Monthly Archives: March 2011

How disciplined are you?

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Had coffee today with a partner at PWC and we got to talking about what makes a successful business.  I gave him the benefit of all of my own well aired opinions on business… vision, planned exit, build to sell, leverage etc etc.  “It’s not rocket science,” I blurted. “Lets face it if I can do it anyone can, I was an advertising copy writer who knew nothing about business… I just learned how to plan an exit and then I executed the plan”.  He looked at me with what appeared to be a mixture of intrigue and I think a hint of admiration.  “You’re wrong…” he said, ” you had clear focus and determination, traits not shared by all who venture into business”.  Then proceeded to tell me of his own experiences with business owners, from the perspective of someone who sees hundreds of businesses in all sorts of stages of growth.  He told me that he sees business owners he knows will make it happen and business owners who he knows won’t.  “The difference” he said simply, “is discipline”.  To see a vision, to determine where you are going to take this business, put a plan in place and then make it happen… these are not the every day approach to business sadly.  You can teach people the tools, he told me, but you can’t give them the discipline it takes to execute it.

I thought about this on my way home.  He’s right you know.  The difference between those that make it huge in any field and those who muddle along at it… is the discipline required… to study, to learn, to invest, to plan, to work at it, practice, stick to the plan and to do what it takes to make it happen.  This is the real quality of the successful athelete, investor, writer and of course, the successful business person.

So … how disciplined are you??

Planning your exit

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More from my night at the Institute of Directors, this time my notes from Matt Kenealy. Matt was a co-founder of Axon Computer Systems in 1986.  He was the majority shareholder when it sold to Integral Technology Group in May 2010.  Here are my out takes from Matt’s 5 minute talk.  As always with the disclaimer that these are my notes and as accurate as can be from trying to read my own writing nearly a week later!

1. You must carefully plan your exit

2. It takes a lot longer than you think it will

3. Allow 2 -4 years to work through your eventual exit as an established business

4. The thing that takes the longest is making the business independent of you… this is the critical factor for a buyer

5. Most exits involve some sort of earn out – this is what typically takes you longer to exit… it can be a dismal few years of being in a no man’s land when you are still working for a company no longer owned by you (in my next blog I’ll tell you the deal I struck when I sold, which made my 3 years earn out pretty exciting).

6. The role of a Board is to help the owner maximise the value of the business.

7.  Value is made up of:  price; the deal (a simple transaction/earn out terms);mimimised risk (what comes back to bite you after you are gone) and other values, such as how you feel you want the business to carry on after you are gone, if this is important to you.

8.  An ‘advisory board’ can be a good way for a small business to get the guidance it needs. (Here’s the wikipedia definition of an advisory board … I thought you might be wondering: An advisory board is a body that advises the board of directors and management of a corporation but does not have authority to vote on corporate matters, nor a legalfiduciary responsibility.  Or in other words: An advisory board is an informal group of local business professionals who can help you run your business better).  The key point is that you can feel more in control with an advisory board and may find it easier to pick the people you really want.

9.  Just having your accountant or lawyer is not sufficient for your Board.  You need a sensible, proven business person with both Directorship and industrial/business relevant experience.

10.  The owner should be exiting before sale (4 years prior to exit Matt left the day to day running of the business).

11.  The company should start acting like a much bigger company early on the piece, grooming itself for the business it will be when it sells.

12.  Should think early on ‘who will buy us’.  Identify your buyer and build your business to be attractive to them.

Great tips based on real life experience.  No wonder I enjoyed the evening so much.

External Directors and Exits

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Further to my last blog, I presented my five minute spiel at the Institute of Directors First Boards meeting a few nights ago.  I was lucky enough to be on a panel with two very impressive men, both having worked with external Directors to see their businesses through to very successful exit (sale). It was a great night and I loved being in the company of such successful business people.  I thought I’d share with you their key tips on the role of external Directors and their thoughts on exit planning.

The first is Jim Donovan, now active Board Director and investor in a number of entrepreneurial ventures.  He talked about his experience as co-owner and CEO of Deltec, a maker of advanced antenna systems for mobile phone networks in Australasia, China, Europe and the Americas. In 2000, Deltec won the New Zealand HiTech Trust’s Supreme Award, together with the HiTech Growth Company of the Year Award and the HiTech Investing In People Award. It was named by Unlimited Magazine as one of the “Best Places to Work in New Zealand”. In 2001, Jim Donovan led the sale of Deltec to Andrew Corporation, a Fortune 500 company. Here are my key out takes from Jim’s address on the role of external Director in relation to exits (note: the comments in brackets are my interpretation and addition to points being made and not an attempt to reflect the speaker’s’ views):

1. To force management and owners to face up to problems (as a Director you may be the one to have to spot the problems in the first place and see their potential impact if not addressed)

2. To help management and owners come to terms with decisions that have to be made (these may be tough decisions where the risk of not making a certain call could be the demise of the business)

3. To manage the owners’ implied power of veto (the owner/majority shareholders have ultimate power to hire and fire Directors and make final decisions.  If you can’t ultimately agree with the call made by owners, you might have to resign as a Director)

4. To manage and faciliate shareholders’ disputes towards positive outcome for the business (when a company is owned by a number of shareholders this can happen on a regular basis – over small and large issues)

5. To hold owners’ hand through the process of exit (being true to the purpose of a business – see my last blog – an exit will be inevitable, the Directors need to be playing their role in grooming Management/owners towards this and then help make it a reality).

As noted, these are just my out takes from Jim’s address, he covered a lot more background to the build up and eventual sale of Deltec and added a huge amount of value to the evening.

My next blog will feature my key out takes from the other panelist Matt Kenealy, joint founder and major shareholder  in Axon Computer Sytems which sold to Integral Technology Group for an undisclosed sum (a rumoured deal of NZ$18 million).

The purpose of an entrepreneur

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Just been working on a talk I am giving this Wednesday on an entrepreneur’s perspective of the role of a Board of Directors.  I only have 5 minutes to speak so has been a very good exercise in making it short but real.  So here it is… you can have a sneak preview of my 5 minutes of fame:

The purpose of an entrepreneur is twofold:

1.  To build a company with a higher purpose (think Richard Branson, Bill Gates, Steve Jobs, Anita Roddick and others such billionaires who make a difference to our world)

2. To build an exit for the shareholders (think Sam Morgan, the Trilogy sisters, Geoff Ross, Rod Drury for local heroes who have built a successful exit)

Why does an entrepreneur need a Board of Directors?

1. To challenge the strategy (to the exit and on-going)

2. To hold them to the goals and plans

3. To reality check the numbers

4. To hold the owners/management accountable

5. To support through the tough decisions

In a nutshell:

  • The purpose of a business is to create wealth for its owners
  • The purpose of a Board of Directors is to be true to the business (in its mission to plan and execute the exit)

That’s it… what do you think?

Have you done your business plan yet?

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Crikey!  Where has time gone?  It’s March already and the end of the business financial year for most of us.  I’ll be nagging my liber8yourbusiness clients about their business plan for 2011 – 12 year.  As Winston Churchill famously said, “fail to plan and you plan to fail”.  Your business plan is your compass, your map and the guiding light that keeps you and your team on track.  I get all of my liber8yourbusiness clients to plan their business right out to its completion, when they execute their exit strategy.  I also get them to complete their annual business plan … which takes them further towards their end goal. Here are the key areas your business plan needs to cover:

  1. Product Development
  2. Sales & Marketing
  3. Team
  4. Operations
  5. Financial

Look at each area as if it were a department in a bigger company and you are asking the Manager of that area to give you their plan for the year.  The plan for each area needs to have clearly defined objectives, strategies to meet those objectives and action steps to bring the strategies into reality.  There needs to be financial goals and expenditure requirements under each heading.  Your sales and marketing department will set the income goals for the year.  All income goals and expenditures are then put into your budget for the year, which in turn becomes your monthly compass.

With a good plan in place you can meet every month to review progress.  You can stay focused, prioritise your actions and make good decisions knowing where you are trying to get to this year.

If you are a liber8yourbusiness online client you can find a copy of my annual business plan template in Session 3.  If you are not a client but would like the template please email admin@liber8yourbusiness.com

Let’s get busy!

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So as I watch the news for the hundredth time in a state of amazement and shock at the Christchurch earthquake I get to thinking today about the business owners.  I watched as real estate agents work a whiteboard of requests from businesses looking for office space and dealing with sudden increase in lease costs.  I’m imagining the stress of trying to keep clients, keep staff, keep paying wages,  keep focus and just plain keep going.  When something so catastrophic happens, suddenly in the face of up to 240 people dead and the loss their families will be dealing with, business doesn’t seem so important.  And yet for so many small business owners, this is their livelihood.  And whilst being grateful for life itself, hundreds of business owners in Christchurch have seen their life flipped on its head.  What happens how?  How do you re-build? 

I’m thinking about Christchurch now from a business perspective and wondering what it must feel like.  I know how to build a business.  But do I know how to pick someone up from the rubble and help re-build from dust and debris? 

I wish all business owners in Christchurch strength, courage and all the best thoughts I can muster.  I remain safe, humbled and grateful.