Building Business Value | Corporate Management Strategies

The Indie Book Awards

The Indie Book Awards were established to recognize and honor the most exceptional independently published books and is presented by the Independent Book Publishing Professionals Group  in cooperation with Marilyn Allen of Allen O'Shea Literary Agency.

This year, Third Bridge Press entered “Building Business Value” and although we didn’t win the lavish first place prize, we were selected as one of the four ‘finalists.’  I use the personal pronoun ‘we’ in this case, because although I was the author, a lot of hands go into publishing a book.  The editing was done by Sharon Goldinger and her team at PeopleSpeak in Los Angeles.  The layout was done by Beverly Butterfield of Girl of the West Productions in Northern California and Mayapriya Long and her team at Bookwrights of Charlottesville, VA designed the cover.   Cardinal Press of Indianapolis distributes the book and Malloy Printers of Ann Arbor, Michigan were the printers.  So you can see, creating an award winning book takes a team.  In our case, a very talented and diverse team.

By the way, the winner in the business category this year was “Business Law Battle Plan for Entrepreneurs” published by Aviva Publishing.  Congratulations to author Marjorie Jobe!

Benefits of Baselining Your Company - Transformational Initiatives

Evaluating how well your company is doing today will provide an important baseline in your value-building process.

Before you can start thinking about the transformational initiatives that will take your enterprise from where it is to the place where it can command the highest premium, you've got to talk seriously with company leaders about where your company is right now. You need to get everybody's perceptions of the company as it exists today out on the table.

This discussion will provide three immediate benefits.

• First, you'll develop a baseline, a market position that will make all of you nod your heads and say, "Yes, that's where we are."
• Second, this is the first step toward determining what kind of initiatives your company needs to undertake to create a premium value.
• The third benefit is the most important-it helps to connect people across the entire company.

Enterprises rarely have company-wide discussions about what's really happening on the ground. For example, your marketing people may seldom have any contact with the folks in engineering, and your sales force may rarely have any meaningful interaction with the people in corporate planning. This exercise gives everybody a chance to have the kind of enterprise- wide conversation that almost never happens. Just getting the key players to talk about the same issues will be beneficial.

Magnifying your Excellence - Find Your Strengths

I came across a term last week that I just can’t get out of my head.  Magnifying your excellence is just one of those expressions that sticks.  In fact, I’d love to pass along credit, but for the life of me I can’t remember where I heard it.  But I keep hearing it over and over in my head.

Consider your business.  If I asked you whether you magnified your excellence, some of you would shout a resounding yes, while others might bow your heads and if truth be told, would say “I’m not sure we are excellent at anything.”   You must admit, it’s tough building long term business value if you are not excellent at anything.

Magnifying your excellence maps to a story told by Marcus Buckingham.  In his public lectures, sometimes Marcus will ask the audience, “if your son brings home a report card with two A’s, 2 B’s and a D, where do you place most of your focus?”  Well if you’re like me, that D really stands out and it's very hard not to let that dominate the conversation.  Never mind that your son might be the next Stephen Hawking,  your going to make sure “no son of yours” gets a D in Language Arts!

Buckingham argues that you must find your strengths and spend your precious time maximizing them.

So now the challenge is to find your strengths and maximize your excellence.

Even Incubator Companies think about Long Term Business Value

The bwtech@UMBC Incubator and Accelerator Business Advisory Board meeting was held last week.  This is another way, actually a pretentious way, of referring to the advisory board for the business incubator located on the campus of the University of Maryland Baltimore County.  

Each board meeting we get a ‘parting glimpse’ from one of the incubator companies.  This time it was our pleasure to meet Plant Sensory Systems, a very cool company that is developing technologies to improve agricultural performance.  Their objective is to alleviate negative environmental impacts by optimizing the ability of plants to acquire and utilize nutrients to increase biomass, yield, and quality.  Trust me … it is really cool stuff!

In any event, one of the founders, Frank Turano, spoke of their current success and their firm’s desire to build additional business value before they go out for additional financing.

This blog focuses on the need for midmarket companies to more fully understand what drives value in their companies.  Building business value also applies to incubated companies.  Frank instinctively knows that early stage companies also need to understand what drives value in their businesses.  That knowledge gives him the focus he needs to reach his targets and fulfill his vision.

Chasing every deal for the sake of revenue can be fools gold.  Laser like focus on your value drivers will build long-term business value.

Thanks for the reminder, Frank.

Your Calendar Screams Your Business Priorities - What are yours?

Every business is under a certain amount of stress these days.  As a result, most CEO’s are conflicted on where to place their energies.  Should you focus on revenue generation?  Should you focus on cost reduction?  Should you introduce a new product or cut your current product line?  How do you build business value in the enterprise when you are constantly putting out fires.

Before you answer those questions, make a quick check on your current list of priorities.  Start by looking at your calendar to get an accurate look at what you currently view as pressing.  Is your calendar dotted with mini-meetings scheduled twenty minutes or two hours before they are to start.  Worse yet, are you so busy, the meetings never even get on the calendar?

Now, compare the time you’ve been spending on fires with the list of transformational initiatives you created three months ago in your planning session.  Initiatives you thought long and hard about and were convinced could add value to your company.  If there is a mismatch, you have to ask yourself if you’ve gone off track.

At the recent G-20 conference in London, Treasury Secretary Tim Geithner told CNN’s Anderson Cooper that “the most important thing, again, is to get the leaders of the world -- these countries represent 85 percent of global output -- to stand together and say, we're going to act together to do what's necessary to bring this recovery back on track.”  That was Geithner’s top priority and we are all depending on him to stay focused on that top task.

The same can be said for you stakeholders.  They are depending upon your ability as a leader to stay focused on your top priorities.  You must find ways to put out the fires while you are still working on your strategic initiatives.

Leadership Strategy - Who are you having for lunch?

Lets make a list of what most midmarket executives do for lunch each day. 

 

• Run down the street and grab a quick sandwich
• Drop off their clothes at the cleaners
• Catch up on email
• Pour over a proposal that is due to go out at 4pm
• Review sales forecasts
• Fill out their NCAA brackets
• Meet with a client
• Meet with the accounting firm to discuss the last months books
• Trade in your Treo for a Blackberry
• Shop for the three gifts you were supposed to buy last week
• Find out why project ‘Avitar’ is behind schedule …

We all get caught up in life’s fire drill activities that are certainly urgent, but rarely that important. 

A biological given is that we all have to eat.  Well, if you are like me, you miss a meal from time to time, but that is missing the point.  Just as everyone needs nourishment during the day, every midmarket exec needs to find more ways to evangelize the vision as well as continue to take the pulse of the organization.  Lets put the two together and see what we come up with.

Make a list of your next generation of leaders.  You know, the superstars that work for the people that work for you.  Not your direct reports;  I’m guessing you spend enough time with them.  Focus on the second level of your organization.  The program managers building your next new product are on the list.  So are the regional managers that rarely make it to the home office.  Don’t forget the recruiter or the sales rep or the accounts payable manager that may not really understand the purpose of the company. 

One-over-one’s

Once you’ve made your list, review the list with your direct reports and let them know that you are going to be scheduling one-over-one lunches.  Commit to twice a week lunches for the next 6 months.  Do your homework before you meet with them.  Find out what they do each day, what they do well, where they went to college and details of their family life.  Be prepared to give your best elevator speech but more importantly, be prepared to listen.

These sessions are called One-over-one’s because you are skipping a level in the organization. You are "jumping over" your direct reports.  You are making a very conscience effort to personally promote the mission, vision and purpose of the organization and your are making a commitment to listening to the folks in the trenches. 

 

A few rules to following when setting up One-over-one's.

• Don’t surprise your direct reports (their bosses)
• Never – ok rarely – miss a scheduled meeting
• Understand what each person does before you meet
• Prepare a few open ended questions
• Listen
• Commit to one or two things and always follow-up
• Follow-up with your direct reports (their supervisors) on any action items
• Commit to One-over-one's for the rest of your career
• Did I mention .... Listen?

So now you may be asking what this has to do with building business value.  I can absolutely guarantee that you are going to be amazed at what you did not know. You can probably come up with more but here are:

Five Benefits for Creating a "One-over-one" Program:

• You will have a great opportunity to motivate and inspire people that impact your company’s enterprise value
• Next generation leaders will get to know you and your passion for the business
• Opportunities for cost saving and revenue generation will be brought to your doorstep
• Retention will increase because your junior leaders will see the connection between what they do and the performance of the company
• Diverse work groups will align behind your vision for the company

Give it a try … One-Over-One’s might seem like a huge time commitment but if you build them into your lunch schedule you are actually accomplishing two things at once.  Nourish your body at lunch and nourish your company with One-over-one's.

Building Business Value ? Look in the mirror.

We all find it difficult to take a good hard look at ourselves.  We become indignant when others point out our flaws.  For example, you know you need to perform an exorcism on your lawn, but you’re not thrilled when your neighbor makes the suggestion.  You may also know you need to loose a few pounds, but when your spouse points this out, you feel betrayed.  You mean I don’t look the same as I did in college?

It can be threatening to look at yourself in the mirror and make an honest assessment.  Bonnie Raitt shared her thoughts on aging in her 1990 hit “Nick of Time”.

“No matter how you tell yourself, it's what we all go through
Those lines are pretty hard to take when they're starin' back at you ... Scared to run out of time”

We are all a bit frightened of the future, but I can assure you, it's not going to get any easier if you are afraid to look in the mirror.  

Think about putting your company in front of that mirror.

Evaluating how well your company is doing today will provide an important baseline for your future plans to honestly and methodically build business value.  A terrific side benefit is that it will also help you build a stronger leadership team. Your team is one of the keys to a successful analysis of your company’s current position in the market, and it will be crucial in increasing your company’s value. While this evaluation takes hard work, the benefits of having a cohesive leadership team that agrees on the current position of the company are priceless.

Stan Sloane, the CEO of SRA International, has done six acquisitions in three years. Sloane said that on average, he and his merger and acquisition team sort through about a hundred “frogs” before he finds one company that’s a “prince.” The hundred frogs are the companies that receive a subpar or par valuation. The prince is the one company in a hundred that commands the elusive premium value because it’s doing the hard work that the other companies in its competitive space are not.  

But before you can start thinking about any actions or transformational initiatives that will take your company from where it is to the place where it can become a real market leader, you’ve got to talk seriously with company leaders about where your company is right now. You need to look into the mirror and get everybody’s perceptions of the company as it exists today out on the table.  

This discussion will provide three immediate benefits.  

First, you’ll develop a baseline, a market position that will make all of you nod your heads and say, “Yes, that’s where we are.”

Second, this is the initial step toward determining what kind of actions or transformational initiatives your company needs to undertake to create a premium value.

The third benefit is the most important—it helps to connect people across the entire company.

Enterprises infrequently have company-wide discussions about what’s really happening on the ground. For example, your marketing people may seldom have any contact with the folks in engineering, and your sales force may rarely have any meaningful interaction with the people in corporate planning.

This exercise gives everybody a chance to have the kind of enterprise-wide conversation that almost never happens. Just getting the key players to talk about the same issues will be beneficial.

So pull your team together and position your company in front of the mirror. 

Those lines staring back at you are begging for change.

Five Mistakes to Avoid If You Want to Build Superpremium Value

Most companies sell at subpar or par value, meaning that their ultimate price tag is somewhere between three to five times EBITDA (earnings before interest, taxes, depreciation, and amortization).  Poorly run companies sell for a smaller multiple, while companies that are run about as well as their average competitors might go for four or five times their net earnings.  But just as superpremium ice creamscommand a higher price in the marketplace, some companies sell for a superpremium of nine to ten times EBITDA. It's like the difference between generic ice cream and Häagen-Dazs. 

So the questions are these: 

Why do some companies command that super premium price while others don't?  And if you are a C-level executive of a $10 million to $100 million enterprise, what do you need to be doing right now to prepare your business for an exit at a super premiumprice?

And just as important, what do you need to stop doing?

Here are five mistakes businesses make that practically ensure sub-par valuations when the founders or the C-level executives are ready to exit.  Keep in mind, building business value should be top-of-mind for every leadership team and is not just associated with an exit strategy. So, since building value is your number one priority, how many of these issues apply to your business?

1.  Your strategy is a secret.

You've got a new mission and direction as a result of your most recent offsite meeting. Great!  But how are yougoing to get the word out to your one hundred and twenty employees?  Are you getting posters designed to illustrate your new mission, vision or purpose?  Are you stuffing paycheck envelopes with a document thatlists the five new goals of the organization?  Most mid-market companies don't communicate these ideas verywell.  If a vision exists, the CEO fails to share it with others.  Or if she does try to get the word out, she does so using what the Reverend Bill Hybels of Willow Creek Community Church of Chicago calls the "Mt. Sinai approach."  Moses came down from Mt. Sinai with the two tablets denoting the Ten Commandments and while that top-down approach might have worked for Moses, it doesn't work in today's business climate.  Keeping the strategy a secret is a recipe for trouble.

2. Your business plans are ego driven.

Normally, a leader's greatest attribute is unbridled optimism.  As retired General Colin Powell says, "Perpetual optimism is a force multiplier."  You would rather have Colin Powell lead you into battle than Eeyore, but you also need to deal in reality.  The unbridled optimism that turned a business dreamer into a business leader has a downside.  It can keep executives from confronting the hard facts about their organizations. Sometimes leaders sweep so much bad news under the rug that they can hardly see their own desks. Optimism is terrific, as long as it is tempered by an ability to deal in reality -  a trait not all leaders have.

3. You’ve got the "I'd like to thank the Academy"syndrome. 

It's great when companies get awards - everybody feels good.  The problem is that the red carpet high can become an addiction for a CEO.  When business leaders get awards like “Entrepreneur of the Year” or "Top 40 Executives Under 40" or an invitation to the Young Presidents Organization or similar groups, they have an unfortunate tendency to believe that they single-handedly accomplished all of their company'ssuccess.  This is a sure way to alienate the team.  One suffocating ego is all it takes to destroy an otherwise successful business. 

4. You’ve fallen into the success trap.

In business today, conditions change so rapidly that what worked yesterday won't necessarily work today.  But tell that to an executive who is so enamored of his own past performance that he can't see how the world has changed.  For example, fifteen years ago, technical service companies could make handsome earnings by augmenting staffs and building custom business applications for clients.  Today, however, those firms make a third of what they once did on the same deals with business going to places like RentACoder.  Serving your customers and staff, however, never goes out ofstyle. 

5. You’ve got the "Fat and happy" syndrome.

A CEO who develops a reputation as a turnaround specialist is likely to be wooed by other struggling companies to accomplish the same magic for them.  This often leadsto the CEO "putting the band back together" - going out and rehiring the team that made the first turnaround so successful.  The problem is that a lot of those executives may well be fat and happy by now - they made their money on the first deal and no longer have the fire, the energy, or the desire to work those sixty-hour weeks all over again. Putting the band back together might work for the Eagles.  But in the business world, people often end up singing an unhappy tune.