.

Many companies have cut customer service levels to a minimum or just below minimum acceptable level to save money over the past two years. This is actually an opportunity your company to stand out. Strong service delivery and customer service are opportunities to win more business from current customers and can be used as sales tools to win customers away from your competitors.

The Situation

A few years ago I accepted the position of President of an IT services business that provided on-site service for many of the large IT outsource and computer hardware companies. On my third day in this position, I attended a business review with our largest customer, Dell. During that meeting I heard that our business was:

“Worst of Breed” in every category – Dell stack ranked their service providers in six different areas, and our business was the worst in all six areas.
Lagging Customer Satisfaction – The business not only had the worst customer service ratings, but our ratings were bringing down the overall customer service scores.
Negatively Impacting Dell Management Bonuses – This was the kicker; not only were we bad, but we were hitting the Dell management in their pocket book!

While this was not the most up-beat meeting I have ever been to, but the Dell management was willing to give us a chance to improve our service.

The Actions

A lot of activity that went into our transformation, but the following areas were the basis of the business improvement plans that we implemented:

Changed the focus of the business unit – A shift from running as many service calls as possible to a main focus on customer satisfaction along with optimizing their time.
Communicated expectations – In the past, clear expectations were not communicated to all levels of employees. Working with my field delivery leaders, we made it very clear to all levels in the organization what was expected in their daily work and how we expected them to operate.
Held employees accountable for meeting expectations – While there may have been some expectations in the past, no one was being held accountable for their actions and operation. This was one of the critical areas needed in changing the culture in the organization. The front line employees and all levels of management knew what was expected from them and how we would measure their results.
Work with under-performing employees to improve or move them out – There were many employees that showed huge improvement in their activities, but there were some that did not/could not meet expectations. These employees ended up leaving the company on their own or with our help.

The Benefit

While the transformation was a lot of work, the most important question we asked was what was the benefit to our company? When I got to the business, Dell was in the process of pulling their business from the company, which represented about 40% of our revenues and 60% of our activities. It would have shut the business down.

We ultimately turned the situation around. Four months later, during the next quarterly business review we had moved to number two overall and “Best of Breed” in four of six categories. 15 months later, the business won Service Provider of the Year award.

The turnaround in service delivery was critical for our company to secure more business. In the months that followed the quarterly business review, our company was awarded additional business in two growing business units at Dell. This new business was critical to our next strategic direction of moving into higher level services and providing revenue growth with strong margins.

Conclusion

The story outlines a company with poor service delivery and customer service. Your business may not be in a situation where your clients are leaving you, but maybe a competitor has cut their costs too deep and is experiencing problems. Customer service can be a differentiator that your sales organization can use to steal clients from your competitor and secure your own customer base.

Manage Change To Succeed In The New Economy

2011-07-11T18:19:00.005-06:00

Change seems to be a way of life today, regardless of the economy. Changing regulations, competition and technological advances just to name a few have required businesses to transform their businesses in one way or another on what seems like a constant basis. The days where you could develop a business plan and run it for a number of years with only incremental modifications are long gone. Today’s business must manage change effectively.

The companies that can manage change more effectively are those that will thrive today and going forward. Identifying a need for change can be easy, while implementation can be more challenging. The inertia in a company is difficult to overcome, because you need to change the way people do their jobs. In many cases, change is seen as a threat to your employees because it is a shift in the status quo.

In August of 2001 I took over a business that was losing $6 million on $38 million in annual sales, the last two audits by our CPA firm were disasters, and a large portion of our business was in threat of being closed down by the government agency that regulated our industry. We needed change and we needed it fast! I started working with the management team immediately and set on a path to improve the business. The results included a company profit of $800,000 in the next calendar year, all audit findings by our CPA firm were cleaned up after three months, and we totally turned around our position with the government regulatory agency within six months.

How we did it:

Identify the current status quo and why it needs to be changed -- In my example above it was easy to identify why and what needed to be changed. In another business I ran it was a little more difficult; the company was a small manufacturing business that had fairly constant top line revenues, a respectable bottom line and was well respected in their industry. We found the company’s products and industry perception of their solutions where outdated and being passed by others in the industry. The problem was not an immediate issue, but one of long term consequence of not changing.

Create a vision of what the company can be after implementing change – Create a vision of how the company could look in the future and develop a roadmap to get there. Develop a long term ideal situation that has interim goals that need to be obtained. In my turnaround example, we created a vision of what the company would be over many years, how we would distribute product, how the company would be viewed by external organizations… really defining the direction of our systems, culture and brand. After we created the long term vision, the management team and I set about hitting the tactical items that needed to be addressed.

Communicate with your stakeholders – Communication with your key stakeholders is an important step in the early part of the process, as well as during the implementation. The key stakeholders may be the board of directors, your direct manager(s), your distribution channel, key vendors, your accounting firm, and in some cases regulatory agencies. You cannot over communicate with stakeholders.

Communicate with your employees – Employee communication is the most important part of a change management plan. This is where your discussion of the status quo and future vision of the company becomes very valuable. Regular all-employee meetings allow you to paint a picture of how the company will operate and how the employees will play a role in the transformation, as well as the new company going forward. Your employees are the resources necessary to implement your plan and it is best to communicate with them personally at least once per month in all-company meetings and interim meetings to discuss major changes or milestones. This may seem extreme, but I have found that this frequency of communication headed off larger problems.

Managing change is a difficult process, but can be made easier through these tactics. Keeping focus on the end-game is critical to keep your management team and employees headed in the right direction. I’m not sure there is every really an end to change, but as you transform your organization it is truly gratifying to see what can be done.

By: Larry Turner

Larry Turner is CEO of Roundhouse Advisors, Inc. and has over 25 years experience growing, starting up, repositioning, and revitalizing organizations. Roundhouse Advisors is a consulting practice focused on helping businesses increase enterprise value by managing pain, growth and owner exits. Larry is consultant, public speaker, and the author of “Owner Exit Planning: Leave On Your Own Terms”. For additional information visit www.RoundhouseAdvisors.com

Survive and Thrive in The Volatile Economy

2011-07-06T12:05:00.000-06:00

The economy is certainly an issue when trying to run our businesses, but it is possible to implement programs that allow you not only to survive but more importantly thrive. Putting your head in the sand to ride out the recession is a normal response by many managers… Don’t do it! You can rise above your competitors by taking steps to build your business.

The following areas can become the cornerstone of your business strategy to thrive in the volatile economy and emerge a much stronger company than your competitors:

Customer Facing Activity
Customer facing activity is critical to maintaining and growing your revenue. Any initiatives that focus solely on cost cutting will result in continued cuts to match an ever declining revenue stream. During turnarounds and right sizing programs, it is critical to stabilize your revenues in order to build a healthy company.

It is easy to cut the sales and marketing departments in slow economic times, because “they are not closing any business anyway”. While this is true in companies that focus only on cost cutting, it is not true if you concentrate on stabilizing or increasing revenues as an integrated management approach.

The customer service department is another area that is an attractive cost cutting opportunity, but it is also a good place to differentiate from competitors. An example of how you can differentiate yourself with customer service in a downturn:

In November 2001, I received letters from two airlines that I flew on a regular basis and had elite flier status on both. One airline informed me how many miles or segments I needed to maintain my status, and the other airline explained that they understood that many companies had cut back on air travel since 9/11 and was extending my status through the next year. I immediately switched all my future travel to airline #2 and strongly suggested that all my employees do the same.

Focused Cost Cutting
Ignore the impulse to make cuts across the board when going through a cost reduction program. When making cuts, it is important to maintain customer facing functions and focus initial cuts on “back office” activities. Back office functions include accounting, finance, human resources and IT departments – all areas that do not interface with your customers and can be supplemented with outside resources.

Use a tool like customer profitability analysis to identify cost cutting opportunities in the “customer facing” functions. This process will identify those customers that are unprofitable and in most cases suck your organization dry of valuable resources. “Fire” your unprofitable customers, so you can focus on those that are profitable.

Once you have eliminated the activities associated with your unprofitable customers, it is now time to cut costs associated with the “fired” customers in your customer facing functions. Taking this approach allows you to provide a consistent level of customer support and maintain a sales staff to grow your business.

Marketing Spend
It is easy to “go dark” and eliminate your marketing spend to save money. Going dark is essentially putting your head in the sand and giving in to the poor economy. There are a number of studies that have been done to evaluate the effects of marketing spend on the results of a company during and after a recession.

One such study was done by ABP/Meldurm & Fewsmith in 1979 to evaluate those companies that did not cut marketing expenditures during the 1974/1975 recession. They found that companies that did not cut their marketing spend experienced higher sales and net profits during the two years of recession and the two years immediately following than those companies which cut in either or both recession years.

This is due to the cumulative effect in marketing communications. When you start a marketing program it does not result in an immediate impact on sales, exposure or improvement to brand; instead it takes many months of continued exposure to provide momentum. For this reason, it can be easy to cut back on marketing because there may not be an immediate impact on sales, but rather a slow decay.

In Summary
It is possible to increase revenues during an economic downturn, but it takes hard work and a focus on results. Any cost cutting program needs to be paired with a program to stabilize or increase revenues; otherwise you will be forced into the downward death spiral of continual cost cutting. You stand a better chance of thriving in the volatile economy through targeted cost reductions, maintaining customer facing activities and not cutting your marketing spend.

Larry Turner is CEO of Roundhouse Advisors, Inc. and has over 25 years experience growing, starting up, repositioning, and revitalizing organizations. Roundhouse Advisors is a consulting practice focused on helping businesses increase enterprise value by managing pain, growth and owner exits. For additional information visit www.RoundhouseAdvisors.com

ref: “How Advertising in Recession Periods Affects Sales,” American Business Press, Inc., 1979

Maximum Wood Behind the Arrow: Increasing Sales Through Vertical Marketing

2009-03-04T15:22:00.004-07:00

The straighter you shoot your arrow, the deeper penetration you get. That is the same philosophy behind growth strategies and increasing sales through vertical marketing. If you provide the exact product/service that your target market wants and needs, in a way they want it, you will get deeper penetration in that market resulting in increased sales and margins.

Sounds simple enough, but in reality few companies succeed in really serving their customers’ needs. Most companies find themselves with a set of products or services that they take to market and focus on a wide range of target markets, which results in a fragmented approach and less than optimum results.

A vertical marketing approach allows you to take your current products and services to a set of similar businesses in a way that allows you to “customize” the solution for that target market. You need to step into the shoes of your prospects in the target market and understand what problems they have and design a solution around solving their issues. It does not need to be an entirely new product design, but rather looking at the problem and understanding it from the client’s point of view, and addressing all areas needed to solve the problem.

Examples of Vertical Markets
A vertical market is more than just a group of businesses from the same SIC (Standard Industry Classification), but that is a good place to start. SIC codes will allow you to identify your target market through the leasing of lists to be used in your marketing and sales activities. The general SIC categories are too broad and need to be segmented further, since you are looking for a near homogeneous target market.

In one business that I ran, we focused our growth efforts on the United States Department of Defense (DoD). While that is a fairly narrow market classification in the federal government, it did not provide enough segmentation to be successful. We further segmented the market to the individual branches in the DoD (for example: Air Force, Air National Guard, Army, and Defense Logistics Agency), because they each had a uniqueness in how they operated and how they purchased. Our solution was focused on each branch of the military with minor changes that supported these unique needs.

Taking this approach we grew the business over 100% year over year during the time we were running these programs. Focus your efforts on a narrow vertical market, learn all you can about their needs and deliver the product/service in a way they want to buy.

Learning the Needs
Learning the needs of a target market takes research, time and effort. Secondary research, information already published, will allow you to learn the basics about your target market. This information can provide background on some historical facts of the market, structure of the industry, identification of key industry players, competition, and some overriding issues. It will not provide you with the information you need to thoroughly understand the needs of individual company’s and the best go-to-market strategy.

Primary research, unpublished information, is necessary to learn the dynamics for your go-to-market strategy, which includes the definition of the whole product solution. Primary research can include an outside agency or business consultants that performs interviews, surveys, and focus groups; but it can be much simpler to get started.

Pull together some key personnel in your business and assign tasks to speak with owners/executives at companies in the industry you are researching to learn about their businesses and understand what keeps them awake at night. This gives you and your team firsthand knowledge of the pain in the industry, and will help you understand key issues in the industry. Once you understand the buying dynamics of your target market along with key industry information, you are now ready to start developing the solutions.

The Solution
This whole product solution approach looks at all aspects of your target markets’ needs, which could include your standard product set. The key is to understand the need and design a solution around it. Look at all areas of your business when developing the solution… not just the product itself:

• Training and support – Are there special needs that this target market has that could position you favorably against your competition? It might be customized training on implementation of your solution into their environment or it could include a dedicated support line to service remote offices.

• Consulting Services – You are the expert in your field, and as such you have knowledge that is valuable. Can you pull together a consulting or outsource service that provides extra value to your target market?

• Interfaces – Are there special requirements in this market that you could add into your product or service. An example might include user interface modification to customize it to the terminology of your target market. Not a difficult thing to do in most cases, but it would make a huge impact during your sales cycle.

• Billing cycles – Can you change your terms or billing processes to better meet the needs of your target market? Customization comes in more forms than just the product or service.

Look at your company to determine if the target market will find you easy to do business with, identify any deficiencies, and then fix them. In most cases, you will find that minor changes in your internal organization will make it much easier for all your customers to work with you.

The solution also includes your go-to-market personnel and materials. In early stages you can use your existing sales personnel to sell to your new market, but they will require training on the new vertical market. As you grow, I found it works best to have sales people that have sold into that vertical market before, or were working in the vertical market. This helps your prospects identify with your firm more closely and in the end provides you with additional knowledge on industry dynamics.

Each vertical market should have sales collateral developed specifically for that market. The material speaks their language and presents your technical product/service in a way that will be easier for them to understand. While the technical product may not be much different from what you sell in other markets, the material and sales approach will most likely be much different.

Getting Started
If you look at this as a huge project, you may never get started. Spending the time to define your current customer base is a great starting point. Segment your customer base by major SIC and start profiling… this will give you a better understanding of the buying triggers of your current customer base and usually results in some changes in approach.

Once you get the feel for the process in your current customer base, move onto a market that is adjacent to one where you are already successful. This provides an easier transition for your sales people and also allows you to use your current accounts as references.

Shoot straight and focus your efforts to maximize penetration in your selected vertical market. This will provide increased sales, higher margins, and better customer service ratings.

Tough Times Mean Tough Decisions

2009-01-05T16:45:00.003-07:00

Drastic measures are sometimes needed during these times of volatile economy just to have your company survive. It is tempting to make across the board cuts in what is probably your largest expense category… human resources. Be careful with across the board the headcount reductions. A wrong move may mean a steeper drop in sales or an inability to invest in areas once the economy bounces back.

Tribal Knowledge

Tribal knowledge is that historical and company specific intellectual property that is key to maintain and growing your business. This can be specialized product development talent that has knowledge specific to your company and industry that once lost would be very difficult to replace, or it may be that special person in customer service that knows all past issues and has a great relationship with key clients or distribution channel partners. In any event, identify these key individuals and do what is necessary to retain them.

Retaining Key Employees

Retaining key employees can come in many forms including retention bonus program, increased communication and soliciting input from these key employees. A retention bonus that is tied to their performance along with the company emerging from this difficult economic position (probably late 2009 or early 2010) is a good way to preserving talent without adding additional cash flow burden on your company. Increased communication to all employees is important, but even more important to those key people with the tribal knowledge to move you forward. Utilize the knowledge by soliciting input from these key employees and bring them into the fold as a part of the solution to the current economic environment.

An Example

I was appointed CEO of a company in August 2001… that’s right, one month before 9/11. Not only did I need to maneuver in a difficult economic environment, but it was also a turnaround situation. The best strategy and tactics used during the turn-around revolved around retention of key employees and using the talent in this group to help with company performance improvement. The key employees came from all disciplines of the company and at all levels including senior management team to front line employees.

Communication to the entire employee base on a regular basis was key to keeping everyone engaged, but additional focused communication to the key employee group allowed me to utilize their skills and knowledge to manage small cross-functional teams to tackle the many tasks that needed to be addressed. This got the employees involved with key turn-around activities, and kept morale up even with reducing the total employee headcount by 40% during the first 90 days.

The end result of the turnaround was an increase in net profits from a negative $6 million to positive $800,000 in the first full year on sales of $38 million, and an increase in EBITDA from 15% of sales to over 35% of sales. I could not have done this on my own and enlisting the employees allowed us to accomplish this in a very short time frame.

Managing in a tough economy is not easy, but can be rewarding. Emerging from difficult economic times stronger than when you entered allows you to grow the business. As business owners and leaders, it is your responsibility to look out for the viability of your company. Take that responsibility seriously and manage expense reductions diligently to focus on the near term while keeping an eye to the horizon.

Larry Turner is CEO of Roundhouse Advisors, Inc. and has over 25 years experience growing, starting up, repositioning, and revitalizing organizations. Roundhouse Advisors is a business consulting practice focused on helping businesses increase enterprise value in all stages of company life cycle. For additional information visit www.RoundhouseAdvisors.com

Managing in Uncertain Economic Times

2008-11-26T08:45:00.005-07:00

Turnaround… Tough Times… Terrible Economy. Call it what you will, in any case it takes a special focus to manage in a down turn and be able to emerge positioned to grow. I have managed organizations that required turnaround skills as well as hyper-growth, and there are challenges associated with both. Turnaround management skills require you to improve or stabilize financial results without putting the company in a death spiral.

The best turnaround management includes not only cost cutting, but more importantly increasing or stabilizing revenues. Any cost cutting effort without an eye to the revenues will only result in continued cuts in an attempt to improve bottom line, which in the end could destroy your company. A focus on the following areas is necessary when managing in uncertain economic times and/or a turnaround situation.

1.) Employees – Employees are your most important asset. Any headcount reductions need to be made swiftly and humanely, while reassuring those that remain of their importance to the turnaround effort. Try to orchestrate all near term headcount reductions at one time, this reduces the concern by the remaining employees of future reductions in force. When making decisions on employee reductions work to retain customer facing positions and any “tribal knowledge” workers. You will need the customer facing employees to help maintain and develop revenues, and the historical company knowledge (referred to as “tribal knowledge”) will be necessary to run your business in the short term and then again after emerging from the crisis.
A key area of managing your employee base during these times is communication. In fact, there is no such thing as over communication during difficult times. In the absence of information your employees will fill the void with what they think is happening, and most times it is untrue and detrimental to moving the company forward. Refer to the November 17, 2008 post in this blog for a complete discussion of employee communication.

2.) Suppliers – Communicate with your key suppliers to update them on your situation and status. Treat these relationships as key partnerships. During the discussion focus on your goals, timing and action plan. Use this as an opportunity to consolidate suppliers and leverage the increased volume with key partners to assist you with your turnaround effort.

3.) Customers – Customers are the lifeblood of your business, and you cannot risk your top customer’s hearing about any turnaround effort through the grapevine. They can and most likely will hear about any difficult time you are managing from your employees or through the internet. Be proactive and discuss your situation with key customers. Visit them in person when possible and reassure them that you are focused on emerging a healthier company prepared to serve them well into the future.

This is also the time to review profitability by customer and make the difficult decision of firing those unprofitable or marginally profitable customers. The client meeting is a good opportunity to discuss a price adjustment that brings them in line with your objectives or terminating the relationship. It will not be a comfortable discussion for you, but it is something that needs to be done and done quickly.

4.) Partners – Partners may be a dealer or VAR sales channel, joint venture partners, or banking/finance partner. It is necessary that you communicate openly and honestly about your situation along with the recovery plan in place. If you have not heard from your banking/finance partner yet, you will, so be proactive and present your plan of recovery along with time lines. It is good with this constituency to be very conservative in your recovery plan, so you feel comfortable the company can achieve the results even with any unforeseen issues that will arise.

5.) Focus on Cash Flow – Now is the time to focus on your cash flow. Have your finance group develop a rolling 13 week cash projection. Have a key management meeting revolving around cash flow to review progress and plan steps to improve the projection. P&L reviews are nice, but they are inherently poor for this activity, due to all the non-cash accruals embedded in the document. Focus on cash generation and cash preservation activities.

6.) Leadership – This is the time your company needs you most. Demonstrate confidence in front of your workforce, even if behind closed doors you and your management team are having violent discussions on the turnaround plan. Your employees need to see a common front from the management team, so they can confidently follow your leadership and the direction to improve company results. Once again, communication is key to building this confidence and providing regular feedback on the progress the team is making.

Turnaround management is not fun, but administered correctly you can emerge from difficult times poised to take advantage of opportunities. Take advantage of your advisory board as input to your plan, and hire an outside consultant to help with your efforts.

Larry Turner is CEO of Roundhouse Advisors, Inc. and has over 25 years experience growing, starting up, repositioning, and revitalizing organizations. Roundhouse Advisors is a business consulting practice focused on helping businesses increase enterprise value in all stages of company life cycle. For additional information visit www.RoundhouseAdvisors.com .

Tough Times Require Greater Employee Communication

2008-11-17T09:35:00.002-07:00

Even the best leaders hear their employees complain about the lack of communication in a company. I have heard this complaint even in companies where I had some communication effort reaching out to the work force on a weekly basis. This is an indication that the employees need regular communication to help them feel engaged in the company and move the company forward.

The employees will fill any void of information with their own assessment of the situation, and in most cases this information does not operate in reality. This informal communication channel then provides the wrong message for a broader employee base, which in many cases demotivates and disrupts the direction of the business.

A lack of internal communication is a problem in good times, and is detrimental in difficult financial times. Instead of focusing on the daily work at hand, employees get caught up in the rumor mill resulting in an atmosphere of fear and concern. The end result is a loss of productivity and more importantly a reduced level of customer service by those employees responsible for dealing directly with your client base.

The senior leadership of a company can prevent this from happening by implementing a proactive communication program. The tactics may be uncomfortable for those senior leaders that spend most of their day sitting behind a desk, because it requires them to get out of the office and spend time with their teams. A few tactics that I have used successfully with teams as large as 1,600 people include:

1.) All Employee Meetings -- I have found that a monthly meeting of all employees provides an opportunity to cover information ranging from progress on initiatives to financial results from the previous month. Even in privately held companies, where there is a need to keep financial results confidential, I have shared how the company had done compared to key financial targets. For example, "last month revenue was better than planned, but profit was short due to unexpected expenses related to..." This provides even the front-line employees with a feel on how the company is performing, and it also gives the senior leaders an opportunity to explain how the different departments contribute to the financial results of the company. I have never had an employee tell me they would rather not know how the company is performing.

2.) Employee Emails -- Take advantage of email to communicate with all the employees that have access to provide updates through the month. The information may be a new sale that just closed, progress on hiring a key position, customer feedback, or the company being highlighted in the press. Communicate the good and bad! Your employees will hear and see the bad, so take a proactive approach and communicate it up front with an explanation they can understand. Emails should be relatively short, and anything that takes more than a 4 sentence paragraph probably deserves an additional all company meeting to explain.

3.) Bulletin Board Posts -- Bulletin board posts allow all employees to share in the information outlined in the employee emails. Post everything that goes out in email as well as any company related articles in the press that did not get communicated in an email.

4.) Walking Around -- I cannot emphasis enough the need to get out of your office and "walk" around the company. It may be walking through the assembly or manufacturing area, spending time in engineering, calling a customer, or making a sales call with your sales and marketing teams. This gives you first hand knowledge on what is happening in your company and allows you to talk to those employees closest to the process and closest to the customer. One of my favorite activities is dropping in to observe a meeting that is taking place (My management team in one business referred to this practice as a "drive by" -- if I was walking by a meeting and it looked interesting I would stop in to observe), which allowed me to hear the issues and observe how my teams were handling with topic.

Increasing communication with your employees will yield a more engaged and effective work place. This could be in the number of widgets produced, but more importantly improved customer interactions and workplace team dynamics. Improving the level of communication with your employees will position you to emerge from these tough economic times a stronger company. Hopefully the economy improves sooner, rather than later.

Larry Turner is CEO of Roundhouse Advisors, Inc. and has over 25 years experience growing, starting up, repositioning, and revitalizing organizations. Roundhouse Advisors is a consulting practice focused on helping businesses increase enterprise value in all stages of company life cycle. For additional information visit www.RoundhouseAdvisors.com

Managing Through Tough Economic Times

2008-11-06T09:42:00.004-07:00

Many say we are in for another 12 - 18 months of difficult economic times. Things were tough enough earlier this summer and it looks like it just keeps on getting worse. There are a number of things you should focus on in your business in order to work through the tough times. In this blog we will discuss spending associated with customer facing activities.

Customer Facing Activities
Evaluate your spending and start cutting back on those that are not customer facing. Any customer facing activity needs to continue until you absolutely have to cut back further. A natural reaction is to cut back on marketing expenses… I have to admit that I have taken this approach in difficult times only to regret it during difficult times and then again when better economic times started to arrive.

Marketing is cumulative and any drastic cuts in marketing communications will take at least twice as long to get back any momentum that you have created. If you have ever started a marketing program, in many cases early months do not yield much in results but as the program continues it seems to snowball. This cumulative effect is lost if you take the tack to going “dark” for a few or many months, so be prepared that it will take a good 6 months to get any momentum back once you start your programs again.

Cutting back on marketing activity also limits your business development efforts. Sales are generated by your sales people, but marketing softens the market and helps drive demand. Cutting back in sales and/or marketing only hurts your ability to stay with your current market.

An Alternative
An alternative to cutting back completely on marketing communications is a good PR program. In my experience, it is the best bang for the buck. It costs a fraction of what advertising costs, and it allows you to craft the message that you want the market to hear. PR provides a great vehicle to offset some higher advertising dollars without going “dark”.

Be prepared, just as advertising takes time to build momentum so does PR. Give it some time and it will help you drive your brand and sales. I recommend using a good outside agency to handle your PR activity. This is what they do and they can help you craft your message and still be a variable cost.

Just because you are going to an “agency” does not mean that you will need to spend big dollars at a large firm. There are a large number of independent contractors that specialize in PR that do a great job and cost a fraction of the big integrated marketing firms.

Spend wisely, focus your efforts and expenses on customer facing activity and it will help you work through the tough economic times.

Larry Turner is CEO of Roundhouse Advisors, Inc. and has over 25 years experience growing, starting up, repositioning, and revitalizing organizations. Roundhouse Advisors is a consulting practice focused on helping businesses increase enterprise value in all stages of company life cycle. For additional information visit www.RoundhouseAdvisors.com