While reading the September 2019 edition of INC Magazine, I was surprised to learn that a small percentage (21%) of the companies in the 2019 INC 5000 have list succession plans, and an even smaller percentage (12%), have a plan but have not identified successors. Therefore, two-thirds of the fastest growing private companies in America are at risk of a major disastrous, disruptive event. While the INC 5000 companies have grown extraordinarily fast, in most other respects they are typical of the general private business landscape in the USA, and probably the world. I’m guessing that at least two-thirds of you don’t have a succession plan. That adds up to a lot of potential clients for me and my ActionCOACH colleagues.
Why do you need a succession plan? There are numerous reasons, some of which include:
- As mentioned in my blog Why You Should Prepare Your Business To Be Sold dated 10/23/2018, “A business that is designed and built for the owner’s exit will provide protection to the business’ team and the owner’s family. There are too many instances of businesses that failed after an owner’s disability or death. The potential for destruction of value, jobs and fortunes is reason enough for you to prepare your business for your exit.”
- A long time ago, a very wise insurance broker explained that a business owner in their forties or fifties is eight times more likely to become disabled than to pass away before retiring.
- A business that is prepared for succession and owner exit is a stronger business.
- If at some time in the future you sell your business to outside potential buyers, they will be attracted by the increased potential to retain the company’s human capital.
- If at some time in the future you sell the company to your employees, the key employees are more likely to remain. The result is a company with a much greater potential for longevity and ability to retire the financing used to purchase the business.
- For all these reasons a business that is prepared for succession and owner exit is a more profitable, valuable business.
One of the main focuses of the ActionCOACH coaching process is planning. Among the many types of plans our clients have is a succession plan and, depending upon their age, an exit plan. If you wish to protect your business should you become incapacitated or prepare your business for your exit and earn more money until you decide it is time to exit, my colleagues and I are ready to assist you.
I just finished reading a very insightful article entitled The Race To Reinvent Everything
by Tom Foster in the May 2018 edition of INC Magazine. The article is about direct-to-consumer (DTC) startups, companies that are emulating the Warby-Parker model for many other product categories. Products currently offered by more than 400 DTC startups range from bras to tampons. While the article made many interesting points about the challenges and opportunities these startups are faced with, two points resonated with me.
- Not All Products Offer the Same Opportunities – Warby-Parker has been extremely successful due to two main factors:
- They offer superior value to their customers. Warby is selling a formerly $500.00 item for less than $100.00
- This value proposition enabled their customers to own many pairs of glasses, converting a category that was a necessity into a fashion category
The article went on to compare several other products where either the value proposition is not strong enough (sofas), the category is flooded with many DTC startups (Razors), or the major players in the marketplace have the technical resources to jump into the category on a DTC basis in addition to their customary channels of distribution (Razors again). If you are considering starting a DTC company, you must carefully consider your proposed value proposition along with product costs, including sales and marketing. Further, this article is a strong primer on the DTC landscape.
- Key Performance Indicators – DTC vs. Bricks and Mortar – The article mentioned some major differences between DTC and traditional retail’s ability to collect actionable KPI’s, giving the advantage to DTC. Specifically, DTC companies can capture essential KPI’s, such as customer acquisition cost, number of leads by source or campaign, and conversion rate by source or campaign more rapidly and accurately than traditional retailers. Customer lifetime value is another very important KPI which is just as hard to predict for DTC startups as it is for traditional retailers. However, DTC companies can have statistically valid lifetime value data sooner than traditional retailers. The increased accuracy and timeliness of KPI’s allows DTC startups to finetune their model as early as possible. Traditional brick and mortar retailers are faced with the need to collect these same KPI’s. However, it can be more difficult, be less accurate and take more time for traditional retailers. The section of the article where this is presented is a good summary of Buying Customers a book by Brad Sugars, Founder and Chairman of ActionCOACH.
Whether you are starting a direct-to-consumer or traditional retailer, you should read this article to achieve a strategic advantage over other potential startups in your planned market space. The article contains lots of additional information you will need BEFORE you get too far on your startup journey. My colleagues and I at ActionCOACH can further assist you in sorting out your options and planning your success.
I took the first two weeks of August for a trip to Europe with my wife, Tammy. Tammy joined one of Berkshire Choral International’s groups which rehearsed and sang in Budapest, Hungary. While she was in rehearsals I toured Budapest and caught up on my reading, both business and pleasure. Following are comments about and links to a few of the articles that struck a chord.
- Jason Fried in the July/August 2017 issue of INC Magazine in an article headlined “Starbucks Wasn’t Built in a Day”, subtitled “Entrepreneurs are told to go big or go home. Stop obsessing over scale, and perfect the basics.” In the article Jason talks about John who wishes to open a tea shop, but often drifted to talking about his next shop, and his next shop, etc. He advises John to slow down and get the basics right before focusing on rapid growth. I have long agreed with this philosophy. While there is nothing wrong with having big long range goals, we emphasize long term planning at ActionCOACH, one needs not to get ahead of one’s self. One of the major points of the ActionCOACH 5-Way Formula is that a business must be built in balance. Before I joined ActionCOACH, I had several turn-around clients. One in particular, a consumer goods company, had great marketing and product, but couldn’t reliably deliver their products to their customers, the retail stores. Ultimately their customers abandoned them in favor of suppliers that had great product, marketed well and consistently delivered. My client had grown their business out of balance, and could not cover the basics.
- In the July 2017 issue of Golf Digest an article about confidence by Sam Weinman titled “What If Everything You’ve Been Told To Think Is Wrong?” caught my eye. Within the article are several concepts that apply equally to business as well as golf. One very important concept was highlighted by a quote from Dr. Fran Pirozzolo, a sports psychologist and mental-skills coach “Confidence is a garbage term in that it induces illusions of competence.” If in business, we confuse confidence with competence, our mind will be closed to our limitations and that will limit our ability to construct plans to overcome them. It is the difference between an “I Know” attitude which cuts off learning and an “Isn’t that interesting” attitude which encourages learning.
Another concept applicable to business revolves around Stanford psychology professor Carol Dweck’s division of our mind-sets into two categories:
– Fixed mind-set – people who seek validation of their abilities
– Growth mind-set – people who believe their skills can be cultivated through effort
The final concept that jumped off the page also came from Dr. Pirozzolo – “Don’t believe the hype.” During my career in the fashion industry, I was aware of countless fashion designers who crashed and burned because they believed the hype and were unable to adjust to changing market and business realities.
- From the September 2017 issue of Success Magazine John C. Maxwell has an article about time management “4 Tips to Set Yourself Up for a Better Tomorrow Today.” The title of the article says it all. In our TimeRICH seminar, we encourage the audience to be militant about their time. Along the militant line, Maxwell’s article contains a great quote I intend to add to the TimeRICH presentation:
“Guard well your spare moments. They are like uncut diamonds. Improve them, and they will become the brightest gems.”
Ralph Waldo Emerson
These are just a few of the ideas I gleaned during my vacation reading, I hope you will find them useful.
This post is a follow up to a Facebook, LinkedIn and Twitter post that I published a few days ago. While reading an article in the July/August 2016 edition of INC Magazine
entitled “Taming the Beast” (http://on.inc.com/28Sr8x4
) by Leigh Buchanan, I was astounded by some of the examples of well-intended silliness mentioned. In addition, I appreciated that the article didn’t simply state the challenge without offering some suggested solutions.
The first example of regulatory over-burden involved a relatively small craft winery in Brooklyn, NY. The CEO, Brian Leventhal fills out monthly reports to each and every state his company ships, or has shipped product to. The information requested on the reports vary by state, but generally includes the name and address of each purchaser of their wine. Furthermore, he must file reports to states even if he had no shipments during the previous month to customers within that state. Mr. Leventhal is quoted in the article saying “it looks like [rules governing the wine industry] exist only because someone made them up that way 80 years ago.”
The article goes on to site some statistics about the proliferation of regulations; 3,400 federal regulations in 2015, 545 with direct effect on small business, for example. In a survey about regulation conducted by Paychex, 39 percent responded that over-regulation dissuaded them from entering a new market, 36 percent from introducing a new product, and 25 percent did not start new business ventures into a new kind of business. Further, that survey found that 65 percent of the respondents reported that regulations hurt their profitability or their opportunities to grow.
Philip K. Howard, founder of Common Good, a non-profit with the mission of applying common sense toward reducing government bureaucracy is quoted as saying “America is run by dead people. The people who wrote these rules are dead, so you can’t argue with them or hold them accountable.” Regulations are like plastic bags or embarrassing social media posts: once they are out, you can’t get rid of them.
I invite you to respond to this blog with a list of the top few regulations that hurt your industry or company. You might highlight your number one target for elimination or revision. I also invite any suggestions about regulations that should remain, with or without revisions.
Finally, if me or my colleagues at ActionCOACH can assist you with overcoming your regulatory constraints, please contact us to learn what is possible to keep you ahead of your competition.
During many coaching sessions with my clients one theme that constantly reappears is how to grow a business in balance. For growing businesses, losing sight of their culture, their mission, their excellence, or their operational consistency is a constant concern. The faster the rate of growth, the greater the danger.
I recently read a great article by Leigh Buchanan in the March 2014 issue of Inc Magazine that addresses exactly this important concern (http://www.inc.com/magazine/201403/leigh-buchanan/how-to-scale-your-company.html). I am sure you will garner a few useful insights that will help you grow your business in balance.