Tuesday, November 27, 2012

Analytical Spectral Devices (ASD)sale to Spectris - a strategic buyer - is announced

Congratulations to Analytical Spectral Devices on its sale to Spectris - a strategic buyer 

Date: November 26, 2012
Location: Almelo, The Netherlands
Spectris plc (“Spectris” or the “Company”) (LSE: SXS), the productivity-enhancing instrumentation and controls company, today announced that it has signed an agreement to acquire ANALYTICAL SPECTRAL DEVICES Inc. (“ASD”), a leading manufacturer of Near-Infrared (NIR) instrumentation solutions and applications expertise for materials measurement and research, for a debt and cash-free net consideration of $14 million (approximately £8.8 million). The consideration will be met from existing cash and bank facilities and is subject to routine balance sheet adjustments. Spectris expects the acquisition to complete before the end of the year upon ASD shareholders’ approval.
In addition, a contingent consideration of up to $19 million (£11.9 million) may become payable to the sellers, based on achieving growth in sales targets for the 36-month period ending 31 December 2015.
The acquisition of ASD is in line with Spectris’ established strategy of growing and strengthening its businesses via acquisition of complementary businesses. ASD will become part of the Materials Analysis segment and will be integrated with PANalytical.
Jim Webster, Spectris’ Business Group Director, commented: “ASD’s successful NIR solutions for the Remote Sensing, Mining and other Industrial markets complement and extend PANalytical’s offering towards scientific and industrial customers and will add a new contiguous product line with portable, handheld, benchtop and online products. Furthermore, the acquisition of ASD will provide strong synergies in the combination of both companies’ technologies, customer support capabilities and distribution channels.”
ASD, based in Boulder, CO (USA), employs around 50 people. PANalytical is the world's leading supplier of instrumentation and services for X-ray diffraction (XRD) and X-ray fluorescence (XRF) spectrometry, with more than half a century of experience. The company offers analytical equipment for industrial and scientific applications as well as for the semiconductor market.

Monday, November 26, 2012

Albeo Technologies announces sale to GE Lighting - a strategic buyer

Congratulations to Jeff Bisberg and the team at Albeo Technologies - a 2010 Colorado Company to Watch.

Today, November 26, 2012,  Albeo  announced their sale to GE Lighting - a strategic buyer.

GE Lighting Acquiring Colorado-Based Fixture Company Albeo Technologies

EAST CLEVELAND, Ohio — November 26, 2012  — (NYSE:GE) — GE Lighting—inventor of many of the major lighting technologies at work today, including the first visible LED 50 years ago—has signed an agreement to acquire Boulder, Colorado-based Albeo Technologies Inc., a privately held LED fixture manufacturer established in 2004.

“The addition of Albeo Technologies’ immensely talented team and its award-winning LED fixture portfolio enhances GE Lighting’s ability to serve as a trusted advisor to enterprise customers around the world,” says Maryrose Sylvester, president and CEO, GE Lighting. “This acquisition is a big boost for GE customers moving aggressively toward an all-LED building envelope in new construction and retrofits, including retail, commercial and industrial high-bay applications.”

GE’s professional solutions business today offers commercial, industrial and municipal customers a range of legacy lighting solutions and LED systems for architectural, indoor, outdoor, signage, retail and transportation applications.

Albeo Technologies’ LED systems—high-bay, low-bay, linear, surface mount and under cabinet fixtures—are at work in commercial, warehouse, industrial, cold storage, office, data center, food processing, parking garage, school, sporting and correctional settings. Its solutions have helped to illuminate a range of “all-LED” facilities, including one of the world’s 10 largest data centers. Albeo Technologies’ products have been recognized with 16 independently judged awards, including six from the U.S. Department of Energy.

Friday, November 16, 2012

Why demographics may drive business owners to sell - Re-evaluating your transition and exit

[Editor's comment: Many business owners and CEOs have been pointing to the presidential election for some signs of positive change in the business and economic environment. It has occurred to me that perhaps these hopes may have been unfounded - regardless of the election outcome.  - DPM]

Have the markets for transitioning your business fundamentally changed? In the early 2000's there was a robust market for selling businesses.  The economy was strong, the market was flush with private equity, and the opportunities to grow businesses seemed endless. Then came the great recession of 2008 - 201_.  Has this recession been a blip? Will we be soon returning to robust economic times over the next few years? Many were very hopeful during the recent presidential election cycle. Regardless of your political leaning, there may be forces at work that neither candidate could overcome.

Demographics have a profound impact on business cycles. Twenty years ago, I attended a conference with the keynote address given by noted demographer, Harry Dent, who forecast several major economic cycles over the past several decades including the early 1980's and the current recession starting in late 2007. Dent's basic premise is that business cycles and opportunities are driven by demographic-based economics. Since 70% of the economy depends on consumer spending, he reasons, tracking consumer spending volume is a key driver. Spending habits, life decisions, etc. are driven by significant demographic changes. If you follow the bulge of baby boomers through the lifecycle, the last of the baby boomers reached age 47 in 2012 - a time in life that starts a decline in overall family spending.

See the graph below which shows peak U.S. family spending. While it shows a slight spike, coincidentally in the 2016 election year, Dent shows that the next decade will decline, bottoming in 2023.

Spending Wave Chart

Demographic spending patterns may indicate 10 more years of decline. Whether or not you believe Harry Dent's many other conclusions, it is interesting to note that in recent years economists have become focused on economic trends caused by demographic extremes. Declining birth rates and aging populations in Europe and Japan foretell long-term economic decline. Issues with a dramatic imbalance of males and females in China due to the 1-child rule (mostly male) are causing predictions of a serious aging population within the next 20-30 years, etc.  The truth is, politics and policy aside, that the next decade could continue to be one of decline in the U.S. until the spending impact of the echo baby boomer generation (2023 -2050) takes effect.

Baby Boomer Business Transition Bubble. If you are a business owner demographics also play another role. If you are a regular reader of the Dave Mead blog and this article series, you have read about the  Baby Boomer Business Transition Bubble. The number of baby-boomers who own businesses who are at (or approaching) retirement age who need to sell to provide liquidity for retirement is at an all-time high. Consider this - in 2001 the number of business owners with businesses between 5 and 500 employees that needed to sell was 50,000. That number reached 350,000 by 2006 and 750,000 by 2008-10. There were relatively few sales in 2008-2012. Today, with that four year pent up supply of sellers, the number is estimated to be between 1.2 to 1.5 million.

What does all that mean to you, as a business owner? If you have many work years ahead of you, your business is performing well, is in an industry with strong growth independent of the economy (e.g., healthcare), and revenue and profits have been growing despite the downturn, you might continue to focus on strategies that will help you continue to grow and expand. Investment bankers, however, report that companies in this situation are commanding valuation multiples at near-record levels and are in high demand. So you could take some chips of the table.

If there is limited growth in your industry, if your industry and company is dependent on robust overall economic growth, perhaps now is the time to prepare to exit. In these situations, the value of your business may not be higher in 5-10 years - it may actually deteriorate. If a business owner is in his/her fifties or sixties and the business has stabilized with good EBITDA over the past 12 months, consider preparing to exit as soon as your company can be prepared. As we have outlined in other articles, it may take 12 -30 months to prepare and execute a successful sales transaction. Properly prepared companies have historically sold faster and at higher valuations.

Knowing when to harvest your business may be your most important decision. If you would like to have a no-obligation conversation about building value in your business and evaluating the optimal path and timetable for a successful transition and/ or exit, please contact us at Mead Consulting. Our senior consultants have been involved with helping dozens of business owners maximize value as well as having the experience of previously navigating their own businesses through successful exits. 

Tuesday, November 13, 2012

Colorado success stories: Quark - Schiavone’s strategy has Quark “revolutionizing publishing again”

[Editor's note: This is another in the series of Colorado success stories - profiles of the companies of our clients and friends as told by the CEOs]

From the moment you meet Ray Schiavone, CEO of Quark, you see his energy, passion, and enthusiasm. He certainly has needed all that passion and determination over the past six years as he led the dramatic transformation of Quark into the digital age. Quark, founded in Denver in 1981 was the market leader in desktop publishing software for the print publishing industry – at one point dominating their market. Through a series of missteps, a lack of attention to innovation, some insensitivity to customers, and a failure to adapt to a rapidly disappearing print publishing industry, the company lost its luster in the early 2000’s and its market share tumbled. It was into this environment that Ray Schiavone entered when he joined Quark in 2006.

Mead: Why did you join Quark?
Schiavone: I was with General Electric for 14 years and worked my way up to the executive ranks. I was asked to run a start-up business for GE – a SaaS (Software as a Service) business for indirect purchasing. We grew the business rapidly and received an unsolicited offer to buy the company within the first 24 months. It was then that I caught the entrepreneurial ‘bug.” Next, I went to a VC-backed venture, Arbortext, where we more than doubled the revenue in 4 years. I joined Quark because I saw an opportunity to leverage Quark’s technology amid the shift to digital and other forms of print. It was a well-known brand with great technology but no clarity of vision or strategy of where to take it.

Mead: What was your initial focus?
Schiavone:  We needed to create a culture of innovation; the company needed to be re-invented. Many of the senior managers had been with the company for a number of years and thought that since Quark had previously owned the market that we should double-down with products in the print publishing industry. I knew that in order to be successful we needed to shift our strategy to digital.  As Wayne Gretzky said, we needed to skate to where the puck was going, not to where it had been. To accomplish this, I needed to be certain that everyone was on board with our strategy and direction.  It took some time to overcome resistance to change, eliminate the “not invented here” syndrome, and to get the team aligned. Quark had revolutionized print publishing with its desktop software. It became our mantra to revolutionize publishing again – in digital media.

Mead: What have been the biggest challenges?
Schiavone: Changing an entrenched culture to a culture of innovation and trying to find ways to invest during the most challenging economic downturn since the depression.  We spent 2007 promoting the new strategy and launched it in 2008. Then, in late 2008, the downturn hit and in 2009-10 we restructured and invested in the new direction (reallocated investment to our digital strategy). The transition was especially difficult, because, while we were investing in digital, the print side of the business was declining rapidly. The down market forced us to diversify our product line and client base and it probably accelerated the shift by five to ten years.

Mead: What is your strategy for differentiation?
Schiavone:  It is Quark’s intent to be the leader in digital publishing. We have created an end-to-end solution for enterprise publishing, meaning that we address the content lifecycle from creation to delivering the output to mobile phones and the iPad. What that means, in one example, is that an enterprise customer can integrate print and digital workflow and automatically push the print-ready content to the iPad, phone, and Web with the push of a single button. We partner with the technology providers that are at the heart of most enterprise infrastructure, such as Microsoft and IBM. We offer the tools that are helping designers to be a part of digital publishing.

Mead: Did the transition also involve some acquisitions?
Schiavone: In 2008, we acquired In.Vision, which had XML authoring software which helped Microsoft Word users create reusable XML content for our digital publishing solution. In 2011, Quark itself was acquired by Platinum Equity, which provided us the capital to grow. Then in May 2012, we bought Mobile IQ, creator of PressRun™, a cloud-based publishing solution for delivery and interactive experiences across tablet and mobile channels. Both of these acquisitions provided Quark with some of the new tools, technologies, and competencies necessary to execute on our strategy.

Mead: Describe Quark’s culture today.
Schiavone: It’s one of innovation. The team is empowered to take a chance, they can change things. We are open to taking risks. We’ve failed a few times, but we keep focused on innovating to solve customer problems.  This is driving our growth today. .
Mead: What are the challenges to current growth?
Schiavone: We feel like we’ve got the best solution in the market today.  Our challenge is to get the word out. 
Mead:  Ray, what lies ahead for Quark?
Schiavone: We’ve made great progress and have built a great team. We grew enterprise revenue 30% in the past year and we anticipate growing another 30% in 2013. We will continue to innovate in our markets, and expand functionality to become the comprehensive solution in financial services, government, and high tech manufacturing. It is our ongoing objective to help them continue to transform customer communications, develop new revenue streams, and reduce their costs by automating the delivery of customized, intelligent communications across print, the Web, and digital media.

Thursday, November 1, 2012

When did it become OK to just be OK?........OR.......... Have we just re-defined success to lower levels?

When did it become OK to just be OK?
          Have we just re-defined success to lower levels?
  • Flat is the new up
  • We’ve maintained our position
  • We’re up from last year” (but up is still well below 2008 )
  • We’re holding our own
  • We’re doing well…considering the economy”
Or do we just ignore problems and congratulate each other for mediocre performance. The predominant use of the word “awesome” to describe any activity is but one example.
Someone who can’t get even the basics right for an event is congratulated on an awesome job...Someone who barely maintains an organization’s or municipality’s status is saluted for an awesome term…Someone who avoids risk and therefore doesn’t make a mistake is saluted.

Is this the outcome of the “everyone gets a ribbon” generation? ….or “grade inflation?”…or just lowered expectations? Or just the impact of an economic beatdown?

Has the economic downturn made it OK to just be OK? Have we lost our MOJO?

Tuesday, October 30, 2012

Failure to launch: 7 reasons business strategies don't succeed

Superior execution is one of the strengths of the Colorado success stories we have been profiling over the past few months. Yet, these companies are the exceptions, as almost 65% of all strategies fail to reach expectations. Why do so many business strategies fail? Barriers to successful planning and execution develop in all companies over time. In fact, some of the very things that help a company succeed at early levels can prevent them from succeeding at the next level. The key is to address these challenges so that the path to execution is uncluttered. Below are seven reasons company strategies fail to deliver desired results.

1. No clear definition of success
Fuzzy goals lead to fuzzy outcomes. While it seems obvious, many organizations simply don’t articulate the specific goal of a business strategy. If the goal of your customer intimacy strategy is to form deeper customer relationships, that’s fuzzy. If the goal is to increase customer retention by 10 percent and increase annual revenue per customer by $10,000 and net profit by $1,000, that’s clear. Here, forming deeper customer relationships is simply the mechanism to achieve the goal.

2. Too many goals
When everything is a priority, nothing gets accomplished. Many so-called strategic plans have too many goals, objectives, success drivers, strategies, initiatives and so on. Worse, it’s not clear how these various appendages are linked. Is it any surprise these plans sit on shelves and collect dust? Choose to do fewer things, but do them much better.

3. Metrics and Alignment - Either no metrics or vague metrics
Many plans are simply a brainstormed list of things to get done by unspecified people at indeterminate times. A plan with specifics outlines who will do what by when. It takes into account the sequencing and timing of tasks, activities and resources. Make certain that the goals of everyone in the organization are aligned to the few key objectives.

4. Visibility - Progress isn’t measured and managed
Ever notice how plans placed in the spotlight flourish while those left in the dark shrivel? Any plan worth executing is worth tracking. A monthly meeting with a tight agenda can quickly determine what actions have been taken; what progress has been made; what will be accomplished over the next month and by whom, and what, if any, challenges have emerged. This builds commitment, accountability and confidence in the process.

5. You lack the right people
Some of those nice people who work for you may not be the right people to get the job done. That statement makes you uncomfortable, doesn’t it? Many have been loyal, are committed to the culture, and may be friends and family. However, if you are truly committed to winning, or achieving success - however you define it - then at some point you have to take a long, hard, honest look at the capabilities of your people. Point them in the right direction, support them, develop them - give them a fair chance to succeed. But if they can’t get it done, then your responsibility is to get people who can.

6. Flexibility - Failure to update the plan to stay real
Reserve the right to do what makes sense. Plans are based on assumptions that can change over time. If they do change, then the plan may need to change. A “recalibration” meeting every 8 to 12 weeks is a good forum to test your assumptions and determine which, if any, have changed. The meeting may result in either a revalidation or redesign of the plan. It ensures the plan stays real and relevant.

7. Reaction to Failure - Failure is met with indifference or an inquisition
Is your team serious about its definition of success? Your response to failure sends a clear message about your commitment to winning. Just as importantly, it sends a message about your credibility. Do you ignore a failed initiative and move on to the next big thing (which conveys that you really weren’t that committed and you shouldn’t be taken seriously)? Do you look for scapegoats (which communicates that you don’t take personal responsibility and can’t be trusted)? Or do you first look in the mirror, take responsibility, then publicly commit to getting it right, and effectively engage your people to make it happen? Your choice speaks volumes about who you are as a leader.

Tuesday, October 16, 2012

Colorado success stories: Mesa Labs -- Success in small niche markets

Colorado success stories: Mesa Labs
Company finds success in small niche markets

By David P. Mead

Editor's note: This is another in the 2012 series of Colorado company success stories as told by CEOs and business owners.
Mesa Laboratories www.mesalabs.com is a public company that designs, manufactures and sells electronic instrumentation and disposable products for quality control applications in healthcare, industrial, pharmaceutical, and food processing markets. The company is headquartered in Lakewood Colorado and was established in 1982, founded by Luke Schmieder, who is company Chairman. John Sullivan, CEO, joined the company in 2004 and has spearheaded the company’s growth strategy.

Despite operating in highly competitive markets with larger companies, Mesa has found a way to thrive through highly selective acquisitions and organic growth. Mesa is an extremely profitable company with 60-65% gross margins, 30-35% Operating income and approximately 20%net income.  Revenue growth rate (CAGR) has been 20% over the past 6 years. The company has grown from about 45 to over 200 employees during this time.

Mead: How do you compete?
John Sullivan: We look for small markets and niches where we can enjoy a strong market position and good growth but have limited competition because of a relatively small market size. We have four major product areas: DataTrace Data Loggers (for tracking temperature mainly), Medical Meters (for dialysis QC), Biological Indicators (for sterilization QC), and Bios Flow Meters (for gas flow QC).

Mead: What have been your biggest challenges?
Sullivan: When I joined in 2004, the company, while very profitable, had seen little growth in recent years. We had to adjust the culture to become more growth –oriented. We improved our distribution, moved from manufacturer reps to a direct sales model, invested in new product development, and added some new talent. We also improved our marketing and invested in our website and electronic lead generation.
The other big challenge was to find the right acquisitions. We have made five acquisitions in the last six years. About half of our growth over the past five years has come from acquisitions. We only acquire companies that can be accretive to our earnings per share in the first year. That means only looking at companies where we can achieve 25% or more in operating income. We also look for companies that have a leading or dominant position in a small niche market.

Mead: Your approach to M&A is easier said than done? Is that like looking for the needle in the haystack?
Sullivan: I spend a considerable amount of my time looking for acquisition candidates, screening companies that we identify through trade shows and company lists. We then contact the company to see if they are interested in selling. Since many business owners are approaching retirement, many of them are open to the discussion. We also look at small product lines within large companies that may not be large enough to warrant their attention. We are patient when it comes to acquisitions, believing that it is far more important to make the right acquisition that fits rather than being more impulsive.

Mead: Has the path always been smooth?
Sullivan: Remarkably it has been fairly smooth – other than in the 2009-10 recession. Some of our products, such as the data loggers (DataTrace) range from $20K to $100K so they are capital expenditures. Our customers, feeling the economic pinch, cut back on CapEx and the DataTrace line was impacted. However, the Biological Indicators product line was fine and continued to grow right through the recession.  Overall our company revenue was flat over six quarters, and we had to take some action to reduce expenses, but overall, Mesa weathered the recession relatively well.

Mead: Mesa has been a public company since 1984. What are the challenges being a small public company?
Sullivan: First, we have to be cognizant of EPS (earnings per share) growth and adjust our strategy to meet that growth expectation. Sometimes that may cause us to focus a little more short-term. It’s also expensive. Now that our market cap is at around $160 Million, we are subject to a SOX (Sarbanes-Oxley) audit and we have had to invest quite a lot in recent years to ensure SOX compliance. But there are also positives in that being public provides stock options for employees and stock can be used for acquisitions.

Mead:  How do global factors influence your growth?
Sullivan: Increasing regulation in the U.S. and the world is a positive for Mesa’s products, since our products are focused on quality control applications in regulated markets. Since between 35-40% of our sales are outside the U.S., the health of the global economy is also a continuous concern.
Mead: What are the keys to your growth over the next few years?
Sullivan: We need to continue to focus on our organic and acquisition growth strategies. On the organic side, that means to continue to focus on growing markets, improving distribution through growing the direct sales force and the distributor base, and focusing on electronic marketing. We also need to continue to invest in R&D. Our acquisition growth strategy has to continue to be selective, investing in companies in niche, growing, regulation-driven markets like healthcare with high tech, high value, high margin products.
Additionally, we need to be certain that we position Mesa to be successful at a greater size. That means having the right people, policies, and infrastructure in place to support our growth.

Friday, September 28, 2012

Colorado success stories: Vforge --Innovative manufacturing process spurs consistent growth

Colorado success stories: Vforge
Innovative manufacturing process spurs consistent growth

By David P. Mead

Editor's note: This is another in the 2012 series of Colorado company success stories as told by CEOs and business owners. Vforge was recognized as a 2012 Colorado Company to Watch.

Tucked just off 6th Avenue and Sheridan in Lakewood is an innovative company in the aluminum semi-solid manufacturing business. Vforge uses a process that enables the manufacture of high precision aluminum parts for a variety of industries. While their products may not be widely known since they are components in other companies’ products, you may have seen their components on popular motorcycles, snowmobiles, wheelchairs, and robotic arms for surgery. Vforge capabilities are in high demand and the company has been growing at 15% per year, year after year, with only low-key sales or marketing efforts.

I met recently with Ken Young (CEO) and Jon Young (VP and General Manager), the father and son who own and manage Vforge which has grown to 110 employees.

Mead: What is Viscous Forged Semi Solid Manufacturing (SSM)?
Ken Young: Typically, aluminum parts require significant amounts of machining. Aluminum is forged into billets which then are machined into the end shapes. Semi Solid Manufacturing (SSM) makes parts that are near to the final desired form without machining – resulting in dramatically improved shapes with high precision, high performance, but at lower manufacturing cost.

Mead: How was this process developed?
Ken Young: I worked, along with several others, on the development of the technology at MIT in the 1970’s. MIT owned the patents until the 1990’s and everyone was precluded from entry other than the large companies (mostly in automotive) that had licensed the technology.

When the patents expired we wanted to broaden the applications. We learned how to take existing manufacturing equipment and modify it to run the SSM process and decided in the mid-1990’s to locate in Colorado. We had lived in Colorado in the late 1980’s and so it was an easy choice to start the company here – it was a decision based on life style.  We are fortunate that Chris Rice, our VP Engineering and Technology and also an MIT alum, shares our love of Colorado and joined Vforge shortly after we opened.

Mead: How do you compete?
Jon Young: We have the equipment and process know-how that makes SSM viable. SSM makes designs possible that would be impossible or cost prohibitive by other manufacturing processes. Many product designers and engineers are unaware of the capabilities of SSM. So we work to captivate engineers and designers to imagine new ideas and how to use the technology. While the process works well with large volume components, it also makes sense even at some low volumes. Once an engineering or design group has worked with us, they understand the unique capabilities of the technology and continue to design components that require SSM.

Mead: Has the growth always been smooth?
Ken Young: There were two big bumps in the road. We were doing huge business with a mountain bike manufacturer that went through bankruptcy in 2003, sticking us with over $700,000 in receivables. In one day we went from 48 employees to 17. Our bankers at Citywide Bank were extremely helpful in working with us to restructure so that we could survive.  Then, during the 2008-9 downturn, we were dependent on raw materials exclusively from Europe. When the exchange rate for the Euro went from $0.90 to $1.40, our costs went through the roof at a time when we also had just lost approximately 20% of our revenue. We launched our own raw material production – again with the help from our bankers.  Today we are much more in control of our own destiny.

Mead: How would you describe your culture?
Ken Young: We are a very customer-responsive supplier, very agile. It’s a family-style organization with a commitment to promote from within and develop our team.
Mead: What are the factors influencing your growth?
Jon Young: Most companies grow by succeeding in marketing and sales. We’re very fortunate to be growing with minimal sales effort.  Our issue however is meeting our blue-chip client’s expectations to deliver Six Sigma excellence with today’s production staff.  We have an ongoing problem maintaining a workforce interested in working in manufacturing as a career. Most of our jobs do not require specialty skills or training, but our wages and benefits are considerably better than industry average.  Developing staff remains a continuing challenge – even at today’s unemployment rates.

Other challenges are in managing the growth. This is a capital-intensive business with each SSM workstation costing $1 -1.5 Million. So we want to be cautious about how we grow.

We also need to continue to develop a middle management group so that Ken and I can transition out of the day-to-day management of operations. This is an ongoing issue as Colorado is not a center of metal manufacturing and finding the emerging middle managers has been a challenge. We are developing these managers internally and are always looking from a young engineer or person with technical background with a good work ethic who wants to develop a manufacturing career.

Mead: Comment on the climate for business in Colorado. Would you build your business here again?
Ken Young: We love Colorado – the climate, the outdoors, the mountains. Jon just completed the Triple Bypass Bike race last weekend. Even with all of the trials and tribulations, we’re glad we’re here.  We would like to see if there are some incremental resources that might help us with some of our staffing issues. Since Colorado is not yet known as a metalworking state, it is a daily challenge! 

Tuesday, September 11, 2012

Colorado success stories: SKYDEX

Company succeeds by ‘protecting the American soldier’

By David P. Mead
Editor's note: This is the first of the 2012 series of Colorado company success stories as told by CEOs and business owners.
From the moment you meet Mike Buchen it is clear that he passionate about the safety and well-being of the American soldier. Virtually every paragraph is punctuated with references to the mission at SKYDEX and the accomplishments of its team of employees in meeting that mission.

SKYDEX Technologies, Inc., manufactures patented geometrically designed products that mitigate (absorb) shock, concussive forces, and vibration for military and commercial applications. Products include blast-mitigating flooring for combat vehicles, padding for military helmets and shock absorbing decking on high speed interceptor boats.  Mike Buchen has been President and CEO since 2003. SKYDEX, based in Centennial, has grown the company ever since, doubling revenue each year for the last three years. The company ranks among the top 40 largest private companies in Colorado according to a recent list. Mike was recently recognized in Ernst & Young’s 2012 Entrepreneur of the Year program.

Mead: What is SKYDEX’ differentiation in the market?
Buchen: It’s our people. Our competitive advantage is our passionate, committed people. One of the early requirements at SKYDEX is for the newly hired person to accompany me to Washington, D.C. They stand by the Lincoln Memorial, visit the other memorials. We then travel to Arlington National Cemetery and go to Section 60. This is where the boys and girls come home. We see the names, ranks, and the dates killed. My message is clear: ‘The better you do what you do, may enable the next person to live. Let’s go save some lives.’ This is our ‘fuel’. My job is to be sure we are pointed in the right direction, that the engine runs well, and has the fuel.

Our mission is to serve those that put themselves in harm’s way. We protect things that matter. We have done well because the more that things matter, the more people are willing to pay.

Mead: Were there any bumps in the road?
Buchen: Not only bumps, but huge potholes. In January 2004, sales were at $0. By the end of 2004, we had to empty our IRA’s/401k’s in order to make payroll.  A number of our vendors helped us and hung with us so we were able to make it through. We learned from failure, as we looked for product opportunities. We looked at everything – from computer bags to football and lacrosse helmets to padding for athletic shorts. It may sound corny, but I have been confident about our success from the very start. I believe that good things are meant to happen to this company. In order to capture the opportunity, you need to use your gifts and work hard. We have lives to save.

Mead: What was the biggest ‘Aha moment’?
Buchen: We started listening to our clients, the combat troops. We were initially focused on the wrong products and markets. As I have said, we were focused on inches, instead of acres.” We learned that the military had a serious problem equipping the troops and gained some early success. Then we started listening to them, as they told us about their problems. We observed them stuffing paper into their helmets as padding. We gave away 45,000 helmet pad sets. Through sampling (technical evaluation) and the feedback, we learned that they were horribly underserved. We started looking for areas of the warrior’s body that were exposed to impact.

Mead: So it was market research and technical evaluation that led to successful products? 
Buchen: Yes, we kept improving the products based on soldier feedback. We’ve fielded over 800,000 helmet pads to date.

Mead: So what new products are coming out?
Buchen:  We will be introducing a SKYDEX shoe – a military PT shoe. People in uniform  tend to run a lot more than civilians. We have engineered it so that we can sell it for about a $60 price point.
We are also expanding into commercial products and markets. We are experts with cushioning technology. Peter Foley, Chief Technology Officer, previously worked with Reebok in Advanced Materials so we have a number of “crossover ideas” such as a boot crossover, forklift seats that absorb vibration, etc. Lighter and faster sells today. We think we have some great opportunities in commercial markets.

Mead: What are the keys to growth over the next five years?
Buchen: I would classify the keys in five areas:
First, we need to look at acquisition of compatible or competing technologies; second, we have opportunities to expand internationally; third, we will be continuing to look at ways to expand into commercial products and markets; fourth, we need to be continually looking for new ways to do business with the government; and fifth, we have to continue to excel at segmenting the market and above all, executing well.

Mead: Mike, when you were named Entrepreneur of the Year, you brought the entire team to the stage to accept the award.
Buchen: I have been blessed to be part of a phenomenal team at SKYDEX. Between them and my wife of 37 years, it’s their award.

Wednesday, August 22, 2012

Preparing to maximize value - More companies point to 2013 -14 as the time to for exit.

[Recent updates to business owner studies indicate that approximately 1.2 -1.5 Million U.S. business owners with businesses between $2M and $100M in revenue need to sell in the next 3 years to provide liquidity for retirement]
Companies have stabilized. Many companies that implemented cost containment or performance improvement measures during the downturn are now reporting higher EBITDA - some on lower revenue. Some companies have seen demand for their products and services rebound; others have found new markets. Some markets, like healthcare, have continued to be robust.

Many believe that there will be a rush to the market in 2013-14 due to the following dynamics:
  • Business results have rebounded  
  • Business owners that wanted to sell during 2008-12 now feel a sense of fatigue
  • Business owners will be five years older by 2013 than they were in 2008
  • After the 2012 presidential election, there may well be a period of disillusionment as business owners recognize that the president alone (regardless of party) cannot fix the economy
  • Business owners may fear that taxes will continue to rise and the dollar will continue to weaken
  • M&A professionals and experienced business owners know that valuation multiples are higher earlier in a sales boom than later in the cycle

Mead Consulting cut its teeth helping companies grow and add value. Growth is still our primary focus. However, as our client business owners "matured" we began to help them prepare to maximize value when transitioning or exiting the business. MCG senior consultants have helped dozens and dozens of companies successfully prepare and navigate through the sales process - both in operating roles as business owners and C-level executives inside their own companies as well as advising MCG client companies. Today, Mead Consulting helps many companies "get ready."

We have seen a dramatic increase in the numbers of companies that are preparing to sell in 2013-14.  These are some of the companies Mead Consulting is currently working with to improve readiness and maximize value:
  • Healthcare services
  • Healthcare IT
  • Building materials
  • Metals service centers
  • Manufacturing
  • Technology-enabled  services
  • Software
  • IT services /outsourcing
  • Business services
 Should you be evaluating your options? Contact us and we can help you assess your current situation and readinessFor more information, see our website www.meadconsultinggroup.com 

Tuesday, July 24, 2012

Ten Deadly Sins of CEOs and Business Owners

Editor's Note: Being the CEO or business owner can be a lonely job. It is important to get good feedback so that you can keep a balanced perspective. Below are just ten of the deadly sins that can be committed by the guy or gal at the top. I have been CEO or owner of eight companies - and I know it's not always easy to see yourself clearly. This is a reprint of a previous Issue for Growth,  Volume 15, Number 12. I think it still holds true.As always, we welcome your comments.   - DPM

Ten Deadly Sins of CEOs and Business Owners¹
Talking Too MuchYou never learn by talking, but some CEOs imagine the world to be in desperate need of their constant wisdom. It is a rare subordinate who will risk stifling a CEO. Be inquisitive, ask questions, and listen at least 75% of the time.
Goals Are Too Aggressive. It is wonderful to have a BHOG (Big Hairy Audacious Goal) or vision. It's another to develop overly aggressive goals on a routine basis. Unrealistic goals "demotivate," especially when compensation is involved. One CEO expected his company to continue its 30 percent annual growth rate, not appreciating that with a larger base and a rapidly maturing market their era of high growth in that market had to end. The result discouraged managers.
Personal Power Building is More Important than Value Building. Some CEOs tend to make decisions that enhance their scope and influence, even at the expense of increasing shareholder value. This can be paradoxically true even when the CEO is a large shareholder or the business owner. Dr Robert Kuhn puts it this way: "I want a CEO whose greed exceeds his ego. Good CEOs and business owners should be motivated more by amassing wealth for their shareholders rather than by building empires for themselves."
Not Respecting or Recognizing the Ideas of OthersCEOs and business owners can be egotistical. Highly successful almost by definition, many CEOs would seem to have every right to be self-impressed. However, when you hold the top spot, puffing yourself up at the expense of subordinates impedes the organization. You benefit when your people are encouraged and empowered to generate novel ideas. Recognition of these good ideas breeds more ideas.
Not Focusing on Accountability and Execution. Some CEOs and business owners love new ideas, programs, and initiatives. They introduce change for the sake of change. One company we looked at recently had seventeen (17) major strategies for an upcoming year. Focusing on a executing well on a few carefully selected strategies, developing clear objectives, and holding managers accountable, can be the difference to success.
Managing by Summaries.  A CEO should perceive the world as it truly is; if cluttered and chaotic, so be it. When information is always "high level," predigested by staffers, a CEO may perceive an artificial world, a virtual reality as it were, of cleanly manicured lawns. Most CEOs have great instincts about their businesses, and such instincts should be nourished by raw data, like, for example, call reports of customers.
Don't Fall in Love. When you sit in the corner office, follow your head not your heart. Every business must have a strategic or financial purpose, and if a business happens to make you feel good that's fine as long as your emotional attachment doesn't interfere with your rational decision-making. CEOs are notoriously vulnerable when making acquisitions.
Feeling Invincible.  CEOs must have superb track records-some are almost unblemished -so they have a proclivity to imagine themselves as invulnerable. The natural corollary is a robust confidence, even if subconscious, that past success assures future success. I can't tell you how many dozens of CEOs I've seen who refused to sell their companies at what would turn out to be, in hindsight, their peak market values, simply because they were convinced that tomorrow's prospects would mimic yesterday's triumphs. Looking backward and looking forward, a humble, healthy respect for the subtleties of serendipity is the beginning of wisdom.
Halo Hiring. In some organizations, many of the senior executives look like the CEO. I mean this quite literally and it can be very funny. Not just obvious characteristics like gender and race, but also personal traits like size and stature, political philosophy, sporting interests, demeanor, even style of dress. In a globalized world where customers and suppliers may be very different kinds of people, it is not wise for the executives of a company to be homogenous, and hence, uniform in their thinking.
Beware of Averages.  Averages can deceive. For example, assume that, in a pharmaceutical company, prices are declining for one-half of the drugs and increasing for the other half; the fact that the average price of all drugs has remained steady is worse than meaningless information. Strategies for drugs that kept prices steady might not work at all with those whose prices were decreasing or increasing. The same is true for net profitability on an individual customer basis. Averages hide meaningful information. The information extremes or "skew" is your friend.

¹ Excerpted from 12 CEO Diseases and How to Treat Them, Dr. Robert Lawrence Kuhn, CEO Magazine, October/November 2006.