The Building Business Value newsletter has one purpose⎯to assist midmarket business leaders in their never-ending quest to build better companies. Whether you are the CEO of your own company, a senior manager of a business unit, or a leader in a company that serves those in the mid market, you will find something in each newsletter to help you serve your stakeholders. Each month we will cover a variety of topics, all focused on leading in the mid market.
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Five Mistakes to Avoid Making If You Want to Build Superpremium Value
Five Crazy Things CEOs Do
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Most companies sell at subpar or par value, meaning that their ultimate price tag is somewhere between three to five times EBITDA (earnings before interest, taxes, depreciation, and amortization). Poorly run companies sell for a smaller multiple, while companies that are run about as well as their average competitors might go for four or five times their net earnings. But just as superpremium ice creams command a higher price in the marketplace, some companies sell for a super premium of nine to ten times EBITDA. It's like the difference between generic ice cream and Häagen-Dazs.
So the questions are these: Why do some companies command that super premium price while others don't? And if you are a C-level executive of a $10 million to $100 million enterprise, what do you need to be doing right now to prepare your business for an exit at a super premium price?
And just as important, what do you need to stop doing?
Here are five mistakes businesses make that practically ensure sub-par valuations when the founders or the C-level executives are ready to exit. Keep in mind, building business value should be top-of-mind for every leadership team and is not just associated with an exit strategy. So, since building value is your number one priority, how many of these issues apply to your business?
1. Your strategy is a secret.
You've got a new mission and direction as a result of your most recent offsite meeting. Great! But how are you going to get the word out to your 120 employees? Are you getting posters designed to illustrate your new mission, vision or purpose? Are you stuffing paycheck envelopes with a document that lists the five new goals of the organization? Most mid-market companies don't communicate these ideas very well. If a vision exists, the CEO fails to share it with others. Or if she does try to get the word out, she does so using what the Reverend Bill Hybels of Willow Creek Community Church of Chicago calls the "Mt. Sinai approach." Moses came down from Mt. Sinai with the two tablets denoting the Ten Commandments and while that top-down approach might have worked for Moses, it doesn't work in today's business climate. Keeping the strategy a secret is a recipe for trouble.
2. Your business plans are ego driven.
Normally, a leader's greatest attribute is unbridled optimism. As retired General Colin Powell says, "Perpetual optimism is a force multiplier." You would rather have Colin Powell lead you into battle than Eeyore, but you also need to deal in reality. The unbridled optimism that turned a business dreamer into a business leader has a downside. It can keep executives from confronting the hard facts about their organizations. Sometimes leaders sweep so much bad news under the rug that they can hardly see their own desks. Optimism is terrific, as long as it is tempered by an ability to deal in reality - a trait not all leaders have.
3. You've got the "I'd like to thank the Academy" syndrome.
It's great when companies get awards, everybody feels good. The problem is that the red carpet high can become an addiction for a CEO. When business leaders get awards like "Entrepreneur of the Year" or "Top 40 Executives Under 40" or an invitation to the Young Presidents Organization or similar groups, they have an unfortunate tendency to believe that they single-handedly accomplished all of their company's success. This is a sure way to alienate the team. One suffocating ego is all it takes to destroy an otherwise successful business.
4. You've fallen into the success trap.
In business today, conditions change so rapidly that what worked yesterday won't necessarily work today. But tell that to an executive who is so enamored of his own past performance that he can't see how the world has changed. For example, fifteen years ago, technical service companies could make handsome earnings by augmenting staffs and building custom business applications for clients. Today, however, those firms make a third of what they once did on the same deals. Serving your customers and staff, however, never goes out of style.
5. You've got the "fat and happy" syndrome.
A CEO who develops a reputation as a turnaround specialist is likely to be wooed by other struggling companies to accomplish the same magic for them. This often leads to the CEO "putting the band back together" - going out and rehiring the team that made the first turnaround so successful. The problem is that a lot of those executives may well be fat and happy by now they made their money on the first deal and no longer have the fire, the energy, or the desire to work those sixty-hour weeks all over again. Putting the band back together might work for the Eagles. But in the business world, people often end up singing an unhappy tune.
I'll have five more mistakes to avoid in next month's newsletter.
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| Optimizing the Value of Your Off-Site Meeting: Five Tips That Can Help Getting a postive return on your executive offsite
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 Why don't all business owners and C-level executives focus on value creation as job one? In my experience working both as a C-level executive and as a consultant who has worked with a number of mid market companies, the answer is obvious: it's hard to think about the future when you've got so much to worry about today. Most leaders function in an atmosphere of juggling crises. They step off a flight to 116 new e-mails and have to devote their most precious resource − their time⎯to figuring out what needs to be handled immediately, what can wait for a few hours, and what can wait until tomorrow. In today's hyperfrenetic business climate, it's all but impossible for leaders to indulge themselves in the ultimate luxury⎯uninterrupted time devoted to thinking about and planning for the future.
The typical solution for harried C-level executives is an off-site meeting, but such meetings typically devolve into extended bull sessions in which people utter a lot of high-minded, well-intentioned platitudes about the future but rarely figure out how to translate those impressive sentiments into action items. You know the feeling, that "off-site euphoria" you experience as you wrap up the meeting with optimism and energy. But that feeling is soon replaced by the harsh reality of the daily grind as the wave of missed deadlines, extended due dates, and lack of follow-through on the meeting's action items becomes apparent. The good news is that everybody gets in a few days of golf, but then it's back to the office, with nothing changed.
So how can you change that?
How can you keep from leaving an off-site meeting with a feeling that you can conquer the world, only to be brought back to reality a few months later by missed deadlines, unkept promises, and a leadership team that has already forgotten what was agreed to during the off-site?
Try these five tips to keep that offsite momentum moving.
1. Make sure your stated goals for the off-site meeting are clear.
Get the leadership team involved in early planning and have them prepare for the offsite meeting agenda prior to their arrival. Preparation is the leading indicator for success. An old adage about speeches goes like this: there are only three kinds of speeches - one you plan to give, the one you give, and the one you wish you gave. Like speeches, preparation for off-site meetings will ensure meeting your objectives and motivate your leadership team to take action.
2. Develop a full script for the offsite meeting.
Just as you would if you were writing a screenplay, orchestrate the offsite meeting with your objectives in mind. If you plan to add a team-building element, consider the appropriate time. If you've developed exercises to tackle an organizational need, develop a flow that will lead to positive outcomes and outputs. If you think you can "just wing" the facilitation of the meeting, you might just as well stay on the golf course.
3. Write everything down.
Adopt the mantra, "if it's not written down, it never happened." I can't tell you the number of times that I've asked for offsite meeting documentation, and a company can't show me. Meeting documentation will give you a transcript of your decision making process and most importantly keep the organization accountable for commitments made during the meeting.
4. Establish clear communications on action items.
Build in time to follow up on the creation of action items or initiatives that have substance. Assign a team to each initiative and be clear on who the leader is and how and when the team will have to report progress. Make sure each initiative team knows how each initiative will add business value to the company.
5. Include initiative updates as part of your operations.
Far too many companies do not have a "culture of execution" and allow great ideas to fall through the cracks. Integrate the initiative updates into your normal operations meetings and hold leaders accountable for the results. No excuses.
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As a business operator, I have been in a position to lead a company during troubled times. Concerns over the direction of the company, sleepless nights worrying about debt and cash flow, high anxiety over closing a deal or a transaction⎯the challenges seem endless. But I've also experienced the highs of leadership⎯the real joy of meeting client needs, the fulfillment of shaping a team, and the satisfaction of watching your vision become reality. As tough as it can be, there is really nothing quite like being a leader in the mid market.
It is my sincere desire that this newsletter will support leaders in the mid market as they navigate their way to building stronger, more valuable companies. I welcome your comments.
Sincerely,
Marty
Martin F. O'Neill
Corsum Consulting, LLC |
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Quick Link to Corsum
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Marty O'Neill
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Marty O'Neill founded Corsum Consulting, which focuses on one goal: helping companies build business value. He is a frequent speaker and consultant on leadership, corporate culture and building business value and is the author of Building Business Value (Third Bridge Press) and the co-author of Act Like an Owner (Wiley). As a business operator, Marty started and sold a company, positioned another for an LBO, and helped a third sell for a significant premium. Marty lives on the Magothy River in Maryland with his wife and three children.
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Act Like an Owner Owner: Building an Ownership Culture
by Martin O'Neill by Wiley
Hardcover
List Price:
$39.95
Our Price:
$24.53
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