Reflections

More pitches or a better swing?

There is a great baseball analogy that I've used over the years and it relates to growing your revenues and therefore, enabling the building of company value. When a baseball team has a player with a great batting average, the manager wants that player at the plate in front of as many pitches as possible. But if a player doesn't have a great batting average, the manager wants them working with a batting coach. This same concept applies to a business. Ask yourself, does my sales team already have a great batting average (aka Close or Hit Rate) so you just need to get them more pitches (aka Leads), or are they getting enough leads, but struggling to close enough of them? If you need more leads, this tells you it would make sense to invest in stronger marketing of your brand to generate more awareness of your company capabilities. But if it's a better close or hit rate you need on the leads you already have, then spending more money on marketing could be a waste right now. Start by assessing your sales team close/hit rate and if it's solid, get them more leads. But if it's not an acceptable rate, get them some coaching! Addressing this in either way can help you in building your long term company value.

Solid technically, scary culturally

I frequently come across companies where the owner or CEO knows they have an employee that is technically solid in their job, maybe even great at it, but this employee is also notorious for causing internal issues with either their peers or those that work for them. In other words, they don't play well with others and this causes ongoing personnel conflicts that can consume time and energy to deal with. Too often, owners or CEO's will overlook the shortcoming in this employee either because they believe the employee possesses an offsetting strength that makes them valuable to the company or just because there is a lack of willingness to make the tough decisions and address the situation. 

My advice to executives facing this situation is they are most often under-estimating the damage and cost this employee is causing to the company. There are real costs associated with toxic employees, some costs are hitting your business now and others will be felt in the years ahead. The short term costs can range from poor productivity due to morale issues within your team to the costs associated with having to replace those employees that get frustrated with the situation and choose to leave your company. Another cost is the one associated with the broader employee base losing confidence in their company leadership for failing to address the problem. Then, there is the ultimate cost that is painful to experience and that is when a future investor or acquirer comes in to value your business and they see signs of a weak or even toxic culture and it sours them on pursuing a transaction. Too often this is when owners and key executives kick themselves for not having addressed the situation far sooner. So it's not a matter of "if" you should address this difficult situation, it's a matter of "when". I share with owners and CEO's, employees want to trust and respect the leadership of their organization and critical to this is fostering a dynamic work culture that helps you build long term company value...don't let anyone get in your way of doing this. Be the strong leader that your employees want you to be.

Wear two sets of glasses when signing customer or supplier contracts

I recently met with the owner of a business and we were discussing my 5 step campaign for building company value. Overall he felt pretty good that his company might one day command an above market valuation and from the sounds of it, he was doing a nice job of building value. He asked me for a few examples of areas where business owners get surprised at time of exit. I shared one particular one relateing to contracts and agreements his company has signed over the years. I asked him if he has signed any customer contracts with a clause buried within that provide for shaing of his Intellectual Property (IP) with the customer as a result of adding his component in to theirs. I asked him if he has signed any customer contracts with "Right of First Refusal" or "Change of Control" clauses contained within the document. He said he felt pretty good that he was clear in this regard but was going to check. Just a day later he called and said his CFO checked and they had in fact two customer contracts, one where IP was being shared and the other where the customer had the Right of First Refusal if he ever decided to sell his business. On one hand he's glad this issue was surfaced now as he is still a few years from exiting, but I'm now assisting him in figuring out how to re-negotiate both contracts which is going to take some time to navigate. He is also revisiting his internal process for review and approval of all contracts so he's not just wearing glasses that ensure what's best for his company but also putting on the glasses of the future potential acquirer and how they might view the contract and its potential impact on the value of the overall company. To read about the 5 critical steps you should be taking now with your company to one day optimize its value at exit, (click here for article).

Business is like a puzzle

Building long-term value in your business is like putting together a puzzle. Up until that last piece is in place, you have that sense of incompleteness. As you near placement of the last few pieces, you can feel the momentum and satisfaction growing. It's the same with building your business except for the fact that the end stakes are significantly greater. As I frequently meet with company owners and CEO's, a very common question I get is, "how much time will it take me to prepare my business for a great future exit outcome?"

My answer is when you have the 5 key puzzle pieces in place, you can begin your exit and will have the confidence and liklihood of achieving a great outcome. However, if lacking one of these puzzle pieces, my experience has shown 2 years at a minimum is required. This is because you need to allow time for planning the improvement, making the change and allowing time for the change to take hold and prove the targeted result. And if your business is missing multiple pieces of the puzzle, you are looking at several years of hard work remaining. This is why I encourage owners and CEO's to begin preparing their business now and getting the 5 puzzle pieces underway and in place. The longer you wait, the longer it will be to experience the euphoria of a great exit. To learn about the 5 puzzle pieces, (Click here)

This is the time of year when many business owners are giving thought to their strategic direction and plan for the year(s) ahead. For many, they jump in to their planning, discussing and capturing ideas for new strategic initiatives to be addressed in the period ahead and setting off to implementation phase. In leading my businesses over the years, I learned first hand the benefit of beginning strategic planning by asking a simple question of myself and my team - "Do we have an effective organization and culture in place for both developing and implementing an effective strategic plan?" My advice to small and mid-size business owners is before jumping in to strategic planning mode, first do an honest assessment of this question. Putting all your efforts in to developing a potentially great plan and yet not having an effective organization and culture in place for successful implementation, will only utlimately lead to disappointment and frustration.

The next effective question to discuss with your team is - "How did we do this past year in implementing our current strategic plan?" Faciliate a dialog to do an honest assessment on where you may have had gaps in effective implementation of strategic plan initiatives. Failing to identify these gaps and reasons that kept some or all of your supporting initiatives from being implemented may very well be the basis for why your team will struggle going forward again even with a new plan. Discuss with your team tangible targets and metrics from the prior year and assess how you did in terms of the actual results. Invest the time to look closely at prior established key strategic iniatives your business identified last year for acting on and assess how you and your team actually did. Doing so can result in identifying organization and culture barriers that still exist and unless addressed, will hold back your results in the period ahead.

We often hear about great leaders and what they did and continue to do that makes them so respected. What we seldom ever hear about is what they decided NOT TO DO. In helping private business owners build their company value, I often hear how busy their teams are and how hard they are working. In many cases this is true. But too often these hard working employees are spending energy on things that might have added value months or years earlier, but are no longer delivering the same value. Brave leaders know when and how to identify what their teams are working on and they tackle the tough decisions on what things should stop getting resources so they can be redirected to inititives or activities that will accelerate building company value. As you lead your company, remember that leadership is equally about knowing what to do as it is what not to do. You build long term value in your company by having an equal balance of both.