Saturday, February 27, 2021
Thursday, February 11, 2021
What is a lower middle market company?
Lower middle market is defined nationally as transactions between $10M and $250M in enterprise value.
When is a good time to sell?
CEOs and business owners routinely ask the question, When is the best time for me to sell? Is now a good time or should I wait? Truthfully, many of the folks that address that question (investment bankers, private equity professionals, financing sources) have a vested interest in having companies go to market. So, business owners can be skeptical when reading optimistic projections.
The Mead Consulting Group has advised business owners for years that there are a number of factors to consider when evaluating if it is a good time to sell a business. The most important is to make sure your company is prepared, and to not wait for the "absolute best time" to sell, but to sell when the market is good. There are lots of examples of companies that have regretted not going to market in 2006-2007 because they thought the market for their company would be better in 2009 or 2010, or got caught in the early “Covid squeeze” when the stock market plummeted in March 2020.
There are a number of factors that suggest that 2021 could be a terrific time for some lower middle market company owners to sell.
1. Company results have rebounded or stabilized. Many lower middle market companies have rebounded or at least stabilized from the early Covid downturn. Even if revenue growth in some sectors is still very moderate, many companies have done an excellent job of managing expenses and increasing cash flow. Demand in many industries has rebounded nicely.
2. Valuations are high. With stock market at record levels, the prices (multiples of EBIDA) being paid for good companies are at high levels.
3. Potential Tax Changes. With changes in Washington, there may be an appetite for raising taxes to offset the cost of the Pandemic, and the economic stimulus packages.
4. Interest rates are still historically low. This is important since the buyer of your business need to borrow for the transaction.
5. Private equity firms have plenty of dry powder and fewer distractions from older investments. Private equity firms have raised record amounts of investment capital. With lots of capital to invest, they need to put that capital to work by buying companies. At this time of year, they can focus most of their attention on looking for new opportunities.
6. Private Equity has an increased focus on lower middle market transactions. There are many new private equity firms and family offices that specifically focus on the lower middle market.
7. Strategic buyers have lots of cash. Strategic buyers have been accumulating cash in record amounts.
8. Strategic buyers need to find new ways to grow. Sources of organic (internal) revenue growth have been difficult for many strategics. They are under pressure to acquire companies that add new products, new customers, new geographies, and new capabilities.
9. There are still more buyers than sellers in the market. The number of baby boomer business owners who are reaching retirement age is increasing daily. In 2021 baby boomers range in age from 57-75 years old. There comes a time when these business owners need to sell and there may well be a glut of businesses on the market. Surprisingly, this has not happened yet.
Are you and your company ready to go to market?
Most business owners who have executed a successful sale of their business will tell you the most important thing is: BE PREPARED.
Selling a business is very different than operating a business. As a business owner you know your industry, your product or service, your customers and your markets. Most business owners will only sell a business once in their lifetimes - and it can be by far the most important financial transaction of their lifetime.
If you would like to perform an assessment of your company's readiness to maximize value in a sales or recapitalization transaction, contact me today.
Thursday, January 28, 2021
Traits for Happiness
Seven Gifts from people with the happiest lives
This list is from Hugh Hewitt's book, "The Happiest Life". As we move into the new year, I thought this list was very appropriate, especially given the trying year in 2020. It was compiled from interviews of people across all ages, ethnic groups, and circumstances. I hope you find it inspiring as we enter this new year. . If you haven't read Hewitt's book, it's a quick read and well worth your time. - dpm]
Best wishes for a happy, healthy, and prosperous new year!
(Excerpt from "The Happiest Life" by Hugh Hewitt)
Monday, December 14, 2020
[Editor's Note: In these uncertain times, business and personal decision-making is very difficult for CEOs and senior leaders. We can never predict the future, yet we must make the best possible decisions, maintain a positive culture, and be adaptable and agile to changing conditions. I hope you find the following article useful about the importance of strategic coaching. - dpm]
Benefits of a Strategic Business Coach
(Someone who has been in your shoes)
Over the past few years, I have been asked repeatedly why The Mead Consulting Group does not promote the coaching we do with CEOs and business leaders. My response has typically been that the term "Coach" is much overused and "abused." We have not wanted to be lumped into the bucket of people who bill themselves as business coaches but who have limited or no real life business experience.
We have been doing strategic business coaching for many years.
For many years, helping company leaders execute and grow as leaders has been a core part of our DNA. Our entire consulting practice is built around helping companies reach the next level - helping them to get results. Leadership, communication, strategic thinking, setting priorities, motivation, team development, alignment, accountability, and personal development are all part of the process. These are developed by close interaction with our client's leaders. We refer to it as CEO coaching or strategic coaching, but in truth it usually involves the entire senior team.
My personal education with a strategic business coach.
A recent conversation with a client brought back to mind my personal situation - when I was thrust into the CEO role by the death of the Founder. My best strategic coach was one of the Board members who took me under his wing. I was 27 and he was 73. He had lived quite a life, from growing and selling businesses to failed partnerships, lawsuits, large acquisitions, employee issues. He had forgotten more than most people ever experience. He was an irascible cuss and didn't suffer any fools. I was able to leverage his failures and successes and his incredible perspective. He helped me achieve my goals, and made sure I was prepared for almost any situation that came my way. He was the person who helped me understand the importance of developing and focusing on strategic plans that can actually be executed.
I saw an article a number of years back that listed some reasons why business leaders could benefit from having an experienced strategic coach. Long ago I turned these into my own list - which I will outline below. It is this same focus that our senior consultants bring to every one of our clients.
Benefits of a Strategic Business Coach
If you want more information about how we help CEOs and business leaders continue to grow and accomplish their goals, please
The Mead Consulting Group helps dozens of companies and organizations -like yours - every year with both strategic planning & execution, and strategic business coaching. These processes have helped our clients consistently outperform their competition.
If you would like to discuss your situation with one of our senior consultants, please contact me to set up a complimentary meeting. Remember - our consultants have been experienced business owners, CEOs and senior executives who have been in your shoes. Our consultants have all been through uncertain economic times before and can help you best position your company to thrive through these next years.
Thursday, August 20, 2020
[Editor's Note: In difficult and uncertain economic times, it is easy to get distracted by the very real details of getting through the "economic day." Sometimes, the development and execution of strategy that leads to a true competitive advantage can get lost in the tactics of survival. Organizations with a focused strategy can emerge from economic (and health) downturns with distinct competitive advantages. I thought this book might be interesting for those of you whose companies might have perhaps inadvertently slipped into one of the mistakes about strategy. I hope you find it useful. -Dave Mead, Mead Consulting Group]
Michael Porter is one of the most renowned authors on the subjects of strategy and competitive advantage. In her book, Understanding Michael Porter: The Essential Guide to Competition and Strategy, Joan Magretta distills Porter's core concepts and frameworks into a concise guide for business practitioners.
Porter discusses common strategy mistakes. Key concepts include:
Assuming you can do it better than everyone else. One of the biggest mistakes a manager can make is to assume the best results come from competing to be the best, going down the same path as everybody else and thinking that somehow you can achieve better results. Competing to be unique is a much more effective strategy.
Confusing marketing with strategy. It's natural for strategy to arise from a focus on customers and their needs. So, in many companies, strategy is built around the value proposition, which is the demand side of the equation. But a robust strategy requires a tailored value chain - it's about the supply side as well, the unique configuration of activities that delivers value. Strategy links choices on the demand side with the unique choices about the value chain (the supply side). You can't have competitive advantage without both.
Overestimating strengths. There's an inward-looking bias in many organizations. You might perceive customer service as a strong area. So that becomes the "strength" on which you attempt to build a strategy. But a real strength for strategy purposes has to be something the company can do better than any of its rivals. And "better" because you are performing different activities than they perform, because you've chosen a different configuration than they have.
Not having a “What we’re not going to do now” list. The need for trade-offs is a huge barrier. Most managers hate to make trade-offs; they hate to accept limits. They'd almost always rather try to serve more customers, offer more features. This prevents them from being able to focus resources.
Misunderstanding the definition of business. Understanding your business too narrowly can leave an organization exposed to disruption from “unseen” competitors (e.g., the record business, Blockbuster video, etc.)
Trying to please everybody - The desire to delight and retain every single customer.
If you listen to every customer and do what they ask you to do, you can't have a strategy. Strategy is not about making every customer happy. When you've got your strategist's hat on, you want to decide which customers and which needs you want to meet.
The worst mistake-but the most common one - is not to have a strategy at all"
Friday, June 26, 2020
Thursday, May 14, 2020
- Fear of the unknown.
- Uncertainty about the future
- Doubt about the appropriate path
- Focus on business fundamentals
- Control what you can
- Pay attention to relationships
- Communicate, Communicate, Communicate
- Look for opportunities
- Liquidate surplus finished goods inventory if applicable - turn it into cash
- Manage receivables closely
- Watch Cash Flow - Daily
- Systematically Examine expenses
- Not just the level, but the processes and the vendors
- Eliminate some expenses for the next 90-180 days (especially discretionary)
- Process mapping to determine if there are unnecessary steps, cost, or waste
- Give your suppliers/providers the ability to offer good ideas, not just be an order taker
- Eliminate some positions - Take the opportunity to trim the underperformers
- Cut wages if necessary (start w/ top management)
- Accounts Receivable - "Pre-collection" activities
- More frequent invoicing
- Seek extended terms from suppliers (Talk with them - don't just stretch them out)
- Overcommunicate with your banker
- What new communication is required - type/ frequency/ form?
- What new reporting is required?
- Do you understand bank and regulatory requirements and their impact on financial lending instruments?
- How can you streamline your reporting function for timely and accurate reports?
- How has the environment changed your relationship with your bank?
- What policy and procedure updates are necessary to meet lender requirements?
- Be visible - Communicate with employees what you know; be honest about what you don't know; Be frank, but show confidence
- Maintain high expectations
- Require accountability
- Reinforce your culture
- Control what you can
- Tailor offerings to your customer's needs, not yours (saves $, flexible payments, simplify, lowers risk, solves problems)
- Use this opportunity to strengthen relationships - People want to do business with someone they know and trust
- Keep in touch with suppliers; some may be in trouble
- Things will not be the same. No one can accurately predict the future, so we need to anticipate and be prepared for different views of the future environment
- Most significant competitive gains occur during downturns
- Competitors are sleeping - internally-focused
- Look for ways to reinvigorate your company and employees
- Get on the front side of this; Not acting will make things worse
- Never waste the great opportunity of a downturn