Curtis, MBA, PMP, Small Business strategy & M&A integration specialist. Author of Vision to Reality! | cljassoc.com | Jenkins & Associates.
Entrepreneurship in the early stages feels like driving through the wilderness without a GPS. With no marked roads or familiar landmarks, you end up driving in circles. That’s why the failure rate for small businesses in the first five years is staggering: Almost half of them don’t succeed.
But you can offset these odds.
Imagine leveraging over 25 years of industry knowledge, know-how and relationships to build a business with multiple owners that fulfills your dreams and positions you to grow an enterprise, sell it and retire.
Recently, I helped a new software company go from being crippled by partner indecision that dragged on for months to building consensus in just two days. That ended with a shared vision they could clearly articulate, defined roles, an action plan and, finally, an agreed-upon exit strategy.
Lessons learned from this business retreat will help owners avoid the quagmires of entrepreneurship. My Vision to Reality framework unlocks CEOs’ potential and their teams’ capabilities to turn around an underperforming company.
Stop wasting precious resources like money and time. Start asking the right questions to assess where you are and where you want to be to get a fast start in 2024 and beyond.
Evaluate your people.
Before you delve into the numbers and the finances, address the elephant in the room that’s being ignored: your people.
The most common people challenges are lack of team alignment, trust and commitment.
Recognize the red flags:
• Complaints about workload
• Lack of mutual respect
• Unproductive, time-consuming meetings
• Dragging decision-making processes
At the retreat, participants shared their views of the major problems of their business. Each was met with resistance or criticism from other team members.
They needed to stop challenging each other and start listening with understanding. To build consensus, we used an improv technique: Saying “Yes, and I would add … ” instead of saying “No,” which reduces defensiveness and increases cooperation.
Once you become aware of your own and your peers’ leadership and communication styles, you can focus on having engaging dialogue without putting anyone on their heels. There are many tools available to help you facilitate dialogue and improve understanding.
Define roles and responsibilities.
Decision-making is often prolonged due to a lack of organization. With clearly defined roles and responsibilities, you can prioritize, delegate and deliver results faster than the alternative.
Organized meetings with clear roles, such as a meeting owner, and a full agenda will increase productivity and success. Share the agenda before the meeting with all the attendees. Don’t just work off a checklist.
Visualize the future.
The team had separate visions in their head—unshared. Once shared, we collectively articulated a vision that everybody understands is now their North Star.
Each one of them wanted to sell the company and retire from their day jobs with a $5-million payoff. They realized they were setting their revenue and profit targets too low and needed to readjust the goals to meet the collective vision.
Assess cash flow; create future business value.
Their target earnings before interest, taxes, depreciation and amortization (EBITDA) was $20 million. Knowing this changed their perspective and what they were trying to achieve, which shaped their goals.
Their initial goal was $5 million in revenue in three years. After two days of exercises, asking the right questions and sharing what was possible, we created a five-year plan with a target revenue number that would meet their vision.
We reviewed the various market opportunities to develop a plan on how they sell their business through the four services they offer.
The plan gave them a clear lens. First to get to the end of the month, focusing on the operational foundation. Second, to get to the fastest path to cash, starting the year by engaging partners, customers and prospects.
Build an exit strategy.
From the start, develop an exit strategy if you’re building a business with plans to sell. Understanding how the merger and acquisition process works helps you position yourself to get the most for your company. Below are key concepts to understand when building an exit strategy:
Valuation
This determines what your company is worth. Knowing this is key to defining your price, which keeps you from selling at less than the value—giving you a firm baseline position for negotiating.
Key People: Legal And Financial Professionals
Consider hiring a team to walk you through the process. Then you can enhance strategies and tactics to become more attractive to buyers. A reputable accountant from the onset saves you time and money and provides confidence that future projections will be within a reasonable margin of planned earnings. Keeping your books in order makes it easier to perform a proper valuation of the company.
Due Diligence And Quality Of Earnings
This is done by a third party for the buyer once the valuation is done. This ensures there are no hidden issues. The longer it takes for the seller to get the answers, the more it will cost you.
Letter Of Intent
This creates exclusivity for the two parties after initial conversations about the value of the company, its past performance and the intent to buy.
Purchase Agreement
This is the agreement of terms and conditions between the buyer and seller.
In Summary
If you want to leverage your years of industry knowledge, know-how and relationships to build the business of your dreams with multiple business partners, you’ll need to evaluate your people, define roles and responsibilities, visualize the future, assess cash flow and build an exit strategy.
These lessons learned from a recent two-day business retreat can help leaders avoid the quagmires of entrepreneurship and accelerate a 2024 start. Their goals were lofty and not easy to achieve, but the exercises gave them renewed vigor as they could see a path of their vision becoming reality.
Anything can be accomplished by taking one step at a time toward your goals, especially with support. Using these steps can guide your process.
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