Building Company Value

what is your business plan Terri Krohn Strategic Business Planning
In a previous post, I wrote about building company value. I can’t over state how important this is particularly for older business owners that are considering selling their businesses in the next 5-10 years.

If you don’t find yourself in the category of older business owner, building value in your business is still important. The sooner you get started, the greater value you will realize when it comes time to sell.

It all starts with a commitment to make planning a priority.

 What do you know about your company?

If you can answer yes to all the questions below then you are in good shape, but if you have no’s amongst the yes’ it is time to think about developing a plan to build value into your business operations.

We have a clear understanding of our business.  Yes  No
We know our primary and supporting customers.  Yes  No
We know what our customers value.  Yes  No
We know the success requirements of our business.  Yes  No
Our management team knows how to manage and drive these success requirements.  Yes  No
We know our strategic dependencies.  Yes  No
We know our customers’ unsatisfied needs/wants.  Yes  No
We know our strategic position in the market.  Yes  No
We know what our strategic position should be to gain lasting uniqueness.  Yes  No
We know what our business should be in the future.  Yes  No
Our management team is on the same page.  Yes  No

Where does your company stand?

If you are ready to start building a plan that guides future growth and worth, we have much to talk about.  As a certified strategic operating plan facilitator, I can help you develop a renewable strategic operating plan that will provide a yes to all the questions listed above while producing results that translate into value and profit.

Please contact me to learn more about how a strategic operating plan can help your company build value.

 9 Strategies to Build Company Value

How to boost company value

Whether you are starting or currently running a business, it is important to take steps to build value into your business operations.  If you want to get top dollar when it comes time to sell, consider every major decision and how it will add value to your company’s exit plan.  Below are nine value-add strategies that any business can implement.

building-company-value

 Build value by. . .

  1. Having a clear mission and vision for your company. If you don’t know why your business exists or where it’s going, it is hard to create value.
  2. Leveraging business strengths to create a unique competitive advantage. Determine what you do best and build upon those strengths to develop your unique selling proposition.
  3. Creating a strong brand identity. Companies with strong brand identities serving niche industries tend to be more valuable than companies serving a broad target market.
  4. Building customer concentration while diversifying your customer base. Build market share within a diversified customer base.  In other words, don’t put all your eggs in one basket.   Don’t allow a single customer to control a significant portion of your sales.
  5. Developing systems and standard operating procedures. By developing operating systems and implementing them through documented procedures you will improve the overall performance of your business.
  6. Building competitive barriers to entry. Obtaining exclusive rights, trademarks and patents to products and services will add a higher price to your business.
  7. Developing a capable management team. Your business should be able to run smoothly without your presence.
  8. Planning for the future. Have a renewable strategic operating plan that addresses your company’s  future growth,  but also manages today, today.
  9. Planning for financial returns
  • Keep detailed books. Bring in the professionals and ensure your business financials are audited.
  • Build a solid performance history over time. Consistently Increasing revenues  year over year make for a great growth story.
  • Develop recurring revenue streams. Products or services that are needed on a regular basis rather than a one-time occurrence have a greater impact on long term revenues.
  • Consistently improve cash flow. Cash flow is the main measurement for company valuation when it comes time to sell your business.
  • Keep debt low – the most effective way to build value is to keep debt low.
  • Focus on the bottom line. Are all products and services profitable.

Contact me today to learn more about strategic operating plans and how one could help your company build value.

 

How Otterbox Found Its Groove

From Millions to Billions – How Otterbox Found Its Groove

Otter Box Logo

Water Sports and Cigars

Otterbox, the maker of protective cases for cell phones and other electronic devices, started out like many businesses do—in a garage.  Curt Richardson launched his business with a water resistant box he developed for the water sports industry, thus the name Otterbox.   Along with its namesake waterproof cases, the company also sold travel cases for cigar humidors.  That was 1995.

Fast forward to 2014 where Otterbox is primarily known for its protective cell phone cases and has ended the year with $1.4 billion in sales.   What an amazing journey!  How did Otterbox successfully make the leap from water sports and cigars to convergent technology?

Finding Their Stride

Like any business, Otterbox has had its ups and downs.  In 2006, when the business was barely eking out a profit on $6 million in sales, Curt Richardson knew he had to do something different. Studying Michael Gerber’s work in the E Myth, he realized that innovators don’t necessarily make good managers, and systems must be in place with the right people running them.

It was about this time that Curt’s brother, Pete, suggested he meet Tom Paterson.   Tom’s StratOp Process had helped scores of businesses improve performance, and Pete was convinced Tom could help Curt turn the tide—and turn the tide he did.

Through deployment of the Paterson Strategic Planning Process (StratOp), Otterbox identified convergent technology as a major market/product focus, which in and of itself set the company on an upward trajectory that has propelled them to record growth over the past nine years.  In addition, the process helped Otterbox identify and develop the processes needed to successfully implement their vision and new direction.

According to Richardson, it all starts with a very pure vision.

“You have to be aware of what you want in a business and where you’re going with it.  To back up that vision, you have to have a strategic way to move the company forward, as well as the infrastructure to implement it.  Most processes are somewhat shallow.  They talk about the trophy at the end of the race, but nobody talks about training for the race.”

The Paterson Process recognizes that to be successful strategically, you need to look at the organization as it is and then look to the future.  Perspective helps you gain clarity around your company’s current situation.  Without clarity it is hard to move forward in a meaningful and productive manner.   Planning, action, structure, management and renewal (or looking at what must change) are also key components.

Over the course of the past nine years Otterbox has integrated the Paterson StratOp Process into its daily operations.  Every division in the company has a StratOp Plan-on-a-Page that contains their initiatives.  Every 6-8 weeks the plans are re-evaluated and adjustments are made based upon progress and market changes.

Managing for Growth

In an interview in 2011, Curt Richardson was asked what the keys to continued growth would be for Otterbox over the next 5-10 years.  His response was focused on product innovation, system/business process innovation, and product development/marketing.  He further added, these key growth drivers will be facilitated by the way Otterbox develops and executes its strategic plan.

The common denominator for Otterbox is the plan.  It’s how they manage growth. Considering  they ended 2014 with $1.4 billion in sales, I would say they are doing a pretty good job of developing and executing on their strategic plan.

Taking the necessary steps and time required to develop an effective strategic operating plan is critical if  a company wants a plan that not only shows them the trophy at the end of the race, but prepares them for the race they will be running into the future.

If you would like to learn more about the Paterson StratOp Process, please contact me or visit the rest of my website.

 

Meeting a Business Legend

Tom Paterson – A Master Process Thinker and Business Legend

From ATMs to Disney’s Space Mountain, people all over the world have been impacted by what Tom Paterson has designed, discovered or helped to facilitate.  It’s no wonder then that Peter Drucker called Tom “the greatest process thinker in the world.”

Last fall I had the privilege of meeting Tom while attending training to become a Paterson Certified Strategic Operating Plan Facilitator. Now in his 89th year, he remains focused and productive in passing on his legacy processes to others through the Paterson Center.

Blog-Meeting-a-business-legend-image

Educated as a mechanical engineer and later receiving an MBA from Pepperdine University, Tom integrated his unique talents of process design, organizational management, opportunity sensing, and understanding behavioral change into what has become known as the Paterson Process™/StratOp which is his strategic operating plan process for businesses and non-profits.

 A Proven Process That Delivers Results

For over 40 years, Tom has helped start-ups and billion-dollar organizations grow sales and profits.   Here’s a sampling of how Tom’s process has impacted the following organizations.

  •  Helped catapult JLG to become the world leader of aerial work platforms
  • Created the breakthrough idea of overnight delivery for the Flying Tigers which became the key profit driver in its sale to FedEx
  • Birthed the “caffeine-free” category for Seven-Up
  • Guided the Tarrington Company to become the largest independent maker in the world of car steering columns

More recently, Tom’s StratOp process helped Otterbox identify convergent technology as a new market/product focus, propelling the company from $6 million in 2006 sales to $1.4 Billion in 2013.

Tom’s ATM Story

Coming from a banking background, Tom’s contribution to the development of the ATM machine has been particularly intriguing to me.  On the final day of my Paterson training, I had the opportunity to ask him more about this.

Tom told me that while employed with RCA in the 1960s, he was at Stanford University researching technology to develop the light weight camcorder.  On a Sunday afternoon, as he got into his car after a day of work, he realized he didn’t have any cash.  Consequently, back then there was no way to obtain cash outside of banking hours.

What he told me next was fascinating.  He said he sat in his car and thought through the entire process of how a pin number could be used to access one’s personal banking accounts through an ATM machine.  He then flew back to RCA’s office in New Jersey and filed a patent for the ATM pin technology.

Upon successful receipt of the patent, Tom received $150 from RCA.  He was quick to point out that he holds no resentment for the payout; that’s how things were done in those days.  “And besides,” he said, “look at how many jobs have been created by the development of ATM technology over the years.”

Not only is Tom a master process thinker, but he’s also a very humble guy.

I learned so much from my time with Tom and am honored to be carrying forward his legacy as a Paterson Certified Strategic Operating Plan Facilitator. 

To learn more about Tom’s Strategic Operating Plan (StratOp) process and how it might help your organization grow, please contact me at terri.krohn@terrikrohnconsulting.com or visit my website at Terri Krohn Consulting.   I would welcome the opportunity to visit with you.

 

Play Like The Seahawks

Dedication to one another comes first

On Thanksgiving Day, the Seattle Seahawks played a phenomenal game of football, beating the San Francisco 49ers by 16 points.  When asked in a post-game press conference how the team accomplished such a victory on their opponent’s home field, cornerback Richard Sherman explained,

“We were having a good time, enjoying the game and each other.  We were like nine and ten-year-old kids playing our hearts out for each other.  Right now we are dedicated to one another.”

Most post-game banter is the same–players review their hard work, preparation, and execution.  But this isn’t what the Seahawks wanted the world to know about their team or this particular win.

Coach Pete Carroll and quarterback Russell Wilson further resounded on Sherman’s comments.  The team had prepared for this game like they would any other.  What set them apart was the spirit of camaraderie that infiltrated each and every play.  This intangible but palpable force brought the Seahawks the win they so robustly went after.

Russell Wilson

Photo by Larry Maurer Via Wikipedia

Carroll describes his team’s culture as being built on trust, respect and confidence.  When his players have trust in and respect for each other they have the confidence to do what they do best.  Each player knows his teammates are working with him to bring about a successful outcome.  Under Carroll’s guidance, the team has cultivated a winning culture that is hard to beat.

Build a winning culture

A company’s culture has a lot to do with its success.  How cohesive a culture is determines how well the company performs.  Winning cultures are founded upon

  • Commitment to a higher cause or purpose
  • Responsibility to accept specific roles
  • Accountability to give and take critique
  • Integrity to do what you say
  • Respect for company, competitors, self, managers and team
  • Trust in self, co-workers and managers
  • Courage to do what’s right
  • Compassion that understands what it’s like to walk in someone else’s shoes
  • Service that is self-sacrificial
  • Humility that gives others the credit and glory

It is no surprise that Carroll, Sherman and Wilson used these words multiple times throughout their post-game interviews. And it is further evidence of the team’s winning culture.

Cultivating this type of winning environment doesn’t happen overnight.  In addition to the characteristics listed above, it also requires

  • The right people in the right places.
  • Consistent communication that is not only about giving information, but taking information in through active listening.
  • shared vision that everyone understands and is committed to achieving.

Play like the Seahawks

Is your team playing like the Seahawks?  Does your company have the character that competitors don’t know how to compete with let alone emulate?  If you don’t know or aren’t sure, it might be time to find out.

ClimatePlus, an online organizational assessment can help determine the state of your company’s culture, pinpointing opportunities for cultural improvement.   If you are interested in learning more, please contact me at terri.krohn@terrikrohnconsulting.com

Boomer Retirement – Businesses for Sale

Businesses for Sale – A Boomer Tsunami

 

Planning to sell you business, Businesses for Sale

Boomer Retirement

Aging baby boomers with businesses for sale in the next ten years will need to be prepared for a buyer’s market.

As one of the most entrepreneurial and innovative generations in U.S. history, this group is poised to make a significant impact as they retire; the oldest ones turned 65 in 2011.  This has set in motion predictions of a selling tsunami–up to ten trillion dollars’ worth of businesses will change hands between now and 2015.

As this wave of wealth transfer ramps up, one big question looms—who will the baby boomers sell their businesses to?

One thing is for sure—most of them will not be selling to their children. While the boomers were building their careers they were not creating the large families their parents did.

In fact, a Trendsetter Barometer survey conducted by PriceWaterhouseCoopers found that only 18% of business owners were considering selling to a family member while a whopping 51% were planning on selling their company to another company.

With such a large supply of businesses on the market, there is most likely going to be a business inventory glut. This will create downward pressure on pricing and spur potential consolidation in some industry sectors, as existing businesses take advantage of the excess supply to grow by acquisition at favorable prices.

Stand Out In A Crowd

What is a baby boomer to do?

For the sake of a secure retirement, baby boomers should think seriously about what succession and liquidity look like for their businesses. And in order to meet these needs in a buyers’ market, a well thought out succession/exit strategy is key.

Proactive Planning

In order to position for the best possible opportunities sellers should:

  • Know what their business is worth. Owners should seek professional, independent expertise to conduct an accurate business valuation report. Once the value of the business is known, decisions can be made with confidence and a future path can be chosen wisely.
  • Strengthen and build value. Build operational value by leveraging strengths and evaluating weaknesses. Every major decision should be considered in terms of how its outcome will add value to the business’ exit plan.
  • Develop an exit strategy. Leave nothing to chance by creating detailed plans because too much is at stake.

Are you a baby boomer thinking about retirement?  Have you developed an exit strategy you feel comfortable with when it comes time to sell?

Want to learn more? Download Key Considerations for Building and Improving the Value of Your Business.

Is Your Mission Statement Killing Your Bottom Line?

A mission statement, simply put, articulates a company's purpose.

Is Your Mission Statement Killing Your Bottom Line?

Have you ever been at a planning meeting or read a business book and the topic of “mission statements” comes up?  Have you rolled your eyes or skipped past the page?  Does it seem like a waste of time, something you come up with in a moment of inspiration or group think, only to forget when the next business decision or crisis comes along?

The truth is, your mission statement is incredibly practical. It can help you with the daily grind of business dealings as well as those major turning points that can hinder or propel your business to the next level of success.

Every decision made, no matter how big or small should align with it.  Every employee should be able to repeat it.  It’s the compass that your company comes back to that helps guide and direct. When consistently used, you’ll see stronger bottom line results.  Yes, it’s that important.

What defines a mission statement?

A mission statement articulates why the business exists.  It should communicate this to its owner, employees, customers, suppliers and general public.

Mission statement mishaps

Chances are you spend more time working within your business than working on it.  That is as it should be, but sometimes it can make developing and executing a good mission statement more difficult than you would expect.  Here are some common problems to avoid.

A mission statement that does not explain why your business exists.  This may be because it’s too generic and can’t provide specific guidance, or worse yet it’s confusing and does not give clear direction.

Example of a poor mission statement:

“To create a shopping experience that pleases our customers; a workplace that creates opportunities and a great working environment for our associates; and a business that achieves financial success.”

This statement is so generic any business could own it.  Would you have guessed a retail grocery chain?   If so, you are amazingly psychic.  This is Albertsons mission statement. Albertsons sells food, but you would never know it.

Example of a Good Mission Statement:  

“Google’s mission is to organize the world’s information and make it universally accessible and useful.”

Clear and to the point, no mistaking what Google’s mission is. It’s statement explicitly says why it exists.

A mission statement that changes often, causing confusion and misunderstanding.  Mission statements are easily confused with vision statements, positioning statements and branding statements.  All of these can change frequently as a company grows. Changes in leadership can also signal changes to the mission.

Remember, the mission statement defines why the business exists.  Unless the business has completely changed its course, its mission statement should remain relatively unchanged in its essence.

A mission statement that is not communicated consistently throughout the organization. Mission statements are usually developed through the strategic planning process by company leadership.  It is not unusual for the mission statement to only be communicated as far as the final planning document(s).   But it’s of little use if it’s not communicated and reinforced within company operations, from the top down. Every employee needs to believe it and live it within their work environment.

A lack of guidance and direction concerning the mission and what it means for daily operations.  When no one is guiding and directing the mission of the company, people are left to develop their own interpretations of what it is and what it means.  When everyone is on a different page, problems ensue on a regular basis, bad decisions are made, and the customer is most likely confused.

Mission statements support business growth

It just can’t be overemphasized—the mission statement is the foundation that supports successful business growth.  When decisions are aligned to the mission, better decisions are made and the company can flourish.

What is your company’s mission statement and how do you use it to make decisions?

Download the worksheets on “How to Write a Mission Statement in Four Easy Steps”.

 

 

Is Your Business a Paycheck or a Business Investment?

Invest in your business

As I visit with business owners and business supporters around the region, one thing has become apparent to me—some businesses are treated like paychecks while others are treated like investments.

A Paycheck Business

A paycheck business produces monthly income for as long as it exists. It is truly a paycheck, nothing more, nothing less.

An Investment Business

An investment business pays dividends in the form of steadily increasing income and appreciates in value over time.

 

When a business is a paycheck it looks like this:
  • It survives in spite of itself. Sometimes it even thrives, but it can’t sustain an upward trajectory. Sometimes it crashes and burns.
  • If the business does survive, it seems a spark is missing. There is no enthusiasm for what it does or why it exists.
  • Many times its leaders can’t distinguish a clear future path. And so it remains stuck in the same rut neither moving forward nor backward.
  • Activity is the mantra of the paycheck business. Busyness is seen as hard work and while all this busyness allows the business to dodge bullets, it also causes it to bypass opportunities.
  • The tyranny of the urgent syndrome is present in a paycheck business. Despite all the activity, the business can’t get ahead. There is always something in front of its owners and management that is more important than the last crisis.
  • Any chance of long-term success for this business is uncertain at best and relies to a large degree on luck. In the end, the true value of the paycheck business is a disappointment for the owner.

 

When a business is an investment it looks like this:
  • The owner(s) of an investment business understands why the business exists, what it is and what it isn’t. They know what its final destination looks like and have charted a course to get there. An investment business is in a much better position to survive despite economic ups and downs.
  • Creating value is as important as producing income. Its owner(s) and management understand that the business is more than a paycheck. While it produces regular dividends in the form of income, the business also appreciates in value.
  • Its better able to weather the inevitable storms that come because plans have been put in place to respond to challenges and opportunities alike. Its owners and management plan for the future, measuring and building upon successes and learning from failures.
  • Its owner(s) know what the end of the road looks like. They have planned for it and when it comes time to sell the business, they have created value that does not disappoint.

 

Which kind of business do you have?

How could your business become more of an investment rather than a paycheck?

Want to go further? Download Key considerations for improving your business Terri Krohn

Do You Know How To Identify The Real Problem?

Charles F. Kettering, an American inventor, engineer, businessman, and the holder of 186 patents, was a founder of Delco and head of research at General Motors from 1920 to 1947.  With a resume like that he no doubt knew a fair amount about problem solving, hence his quote, A problem well stated is a problem half solved”.

It’s Not the Problem, It’s the Symptom

Many times in our businesses we’re not sure what the real problems are.  I’ve seen many a client come up with solutions to what are really symptoms rather than problems.

And when you treat the symptoms, the underlying problem doesn’t go away; it festers.

Do you know how to identify your real problems in business

Focusing on the Symptom

Just the other day, a potential client called asking for financial expertise. He wanted to know if his business was flush enough to afford another employee.  The problem in his mind was financial; he wanted someone to look at the numbers and tell him if he could afford another employee.  If he could add to his staff, then that would take the pressure off of him.  Problem solved, right?

Upon closer examination, the true problem wasn’t that he needed another employee.  Rather, it was that the business was too dependent on him. He felt that the business was consuming his life.  There was no balance between his professional and personal life. That is the problem clearly stated and the identification of it alone can do worlds for him and his business.

State the Problem, the Real Problem

Before a sound decision may be made, the problem itself must first be clearly stated. By understanding the real problem and finding a solution for that problem, the business owner may go down a different path than he expected.  By understanding the true problem, and not just its symptoms, he is setting himself up to find the best solution in half the time and take a vacation to boot!

Are you ready to identify your businesses real problems? Do you have a strategy for doing so?

 

Do You Run Your Business By Luck or Design?

Have you ever taken a road trip not knowing where you will go?  The kind where you get in the car and go wherever the pavement takes you?  It sounds adventurous, exciting and maybe a bit glamorous.   

Not knowing where you’d end up or what you would encounter, this sort of trip would have to be one of low expectations.  You may find fun and adventure, or you may end up lost or calling a mechanic.   Would you spend your time and money on a trip that at best had a 50% chance of success?  

Planning The Business Trip

Road Map Icon

Image courtesy of mapichai / FreeDigitalPhotos.net

Many businesses, particularly small to medium-sized ones, go on a trip like this every day.  They’re not sure where they are going, but one thing they know for sure is that they have to keep moving. Their movement helps them dodge bullets, but they also by pass opportunities.

Despite so much activity, these businesses can’t get ahead and they don’t understand why.  They work hard, only having time for what is in front of them.  And there is always something in front of them that is more important than the last crisis.  For businesses like these, any chance of future success financially or otherwise is less than 50%.

Lewis Carroll put words into the Mad Hatter’s mouth when he penned, “If you don’t know where you are going, any road will take you there”.  That is how many businesses operate.

The objections for having a future plan are many but those most frequently heard are as follows:

  • There is no time to plan.  I can barely keep up with today.  When and how would I create a plan?
  • Business is great, why do I need a plan?  I am going to keep doing what I’m doing.  That’s my plan.
  • My business is so unpredictable and affected by factors I can’t control.  How can I plan when I can’t predict where I will be 2 weeks from now, let alone a year or two?
  • What am I going to do with a plan once I have it?  Nobody here has time to implement it.

Luck or Design

Several years ago, I had a client who without a plan had managed to achieve reasonable profits year over year.  When presented with the notion of doing some forward thinking, his response was, “I just had an 8% annual increase in a down year, why do I need a plan?  It seems like things are working fine.”

At that juncture he was asked if an 8% increase was by luck or by design.  He admitted it was luck.  The next question was “What kind of increase do you think you could have had if you had a plan?” Long story short, the next year he committed to developing a strategic focus and since that time profits have increased by 15% per year.

Let’s go back to our road trip example.  A year has passed and it’s time for another trip.  This year, with a plan in hand you will know your final destination, the route you will take, and what you will do once you get to there.  This trip already feels better than last year’s and you haven’t even hit the road.   This time your success has not been left to chance.

Have you ever operated by luck?  What has been the result?

What do you think your company could accomplish if it had a plan?