Building resilience to crises

December 6, 2011 1 Comment

For many ambitious owner managers, crisis is a stimulus for change and growth. For some, crisis may be too strong a word. For others, it may describe exactly how it felt.

“We turned up to work that morning and had a choice to make. Do we give in and close the business? Or, do we make the tough decisions and see what we can rescue? We went for the latter.”

“The (then) FD told me that we were insolvent. He was wrong. He didn’t understand our business model (that is why he is the then FD!) It was a real shock to the system.  I knew we had to do things differently.”

“We nearly went bust in 2002/3. In 2007/08 we posted a profit of £7m.”

“Crisis forced me into making moves. Sometimes you need a push – redundancy is a strong driver!”

Crises in business appear inevitable. In 1972, Larry Greiner defined his Growth Model consisting of periods of relatively stable growth followed by a ‘crisis’ – where major change is needed if the company is to carry on growing.

Whilst these crises hold the potential to provide significant learning and the stimulus for growth, they can also break the business. So how can our knowledge of them drive sustainable success?

If a smaller, growing business is to be sustainable, it has to build resilience to crises. What appears fundamental is the ability to take early action – a phrase that we’ve come to know as ‘confronting the brutal facts’. However, to confront these facts, you first have to see and to accept them.

For some, the signs of crises were clear but they just didn’t follow through: “I wish I had trusted my gut more – no advisor has been as good as my own instinct”. For others, they are lacking information and carrying on blissfully unaware: “it wasn’t until I went on a finance course and had to look through my accounts that I realised that we were on the edge of going under”.

Given that this is the case, some key questions worth asking are:

  • What are you doing to build your personal and business resilience to ‘crises’?
  • What have you learnt from your previous ‘crises’?
  • How have you used them to stimulate progress within your business?
  • What is the next potential ‘crisis’ within your business?
  • What are the signs and symptoms and how are you measuring them?
  • What is your ‘gut’ telling you about your business?
  • What brutal facts do you need to confront?
  • What early action are you taking?

Compass meeting # 2 – building resilience to crises

Filed under Business Growth Networks, Themes of sustainable success

Creating options for successful exit

December 6, 2011 2 Comments

All business owners dream of exiting their business. The timeframe for the occurrence of this dream tends to differ from one owner to the next. For some, it is before the business exists. For others it is the result of conversations with other business owners who have managed to ‘realise the value’ of their businesses. For those remaining, it is normally the result of years of draining hard work and the desire to create a different, alternative life – quite frequently labelled ‘retirement’ – not that they actually go on to retire!

Whilst the dream is enticing, the reality of exiting the business is a somewhat difference experience.

Imagine, that you have worked your whole life to develop something then all of a sudden the moment comes, the sale is agreed and the business is no longer yours. You feel a sense of achievement, a moment of relief, but the business still feels like yours.

The new owners arrive. You may have an earn-out clause as part of the deal or, you may just be keeping in touch with the people in the business. Very soon, you start to feel “a real sense of loss”, “guilty that I’ve let the people in the business down”, “annoyed that the new owners want me to report on my business progress” or, “regretful that the new owners are destroying the very business I’ve spent my life creating”.

Eventually, the owner leaves the business fully, with a sense of remorse, a sense of unfinished business and a sense of bewilderment that results in some serious soul searching – “what do I do next?”. Frequently, they go on to invest their new found wealth in fresh ventures or younger, more energetic, ambitious entrepreneurs.

Meanwhile, on the other side of the fence, the new owner of the business is often left wondering “how am I going to realise value from this business”, “the people have too much loyalty to the owner”, “the owner is becoming an obstacle to growing the business”, “can’t they see the potential for growth that we can?” and, “there are a few more problems here than we realised”. Soon the ‘fixers’ descend upon the business and implement the ways of the new world, casting aside all reminders of the past. People leave. Those who remain hanker after ‘the good old days’.

Of course, all business sales are not the same. Not all have the same drivers. Not all have the same business model. Not all have the same personalities involved. Not all are extremely felt as those described above. However, those that go better than others do seem to have some consistent themes:

  • It allows the owner to realise an appropriate amount of value
  • Selling the business better allows the business to fulfil its founding principles – it is the right time to sell
  • Time is spent co-creating a new future for the business
  • The original identity of the business is nurtured and evolved rather than destroyed
  • Time is spent on engaging people in both businesses during and after the acquisition
  • The integration is viewed from a long-term perspective
  • The seller plays an important role in the transition of leadership
  • The original owner is supported in discovering a new role/life for themselves

Given this, some important questions to ask might be:

  • What type of ownership/leadership does your business now require to fulfil its purpose?
  • Rather than investing in them when you have sold, how might your business benefit from bringing in fresh entrepreneurial energy now?
  • What are your criteria for an ‘ideal buyer’?
  • What would you actually do if you left your business? No really, what would you DO?
  • How will you ensure you maintain ambition and drive during an earn-out period?
  • How would you avoid developing sense of seller’s remorse?
  • What would you do to work with the new owners to nurture and evolve the identity of the business?
  • How would you work with the new owners to create a new direction and future for the business (in a way that you couldn’t do before)?
  • How would you support the people in the business ahead of/during the sale so that they could be successful in the new organisation?
  • What role will you play in the transition of leadership?

Compass meeting # 4 – creating options for successful exit

Filed under Business Growth Networks, Themes of sustainable success

Entrepreneur as leader

December 6, 2011 4 Comments

At a recent workshop, a room of business owners were asked, ‘do any of you know what your role is?’ The room was filled with an awkward silence. The silence you get when you realise a good question has been asked by mistake. The silence that fills the person being asked with a mild sense of panic – a realisation that they should be able to provide the answer! After a few moments, someone replied “deal with all the c**p that my staff leave me with!”

What is the role of the business owner? Or, more specifically, how do they make the transition of entrepreneur to business leader?

It goes without saying that the energy needed to start up a business is not the same as the energy required to lead a growing business. One requires a ‘just do it’ mentality, whilst the other requires a whole lot of stuff and patience that many business owners often struggle to deal with. “If I am not doing ‘stuff’, then what is my role?”

To answer this question, we often find ourselves exploring the functions of leadership (referred to in the book Reflections and Challenges – see http://www.telospartners.com/index/reflections.php).

Those business owners who we have observed take significant leaps forward seem to have a canny knack of ‘managing the present’. They do it in a way that allows them to work and provide clarity on ‘creating the future’ and ‘nurturing identity’. “Some of the most valuable time I spend in my business is staring at a blank wall. It is then that my thoughts and ideas crystallise.”

Without doubt, the transition towards business leader moves the business forward – “each time I have let go of stuff, to focus on where I can add real value, the business has jumped to the next level”. It is a transition that has real challenge – “the reason I set up the business – autonomy and control – is the very reason I find it difficult to let go of stuff”. It is a transition that requires a certain leap of faith – “I wish I had managed to trust my team sooner”. It is a transition that is particularly challenging when family is involved – ask any son or daughter who has taken over the business from their mother or father.

The transition appears easiest in those businesses that have a clear plan for the founder to exit the business: “I realised I needed to manage my exit”. And, in planning this exit, they aim to create, to build and to sustain a legacy that lasts beyond the founder.

To do this requires a need to “be bolder about paying for and hiring in the best talent available”; “build a team with everyone on the bus doing the right roles without pandering to individual wants and needs – a clear focus on the ambition and the vision”; “find a way to articulate your vision and values and get your team to develop and create a strong brand together”; “focus, focus, focus – ask the right questions of those who want to help you”.

And of course, to do this requires a need for the founder to behave differently themselves: “entrepreneurs must be confident to lead the business and not so confident that they can’t ask for help and stand in the way of success.”

It is important to note that exit doesn’t always mean sell. On a number of occasions, we have observed entrepreneurs suffering from ‘seller’s remorse’ – a sense of loss and regret that has occurred once the business has been ‘taken away’ from them. Perhaps this a sign that they have not properly thought through the process of ‘passing on’ the business – an insight that we may find develops further with time.

In the pursuit of sustainable success there is a need to think about passing on the business. Given this, some key questions worth asking are:

  • What does exit mean to you?
  • What heritage are you trying to create?
  • What role does your business require you to play (now and when you exit)?
  • What is the real value that you can add to the business?
  • What do you need to do differently to perform this role?
  • Who are your potential successors?
  • What are you doing to develop them further?
  • How will you manage the transition?

For more information, please review the discussion of our compass meeting # 3 Entrepreneur as leader

Filed under Business Growth Networks, Themes of sustainable success

Holding yourself to account

December 6, 2011 2 Comments

We have run numerous meetings, programmes and workshops with business owners and we are consistently amazed by how much they value the time away from the business. They enjoy spending time with like-minded people that challenge their thinking and give them the opportunity to work on the business.

A more longitudinal study of processes of this type might also reveal how the conversations shift in energy from the initial generation of thoughts, ideas and actions to the challenges laid down to report on the actions that were previously discussed or agreed. “Last time we spoke about this you said you were going to …… what happened?” In some cases, there is follow through and tangible business impact, in others there is not.

And herein, lays a particular challenge for the ambitious owner manager – how do “people with a large need for autonomy and control”, who typically hate being told what to do, hold themselves to account and keep themselves honest for their actions?

Now, this is not to say that business owners and entrepreneurs are a dishonest bunch. It is more to say that a CEO of a large corporate is supposedly held accountable by a board and investors, whereas, the business owner often is the board, the management and the majority shareholder. So there seems a need to ask the question “what is your framework of accountability – board, trustees, mentor/coach, non exec?”

We know that this is important stuff …

“Your governance structure can inhibit or enable long-term success”
“Defining your constitution and mandate are important”
“I needed more structured learning and business advice for myself earlier on”

…difficult stuff …

“I spent lots of money on lawyers for a written constitution and didn’t really end up with what I needed for the business “
“I’d find more support for start up organisations – Business Link were laughable”
“Finding the right support for the evolving needs of my business and for me is a real minefield – where do I start?”
“I needed something to help me make sense of the various advice and support that I was being given from an accountant or from a solicitor – they simply didn’t ask me the right questions”
“There are a variety of business models and one size fits all support simply does not work”

…and some people find a way to do it.

“I’m part of a small network of business owners who meet once a month, they are like my non-executive directors, justifying my plans and actions (or lack of) to them can be a challenging experience”
“For years we have struggled to articulate and write down the founding principles of the business, now that we have managed to do so we have a strong framework for taking the business forward”
“I was challenged by my coach to write a business plan, we meet regularly to see how it is going. To begin with I resisted the process but I am starting to see the benefits of such an approach”
“With a proper management team and strategic plan in place we are finding new ways to use our meetings to keep ourselves on track. Keeping on top of this process is paramount to our success but it is challenging to maintain”
“Appointing a non-executive Chair was a difficult decision for me. I mean how do you recruit your own boss? It has taken a while to understand how to derive value from the process but it is starting to reap rewards”.

So the final questions we ask are:

  • What needs to be in place for you to be held accountable?
  • What challenge and support do you need to keep true to your purpose and values?
  • Who is challenging you to drive the business forward?
  • Who keeps you honest for your actions?
  • How is your ownership structure supporting or inhibiting your growth?
  • How will the next leader(s) of your business be held to account and kept honest?

Find out what other business owners said at one of our Compass Meetings on this very topic.

Compass Meeting # 5 Holding yourself to account – outputs from discussion

Filed under Business Growth Networks, Themes of sustainable success