Profitability
Innovation
How Successful Companies Make the Hard DecisionStrategic Plans provide the road map to the future.Every successful business owner I have ever met has the long-term goal of maximizing the value in their business and figuring out how to monetize that value one day. Seems simple enough. Put your head down, work hard, and everything will work out. Oh, if it were only that easy! Working hard alone does not ensure that you will have success. Working smart and working on the right things vs. doing things right – these are the attributes of success. Owning a privately held business is one of the riskiest investments people ever make yet they fail to adequately Plan for success. Developing a Strategic Plan is the road map to help guide you to work on the right things. In essence, it’s your ensurance on your future. We recently worked with a family business client who owns a financial services company. The company was relatively successful, but the owner was trapped in his business. All his net worth was basically tied up in his illiquid business. There were no apparent successors who had enough money to buy the company, and since he owned most of the client relationships, there wasn’t much to the business without him, keeping him locked in his business even if a 3rd party purchased his business. When we first met, he shared his goal of developing a robust team that would one day buy his business. With that as our guidepost, we set off to develop a Strategic Plan with his team. Preparing for Strategic Planning is critical to achieving the results that will move your company forward. We spent about 45 days with the team developing various analysis including SWOT (strengths, weaknesses, opportunities, and threats), PESTEL (political, environmental, social, technological, economic, legal), Competitor, Customer, Employee, and Financial Review. This pre-work helps loosen the rust in people’s thinking, and through analysis, strategic insights begin to appear. It is these insights (where the proverbial ‘light bulb’ goes off) that lead to developing a Strategic Plan that is relevant to the company, its markets, and competitors. The Strategic Planning Retreat for this company was a real eye opener for every member of the team, including the owner. In the end, a Strategic Plan should be neither complicated nor difficult to understand. Instead, it should provide clarity, focus, and a clear direction of where the company is headed in the future, and how they will get there. It should prioritize the company’s use of its limited resources of time, money, and talent. In the case of our financial services company example, breakthroughs came in the way of a clearly articulated vision for the company. As one employee put it, the Plan gave every employee in the company an understanding of what it looked like to “win the Super Bowl”. There was agreement on customer targets, profitability targets and how to achieve them, and agreement on the company’s top 3 goals. The profitability metrics were critical to providing the added income the ‘insiders’ needed in order to one day buy the company from the owner. This improvement in profitability was now in their hands, essentially holding them accountable for their future. And for the owner, the planning process identified dozens of projects and tasks that were D.O.A. (dead on arrival), sitting on his desk that he never had time to implement. These were scrutinized, prioritized, and delegated to members of the team for implementation. A complete Action Plan for implementation was developed for the entire Strategic Plan, including benchmarks and measures. For the first time in the company’s history, everyone (not just the owner) understood the company’s vision, its goals, and the accountability for action to make it happen. Following the Strategic Planning Retreat, the company achieved numerous milestones set in the Strategic Plan. And financially, the company is moving into upper quartile performance, leaving the middle 50 where it spent most of its lifetime. If you want to move your company forward, a Strategic Plan is essential to your success. It is a dynamic road map, adjusting to opportunities and threats, new discoveries being uncovered, and changes in the marketplace. It provides the stability your team needs to understand the direction they are headed in, and guides the decisions that get the company to the next level. Tom Garrity is the founder and managing partner of Compass Point, and an espi resource partner. He is a strategy and ownership-transition executive with experience in lower-middle market companies and family businesses. Tom has worked with hundreds of business owners and companies to develop stronger organizations and exit strategies. He is a Certified Exit Planning Advisor by the Exit Planning Institute. Tom Garrity |
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