Mead's Issues for Growth
Thoughts from Dave Mead and discussion about issues and concerns for Small and Mid-size Businesses. Some discussion topics will include strategic planning and execution, improving profitability and cash flow, maximizing value for exit.
Saturday, February 27, 2021
Prepare your company to be bought
Thursday, February 11, 2021
Nine reasons why 2021 could be a great time to sell your lower middle market company.
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
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]
Encouragement
Enthusiasm
Empathy
Energy
Good Humor
Graciousness
Gratitude
Best wishes for a happy, healthy, and prosperous new year!
(Excerpt from "The Happiest Life" by Hugh Hewitt)
Monday, December 14, 2020
Benefits of a Strategic Business Coach (Someone who has been in your shoes)
[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 contact me ------------------------------
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
Survival is not a strategy: The most common mistakes organizations make about strategy
[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
Five possible scenarios of the economy in the future
Thursday, May 14, 2020
Ten tips for preserving the value of your company in these uncertain times
- 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