Monday, February 19, 2024

Preparing for an Exit - Take the Value Creation Assessment TM

 [Editor’s Note: Many business owners are busy running the business and do not take the time to prepare for an exit. Often, they do not even think about it until they receive an unsolicited offer from a prospective buyer. Business owners who have prepared for an eventual exit typically have a smoother transition and receive a higher value for the business. - dpm]


Preparing for an Exit - Take the Value Creation Assessment TM


An offer comes out of the blue. A company in your industry, whom you may have known for years, contacts you with an offer to buy your business and states that they can close in 30 to 60 days. What's next?


If it seems too good to be true, it likely is. History tells us that "one buyer offers" with promises of a fast close - for a company that was not prepared -wind up stretching out for many months, often with changes in the purchase price offer, and consuming lots of the seller's time and resources - only to end in a broken deal. Or...the offer is significantly less than the seller could realize with additional prospective buyers.

Businesses can operate for many years in a somewhat informal manner with handshake agreements, employees with tribal knowledge of process, etc. Many business owners are surprised when they learn that you can't sell an "informally run" business for a premium price.


What determines the value of a business... to others?

  • Solid performance history.
  • History of improving revenue and cash flow.
  • Capable management team.
  • Strategic growth opportunities.
  • Documented repeatable processes.
  • No "gotchas" (no surprises during due diligence).


Surprises will cost you. Buyers hate surprises. When a buyer discovers something during due diligence (issues with financials, issues with customers or suppliers, issues with employees, etc.), it causes them to look deeper, wondering what else they might discover that was not disclosed. This potentially breeds distrust and often results in a change to the offering price.


Identifying and resolving issues in advance saves money, time, and leads to a cleaner, more productive transaction. Identifying potential issues in advance allows the company time to resolve them over time, at lower cost...and a lot less stress. For example, it can take time to clean up contracts with customers and suppliers, resolve issues with financial statements, etc.


We can help. Take the Value Creation Assessment TM. For over two decades, The Mead Consulting Group has been working with companies to assess their preparation for a potential sale, identify issues and recommend corrective actions. Investment bankers and buyers have remarked that companies that have gone through this process are the best prepared that they've worked with. We help companies routinely go through this assessment in several days. Then they can be armed with detailed action plans to be best prepared.


For more information on the process to unlock maximum value, please contact me at meaddp@meadconsultinggroup.com or (303)660-8135.

 ____________________


Monday, February 12, 2024

Steps to Best Prepare Your Company to Borrow

Preparing your company to borrow involves several steps to ensure financial stability and credibility and enable a smooth borrowing process.

1. Assess Company's Financial Condition: Conduct an in-depth analysis of your company's financial statements, including cash flow, profit and loss, and balance sheets. Ensure financial records are accurate, up-to-date, and reflect the true performance of your business.

2. Develop a Solid Business Plan: Create or update your business plan, outlining your company's objectives, target market, growth projections, and strategies for success.

3. Understand Borrowing Needs: Determine the specific purpose and amount of funds you need to borrow. Whether it's to purchase new equipment, expand operations, or cover operating expenses during slow periods, having a clear understanding of your borrowing needs is essential.

4. Strengthen Creditworthiness: Strengthen your company's creditworthiness by maintaining a positive credit history, paying bills on time, and reducing outstanding debts.

5. Prepare Documentation: Prepare and organize necessary documentation, including financial statements, tax returns, business licenses, and legal documents.

6. Research Lending Options and Establish Relationships with Lenders: Research types of lenders (banks, non-bank lenders, asset financing, etc.). Cultivate relationships with potential lenders by networking, attending industry events, and seeking recommendations from other business owners and outside consultants. Building rapport with lenders can improve your credibility and increase the likelihood of loan approval.

7. Create a Loan Proposal: Develop a loan proposal that highlights your company's strengths, borrowing needs, repayment plan, and how the borrowed funds will benefit your business. This can increase your chances of securing financing on the best terms.

8. Review and Negotiate Terms: Review loan terms, including interest rates, repayment schedules, fees, and penalties. Understand if personal guarantees are necessary and those terms.

9. Establish and Maintain Good Communication with Your Lender: Remain in regular communication with your lender throughout the borrowing process. Respond to any concerns or questions promptly and provide requested information in a timely manner. Maintain good communication with lender throughout the term of the loan.


Monday, January 15, 2024

New Approaches to Strategic Planning

 [Editor’s Note: As we enter 2024, uncertainties loom large for Business owners and CEOs. Navigating these uncertainties requires strategic foresight, adaptability, and a proactive approach. This article explores what new approaches to strategic planning that business owners and CEOs should adopt to prepare for the uncertainties that may arise, ensuring sustainable growth of revenue and profitability in the face of challenges. We hope you find this thought-provoking. –dpm]

New Approaches to Strategic Planning

Strategic planning is the cornerstone of any successful business, providing a roadmap for growth, sustainability, and competitive advantage. In the dynamic landscape of lower middle market companies, which typically operate with limited resources, limited access to capital and face unique challenges, traditional approaches to strategic planning may fall short. New innovative methodologies have emerged that address the specific needs of these businesses.


Flexible Plans with Frequent UpdatesTraditional strategic planning often involves rigid, long-term plans. In contrast, an agile approach embraces flexibility and adaptability. Companies benefit from shorter planning cycles, allowing them to adjust strategies based on real-time feedback and market dynamics. This iterative process ensures that the organization remains responsive to changing circumstances. We recommend that companies review strategies every 3-4 months.


Scenario Planning. Given the uncertainty in the business environment, scenario planning has gained prominence. Prior to 2008, scenario planning was utilized mostly by larger companies. Since that time, a greater number of lower middle market companies have embraced scenario planning. Scenario Planning involves developing multiple strategic scenarios based on different possible views of the future. Companies can use this method to identify potential risks and opportunities, enabling proactive decision-making and risk mitigation. Managers can “rehearse” how the company would respond to various scenarios.


Data-Driven Decision-Making. Leveraging analytics for strategic planning is essential. Companies can harness data to gain insights into market trends, customer behavior, and operational efficiency. This data-driven approach enables informed decision-making, minimizing risks and maximizing opportunities.


Collaborative Strategy Development. Strategic planning is not a task for the executive team alone. Companies are involving key stakeholders at various levels, which fosters a sense of ownership and commitment to the strategic goals. Collaboration encourages diverse perspectives, leading to more comprehensive and innovative plans.


Customer-centric Planning. Understanding and meeting customer needs is paramount for success. Lower middle market companies can differentiate themselves by adopting customer-centric strategic planning. This involves a deep analysis of customer preferences, feedback, and market trends to tailor products and services accordingly.


Digital TransformationEmbracing digital technologies is no longer a choice but a necessity. Companies can use strategic planning to create a roadmap for digital transformation. This includes adopting e-commerce, enhancing online presence, and implementing automation to improve operational efficiency.


Strategic Partnerships: Collaboration is a powerful tool for growth. Lower middle market companies can explore strategic partnerships with other organizations to share resources, access new markets, and benefit from complementary expertise. Strategic planning should incorporate a roadmap for identifying and nurturing such partnerships.

 ____________________

 

We can help. At The Mead Consulting Group, we utilize many of these approaches: 

Customer Forward™ Strategic Planning Process, Scenario Planning, and “Agile” or Flexible Planning are some of the approaches we use to provide the best tools available for clients.

Check out our website for descriptions of some client success stories.

 If you would like to discuss how we might help your company begin the process of adding value and moving your company to the next level of performance, please contact us for a free consultation. 


Best regards,

Dave Mead                

Friday, January 12, 2024

Seven tips to make networking work

 [Editor’s Note: I am often asked about my approach to networking. I thought it might be helpful to list some of my observations about successful networking. –dpm]


Seven tips to make networking work

There have been many articles written about networking. In the past, I've read that you should join an executive golf networking group, connect with anyone who asks on LinkedIn, you shouldn't spend time with the same people, etc.

There have been several articles written about the disturbing trend to transactional encounters rather than relationships. I am not sure if the trend to transactional reflects a need for immediate gratification, is a sign of desperation, or if people just didn't listen to lessons their mother taught them.

The truth is, there is no easy path to developing a meaningful network. It's not about collecting business cards, social media contacts, golfing partners, cycling partners, or meeting as many people as you can. It's about building relationships. In the current social networking world, some people seem intent to "friend" everyone and feel that the moment they meet you, they are "entitled" to tap into your network.

The following are some observations I've made over the years about building relationships:

1. Be a giver not a taker

Make deposits before withdrawals. Nothing turns people off faster than someone who gives you a download of their needs with little or no regards for yours. Take the time to understand the other person's needs. Seek to help them first.

Help people. One very successful investment banker made it a point to know all of the leading surgeons and researchers in the medical field so that he could help the families of colleagues in his network. Another person helps find jobs and internships for children of colleagues and friends.

2. Be a connector

Find out who others need to meet and make introductions that will help them in their personal and professional lives. Become known as someone who can make connections for others.



3. Go deep

Get involved with organizations and make a difference. People will make decisions about you based on how you engage with trade groups, not-for-profit and community organizations. If you get involved and make a difference, people will take notice. If you merely "write a check and check a box," distribute cards and look for introductions, they will notice that as well. We have made it a point to participate in organizations where we can get things accomplished and use our skills to advance the organization's vision and mission. Our consulting firm is all about execution and getting results for clients - people do notice that we do the same thing within the community. Want people to see you as dependable, creative, a leader? Superficial "fly-by" participation will not do it.

4. Deliver on your promises

If you say you'll do something for someone, make sure you follow-through. People want to build relationships with people who are dependable.

5. Do it for the right reasons

Some people call it creating good karma, others say it's doing the right thing. The key is that if you go out of your way to help others -it will come back. Perhaps not today or tomorrow, but it will come back.

6. Say thank you

Your mother taught you always to say thank you when someone helps you. People want to know that were helpful and that you appreciate their efforts.

7. Stay visible 

Many folks in transition are visible in the community only as long as it takes to find the next job. It is likely you will need to network again in your lifetime. Create a positive lasting impression. Otherwise, why would someone ever want to help you again?

Wednesday, January 3, 2024

Navigating uncertainty: 9 Steps for Business Owners and CEOs entering 2024

 


Navigating uncertainty: 9 Steps for Business Owners and CEOs entering 2024

 [Editor’s Note: Happy New Year! As we enter 2024, uncertainties loom large for Business owners and CEOs. Navigating these uncertainties requires strategic foresight, adaptability, and a proactive approach. This article explores what business owners and CEOs should do to prepare for the uncertainties that may arise, ensuring sustainable growth of revenue and profitability in the face of challenges. We hope you find this thought-provoking. –dpm]

 1.      Conduct a Risk Assessment and Develop Scenario Plans:  Business owners and CEOs should start by conducting a thorough risk assessment. This involves identifying potential risks across various aspects of the business, including economic factors, market dynamics, technological changes, regulatory shifts, and geopolitical. By understanding potential challenges, leaders and their teams can develop proactive strategies to mitigate risks and fortify their businesses against unforeseen events. Remember, you need to plan for not only what you think will happen, but also examine plans for what you don't think will happen.

 2.      Foster a Culture of Adaptability (Flexibility and Agility): In times of uncertainty, adaptability becomes a key differentiator. Business owners should cultivate a culture that embraces change, encourages innovation, and fosters adaptability among employees. The ability to adapt quickly to changing circumstances allows companies to stay ahead of the curve. Business owners should encourage flexibility within their organizations, fostering innovation and a willingness to embrace change. This may involve revisiting business models, exploring new markets, or diversifying product and service offerings. This may also involve implementing flexible work arrangements, encouraging continuous learning, and being open to feedback from all levels of the organization.

 3.     Invest in Technology and Innovation:  In the rapidly evolving technological landscape, businesses that fail to embrace innovation risk falling behind. Business owners should invest in staying technologically relevant, whether through adopting new tools, automating processes, data analytics, or incorporating emerging technologies such as AI. This not only enhances operational efficiency but also positions the business to adapt quickly to industry changes and evolving customer expectations.

 4.     Diversify Supply Chains: The global supply chain disruptions of recent years highlight the importance of diversification. Business owners should assess and diversify their supply chains to mitigate the impact of potential disruptions, such as geopolitical tensions, natural disasters, or unforeseen economic downturns. Building relationships with multiple suppliers including local sourcing can enhance supply chain resilience.

 5.     Focus on Talent Management: Attracting and retaining top talent is a perennial challenge, and it becomes even more crucial in uncertain times with chronic labor shortages on the horizon for the next decade. Prioritize talent management by creating a positive workplace culture, offering competitive compensation packages, and providing opportunities for professional development. Equip your employees with the skills and knowledge needed to navigate challenges. Foster a culture of continuous learning and adaptability. Additionally, effective communication is crucial to keep your team informed and engaged.

 6.     Financial Resilience: Business owners should focus on building financial resilience by maintaining a healthy cash flow, reducing unnecessary expenses, and diversifying revenue streams. Creating a financial contingency plan that includes a buffer for economic downturns or unexpected expenses will provide a safety net during challenging periods. Consider securing lines of credit to provide a financial buffer. Make adjustments to align with the economic conditions.

 7.     Focus on your customers: During uncertain times, understanding and meeting customer needs become even more critical. Engage with your customers to gain insights into their evolving preferences and expectations. Leverage customer feedback to enhance your products or services. Building strong customer relationships can create a loyal customer base that remains committed to your products and brand.

 8.     Stay Informed About Regulatory Changes: The regulatory landscape is dynamic, and changes in regulations can significantly impact business operations. Stay informed about relevant regulatory developments in your industry and geographic region. Establishing a compliance monitoring system, maintaining a presence in trade groups, and building relationships with relevant legal professionals can help ensure that the business adapts swiftly to any regulatory changes.

 9.     Watch out for DisruptionMaintain scans across your industry and tangential developments to be aware of possible disruptive trends and companies. Most disruption occurs during periods of uncertainty when customers are eager for anything that is better, faster, cheaper.

 ____________________


We can help. At The Mead Consulting Group, we work with many clients as Strategic Business Coaches. As coaches, we can help CEOs and Business Owners prepare for uncertainty and help them to keep focused on the prize - better business outcomes.

Check out our website for descriptions of some client success stories.

 If you would like to discuss how we might help your company begin the process of adding value and moving your company to the next level of performance, please contact us for a free consultation. 

Best regards,

Dave Mead                

Thursday, November 2, 2023

Seven Gifts from people with the happiest lives

   

[Editor's note: As we enter the Thanksgiving and Holiday seasons, I thought this list that was compiled from interviews of people across all ages, ethnic groups, and circumstances was especially thought-provoking. While it is a departure from our normal content for these eLetters, I hope you find it inspiring. This came from Hugh Hewitt's Book, "The Happiest Life."  It's a quick read. We first published this list several years ago when the book first came out . - dpm]



Traits for Happiness

Seven Gifts from people with the happiest lives


Encouragement

Enthusiasm

Empathy

Energy

Good Humor

Graciousness

Gratitude


[Note: While the author listed these more or less in alphabetical order - I would head the list with "Gratitude." We are grateful for our friends and colleagues who continually inspire us!]


Best regards,

Dave Mead                

Monday, October 2, 2023

Uncertainty and 2024 - How prepared are you.....?

Uncertainty and 2024 - How prepared are you.....?


Editor's Note: Many articles have surfaced in recent months about strategic planning. Acronyms abound - RED (rapid), FAST, EASY. Some others stress the creation of assumptions, or financial-based models. While acronyms and simple approaches may sell books or make for interesting speaking engagements, the truth is there is no magic button, no easy way to predict the future. Uncertainty and pace of change have accelerated, resulting in the need for a more flexible approach to planning. 

The Mead Consulting Group has been utilizing scenario planning to help clients build flexibility into planning and execution for almost 25 years. While scenario planning was once conducted primarily with our larger clients, today, over half of our clients (owner-operated, strategic, and private-equity- backed) have discovered the benefits of scenario planning. - dpm]

How well are you prepared for what you think will happen in the future? 

 How well are you prepared for what you don't think will happen?


Imagine yourself inside your business in September 2007 or September 2019. Life is pretty good. Your business has been consistently growing with the market. The Dow Jones is at record levels, unemployment is low.

You are in the middle of developing your company's plans and budgets for 2007 or 2020. How likely is it that the assumptions in your plan accurately forecast that one year later in September. (Think the Great Recession and Covid-19). The Dow was way down and unemployment had skyrocketed.


Uncertainty, volatility and risk are here to stay. Were these one-time, isolated events? Life and planning in businesses have changed. Uncertainty, volatility and risk are here to stay. The world has been transformed from a series of loosely connected, reasonably predictable economies to a complex web of relationships where the global impact of local events is felt almost instantaneously.


The past is no longer a good predictor of the future. In response to such uncertainty, traditional strategic planning and budgeting simply no longer works. Scenario planning, which was pioneered by Royal Dutch Shell in the 1970's, was traditionally used only by large organizations such as AutoNation, British Airways, Corning, Disney, General Electric, KinderCare, Mercedes, UPS, etc.


Today, scenario planning is being widely used by many small and mid-size organizations. In the past 15 years , Mead Consulting has seen the number of middle-market and lower middle-market companies embracing scenario planning grow by more than 4X. These companies cross a broad array of industries from technology, software, education, and consumer, to manufacturing, distribution, health care, and business services. These companies are seeing a dramatic improvement in their management team's ability to adapt to changes in the environment, and to move more quickly to gain competitive advantage. In addition, business owners, boards, and investors are beginning to ask questions that can only be answered by scenario planning.


Scenario Planning is NOT the same as contingency planning.

All organizations should include contingencies in its planning - a good example is disaster recovery from power failures, natural disasters, etc. However, scenario planning looks at the dynamics of potential changes in competitive landscape, disruptive innovation, changes to buying patterns, etc.  


Traditional strategic planning alone can be based on a foundation of shifting sand. Traditional strategic planning causes us to make calculated "guesses" about the future. We make a series of assumptions about our industry and competition, as well as social, economic, political, and technological factors. Then we develop strategies based on those assumptions. Many times, it is the most senior, most dynamic, or most powerful person in the room that forces decisions about these assumptions. Black swans never seem to make it into the discussion and are seen as unlikely and their consideration is regarded as a diversion, or waste of precious management time.

Really? Since we now know how uncertain the future is, why would we ever base our future on such a faulty foundation?


Scenario planning is largely focused on answering three questions: (1) What could happen? (2) What impact would a given scenario have on our strategies, plans and budgets? (3) How should we respond to maximize our competitive position?       


Differences between traditional strategic planning and scenario planning    

 

Differences between traditional strategic planning and scenario planning

Traditional Strategic Planning

Scenario Planning

Static Plan

Dynamic possibilities

Strives to Maximize return

Strives to pursue possible opportunities

Fear of Uncertainty (Assumes away uncertainty)

Seeks gains from uncertainty

Focus is on "working the plan" and minimizing risk

Maximizes learning and flexibility;

Builds adaptability in management and culture

Typically blind to competitive threats from non-traditional sources

Anticipates sources of disruptive innovation and competition from non-traditional sources






"I can't change the direction of the wind, but I can adjust my sails to always reach my destination."  


_________


It's Planning Season

Time for your team to chart the course for 2024 and beyond.


________



The future has never been more uncertain, but your business can always be prepared with flexible approaches to planning and execution

________  


Scenario Planning does not replace strategic planning - it adds an important context. 

Scenario Planning should be the first action your senior management takes before embarking 

on a planning process. Best practices for companies on a calendar fiscal year show that scenario 

planning occurs between the months of April to July and strategic planning between the June 

to September period. However, companies that have not conducted scenario planning in recent

years - or never- can benefit by doing it any time of year. Contact us  with any questions or to 

discuss how to get started.