how to shift your company into high gear! - welchgroup consulting
DESCRIPTION
On October 2nd, 2013, WelchGroup Consulting presented the top 5 red flags that business owners and senior executives face today. To watch the full presentation and walk away with fantastic strategies & tactics to shift your company into high gear, visit our event page: http://bit.ly/H1ZxbPTRANSCRIPT
Bruce Fischer, MBA, CMC, ChairmanFischer Group Inc.
1
How to shift YOUR Company into High Gear!
Chairman’s View
Agenda
2
• Top 5 Red Flags
5. Quantifiable Advantage
6. Financial Management
7. Talent Management
8. Strategic Direction
9. “Do it All” Business Owner• Panel Discussion
Chairman’s View
Value challengePerformance challenge
Get Owners to:
• View their businesses as assets • Think like an Owner• Build your business to last decades, but prepare to sell it
tomorrow
3
Jeffrey Dale, ChairmanCEO, Odawa Group Inc.
4
Margins that are very low, or lower than average in your industry means your operating business doesn't efficiently make money and may not be well positioned in the market
Quantifiable Advantage
What sets you apart in the Marketplace?
5
Product/Service Differentiation Innovation Corporate Culture Cost/Operational Leadership
Business Books
Blue Ocean - Framework
• What needs to be eliminated• What needs to be reduced
below industry standards• What should be raised well
above industry standards• What should be created that
the industry has never offered
Blue Ocean of Cirque du Soleil
• Eliminate– Star Performers– Animal Shows– Aisle Concessions
• Reduce– Thrill and Danger
• Improve– Unique Venue
• Create– Theme– Artistic Music and Dance– Multiple Productions
Local Quantifiable Advantage
The Works: Product Differentiation
• Started 2001 – Sold 2010– 6 Locations in Ottawa
• Improve - Its all about Burgers
• Eliminate - No Bar, No TV• Reduce - Close at 10• Owner had health issues • Large expansion
opportunities– (30 GTA requests alone)
• Right time to sell at a premium
Bridgehead: Corporate Culture• Opened 2000
– 16 Locations– 2004 Bakery 2012
Roastery• Improve - fair trade + organic
food & sustainable environment
• Create - unique feel in every store (employees and décor)
• Low employee turnover• Customer loyalty
Med-Eng: Innovation• Founded in 1981• Bomb Disposal Suits and
equipment– Founder tested 19 times
• Growth - Electronic Counter Measures (Bomb Jammers)
• Improve - Helmets and Suits• Create - Electronic Products
– success in Afghanistan & Iraq• 2001 – Revenue ~$50M• 2007 – Revenues ~$400M• 2007 Sold - $650M
Advantage of Quantifiable Advantage
VALUE TO BUSINESS
• Attract new customers• Retain existing customers• Faster revenue growth• Maintain/improve
margins
VALUE TO OWNER
• Increase value of the business
• Options for owner– Grow the business– Transition or sell
business
Polling Question #1:
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How well do you know your company’s quantifiable advantage?
1. Very well
2. Better than your competitors
3. Have a solid understanding
4. Somewhat
5. Don’t know it
Candace Enman, CA, CPAPresident, WelchGroup Consulting
15
Strong governance, transparency and financial & operational reports will strengthen the business and its ability to make effective decisions, AND make it bullet proof for a due diligence
Financial Management
16
1. Financial Statements
2. Operating Reports
3. Audits
4. Intellectual Property
5. Tangible Assets
6. Banking & Capital
7. Risk & Insurance
8. Tax
Financial Drivers
1st Gear
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1st Gear: Financial Statements
1. Spreadsheets2. “Box Jobs”3. Computerized financial reporting package
• Balance sheet• Profit & loss
Doing compliance reporting alone will not add value to your business.
2nd Gear
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“management reports that are routinely generated and used by management to review the company’s
performance and make operational decisions”
2nd Gear: Operational Reporting
1. Operational reporting• Do they tell the
company story?• Key Performance
Indicators (KPI’s)2. Transparency
2nd Gear
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3. Forecasts/Projections4. Dashboard reporting
Real time reporting
Position yourself to make decisions proactively. Accelerate or put on the brakes when you need to.
2nd Gear: Operational Reporting
3rd Gear: Audit
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1. Numbers are audit-ready & “bulletproof”• Clean records, business processes, internal
controls
If you performed a due diligence on yourself would you like the results?
2. Documentation• Business continuity
Greater Confidence = Lower Risk for Buyer
= More Value!
21
Cruise Control
Polling Question #2:
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Do your Operational Reports identify the activities & health of your business to help with “proactive” management decisions?
1. Yes – very helpful
2. Yes – but needs improvement
3. No – I don’t think we’re focused on the right things
4. Don’t have operational reports
Margo Crawford, PresidentBusiness Sherpa Group
23
Talent Management
A company that has the ability to find, develop and retain quality individuals in the right positions, at the right time, will enable success in all aspects of the business
Financial Measures
Revenue, EBITDA
3 Major HR Themes that can Depress Value
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1. Having the right team at the right time through business changes and for long term success
2. Having a team that is performing at its full potential to drive business value.
3. Having the right structures and processes in place to ensure sustainable and repeatable performance
Time
Corporate Leadership and OperationsBuild, deliver & support
Design & development
Marketing & Sales
Hea
dcou
nt
Product definition roles
Bus
ine
ss P
erfo
rman
ce
Hea
dcou
nt (
mix
/#s)
Formation Early Growth
Accelerated Growth
MaturingGrowth
Next StageGrowth
• Natural business inflection points require different skills & sometimes different people
• Common response to business challenges is to add people• Over time it becomes more difficult to change the trajectory of business
performance with a given team• Strong tendency to not change up the team that built the business at an early stage
Do you have the right team at key business inflection points?
• Has there been any additions or changes to your leadership team?
• Does your organization achieve relatively less with more people?
• Pressure on margins despite revenue growth
• No or exceptionally low turnover OR exceptionally high turnover
• Confidence around leadership team
• Succession plans – single points of failure
• Productivity & performance – a team that can achieve results (revenue/head)
• Cost of over loaded team
• Skills to achieve what the business needs
Value DepressorsIndicators of Workforce Weakness
Val
uatio
n
TimeCurrent Value
$50M
Future Value
$70M
$30M
$60M
$20M
$40M
$90M
$80M
$100M
How do you get the team driving this additional valuation?
• Important to set a course and let the team know what needs to be accomplished
• Develop programs to drive value – performance management; total rewards/incentives; set expectations and measure performance
Do you have a team that is performing at its full potential to drive business value?
• Expectations not articulated
• No communications around corporate goals
• Connection of corporate goals to individual goals and behaviours
• Lack of approaches to reward behaviours that drive value
• Missed milestones and key deliverables
• Star performers not identified and not locked into business
• Nothing in place to push performance – possible low caliber team
Value DepressorsIndicators of Low Performing Team
• Protect IP & assets• Retain or lock in key employees• Appropriate liabilities and obligations; mitigate risks
Contracts
Compensation
Sales Incentives
Policies
Workforce Planning &
Recruitment
Performance Management
• Appropriate compensation for market• Motivate and Reward performance
• Sales compensation plans that drive quota attainment• Models that make financial sense and are in line with market• Terms that create appropriate obligations
• Policies that ensure compliance with laws• Practices that align with business values; motivate the right behaviours;
and ensure sustainable business operations
• Exceptional recruitment process and selection practices – resourceful and diligent sourcing; hire for best fit
• Workforce plans that align with business goals
• Effective feedback tools; programs that build goals that align with business goals
Having the right structures & processes in place to ensure sustainable and repeatable performance.
Contracts
Compensation
Sales Incentives
Policies
Polling Question #3:
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What type of goals does your company measure & reward senior management on?
1. Corporate, functional & individual goals
2. Corporate & functional goals
3. Functional area goals only
4. Individual goals only
5. No specific measures/rewards given
Strategic Direction
Bron Vasic, CA, CMC, ChairmanPresident, B Vasic & Associates Inc.
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A business without a strategic plan is like a ship without a compass. Your
business may float just fine today, but chances are it will eventually get lost.
Valuable businesses have a strong sense of direction.
Shift your Company into High Gear
Valuable businesses have a strong sense of direction
They make the time to Think & Act Strategically
Strategy: A plan or method for achieving something, especially over a long period of time
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Management Functional Areas
StrategicManagement
Financial
Operations/
Delivery
HumanResources
Need for Alignmen
t
Marketing
Information
Technology
Strategic Planning
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1. Focus its energy2. Ensure that all staff are
working toward the same goal
3. Assist in assessing and adjusting the organizations direction in response to a changing environment
4. Prioritize Financial Needs
Strategic planning is a management tool
Excuses to Think or Act Strategically
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1. Lack of understanding and focus in the process of planning
2. Mentally fatigued
3. Partial commitment
4. Lack of understanding
5. Lack of accountability.
6. Lack of follow-up
7. Lack of flexibility
5 Strategic Questions to Ask
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1. What business are we in and how are we doing now?
2. What’s happening around us?
• Are there any serious dangers in staying where we are – i.e. sticking with the same business and strategy?
3. If so, is there a better place for us to be?
4. How do we get there?
5. How will we know we have arrived?
Strategic Direction
37
• Run at peak performance• Make sure that the business is in the right gear
• Bigger is not better• Running leaner has many advantages and efficiencies
• Get out of crisis mode, get aligned, get things meshing well• People are starved for leadership – take charge, be proud of what you
have and make decisions based on what you know • Procrastination for a day can be good, even a couple of days but
beyond a week you are in analysis paralysis
• Don’t grind your gears• Have the necessary tune ups that will allow for a smooth ride (perform
better, save gas)• Getting all on the same page and not doing business alone
• Simplicity in planning and words that everyone will understand
Polling Question #4:
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Does your company have a strategic plan?
1. Yes we have a plan
2. We have a plan, but it’s not updated
3. No plan on paper, but we meet regularly about it
4. No plan on paper, but we have a common vision
5. No plan
Polling Question #5:
39
We have a private jet waiting for you at the airport that can take you anywhere you want to go. You only have 1 hour to prepare. Would you be able to pack up and leave your company and have it continue to operate smoothly without you?
1. Yes
2. Yes, but only for a month
3. Yes, but only for a week
4. Yes, but I would need my smartphone
5. No
Chuck Richards, CEOChairman’s View/CoreValue
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Do it All Business Owner
A "do it all" business owner means the value of the business is in the business owner versus the actual operating business
The fundamental responsibility
of the CEO is to build
enterprise value.
Owner’s Role
If Enterprise Value is the measure of business success, questions every CEO needs to ask and
answer:
What is my business really worth?
Why?
How do I make it more valuable?
Enterprise Value is:
Polling Question #6:
43
Do you know the value of your Company today?
1. Yes
2. I have a general idea
3. No
Polling Question #7:
44
If your business sold today, could your business survive due diligence (i.e. is the value transferable)?
1. 100% confident
2. Greater than 75% confident
3. Greater than 50% confident
4. There’s some work I’d have to do to get it ready
Polling Question #8:
45
Do you know how to improve the performance and value of your business?
1. Yes and I have a plan that will help me execute it
2. Yes but I don’t have a plan
3. I’m not sure where to start
1. Profit
2. Revenue
3. Captured on the Balance Sheet
Enterprise Value is not:
A company’s ability to generate future revenue and profit,
without the current business owner(s) in charge
Enterprise Value is:
You Need to Know
43%
22%
19%
Red Flags – Negate all Value
6,500,000+ private businesses with payrolls
• 50%+ North American job base
• 75%+ Owned by Boomers
• 80%+ Failure rate to transfer ownership
Why it Really, Really Matters
Business is An Engine
Finance Measures the Outputs of the EngineRevenue and Profit
Value = Ability of the Engine to Dependably Generate Revenue and Profit into the Future
Need to Look “Under the Hood”
CoreValue Rating based on a framework of 18 Value Drivers
Define Success– Owner Interviews– Management Interviews
Core Value Software– Assess– Track
The Chairman’s View Process
• Transferable Enterprise Value• Potential Value• Value Gap• Red Flags• Pre Due Diligence• Roadmap to Improve Value
CoreValue “Assess”“Market View” of the Value of Your Company
• Quantified list of Actions• Prioritize Actions by $$ / ROI• Regular CoreValue Rating reviews• Track how Enterprise Value increases• Complete Due Diligence as needed
CoreValue “Track”:Building real Transferable Enterprise Value
Next Step: simpleENGAGE
• Structured Conversation• Strength of your Business Engine• Estimate of your Value Gap• Identify 5 Value Drivers that need your
time
CoreValue “Engage”:Begin the conversation of a Lifetime
Panel Q&A
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• Bruce Fischer
• Jeffrey Dale
• Candace Enman
• Margo Crawford
• Bron Vasic
• Chuck Richards
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Contact UsCandace EnmanPresident, WelchGroup [email protected]
Bruce FischerChairman, WelchGroup [email protected]
Jeffrey DaleChairman, CEO, Odawa Group [email protected]
Bron VasicChairman, WelchGroup [email protected]
Chuck RichardsCEO, Chairman’s View/[email protected] www.corevaluesoftware.com
Margo CrawfordPresident, Business Sherpa Group [email protected]