Author: PJ Guisto
Start Strategic Succession Planning and Make the Retirement Playoffs by Hiring a General Manager
First, a confession: I can’t help myself - I’m a died in the wool Buffalo Bills fan.
It’s that time of the year when the smell of a Super Bowl is in the air: draft choices have been made, veterans have been signed, and Ralph Wilson’s wallet has been lightened with free agent signings. And, all of this has been largely orchestrated by Buddy Nix, the Bill’s General manager.
In fact, the Bills can’t win a Super Bowl (let alone make the playoffs) without someone at the helm pulling all of the pieces together, and to a very large degree, that’s true of succession planning for the owners of a family business. In fact, I think that you should develop and execute your exit strategy the same way that NFL teams develop and execute their plans to win the Super Bowl.
Like a championship team, there are a significant number of moving pieces that need to be put into play and coordinated in order to carry the Lombardi trophy home. In this case, however, the trophy is the business owner leaving their business with a way to cash in on the equity they’ve built over time. Making sound decisions about what do to with the kids (like I talked about in my last post, “The Toughest Succession Planning Decisions You’ll Ever Make”), or how to make your cash last for a lifetime, or how to get your business ready for sale, are just a few of the items on the exit strategy table.
It makes sense to start your plan by hiring a Succession Strategy Advisor – a General Manager for your exit plan, if you will – that can pull all of the pieces together and oversee their implementation. The role of the Advisor could include:
- Development of the overall strategic succession plan
- Identifying and engaging team players like bankers, attorneys, life coaches, and business valuation experts.
- Monitoring the execution of the plan
- Changing the plan – or finding new team players – for achieving plan goals
Often, a Strategy Advisor will play a role in executing one part of the plan, as well as overseeing the execution of the total plan. For example, I work with companies prior to their putting their businesses on the market to improve operational efficiencies and overall margin, as well as serving as a succession planner/GM.
I have high hopes for the Bills this year – like I do every year prior to the start of the season! But like your exit strategy, without an experienced General Manager/Advisor at the helm, the chances that you’ll make the retirement playoffs won’t be as bright.
JC Jones has a team of strategic succession planning experts that can help design and implement your exit strategy. For a confidential discussion of your situation, click here, or call us at 877-899-4072.
Posted by
Matt Lumia on Mon, May 07, 2012 @ 08:27 AM
Your Kin or Your Business?
25% of business owners feel the next generation is not competent enough to lead the company.
If you are the owner of a family business, and retirement is looming on the horizon, you’ve got some serious issues at hand. It’s likely that between 60 and 80 percent of your total net worth is tied up in the business or business-related real estate, and you need to monetize some or all of those assets that will fund retirement.
Natural inclination is to pass the business on to your children, but assuming they don’t have an independent source of wealth for a cash deal to buy you out; it’s likely that they’ll be funding the purchase (and your retirement) out of the future proceeds of the business. What complicates this issue even more is that family dynamics, the skills and aptitudes of family members, the owner‘s emotional attachment to the business, and the owner’s desire to leave a legacy represent difficult challenges to making tough and smart decisions for a successful business succession.
Consequently, it’s no surprise that a recent PricewaterhouseCoopers survey of more than 1,600 family-owned or managed businesses found that 34 % of companies based in North America expect to bypass their families altogether for succession and sell to key employees or outsiders. But that still means that about 70% expect to pass their business on. … and the disturbing part: only one out of three of these will survive.
These aren’t particularly good odds for someone with retirement looming on the horizon who expects that the business they founded will the source of cash they need for the rest of their life.
There is an abundant amount of research on why succession plans and exit strategies fail, from lack of a long term vision and focus for the business, to sibling rivalry and conflicts based in nepotism, narcissism and greed. Perhaps one of the most troubling reasons for failure is that while the business owner may have a strong desire to pass the business on to family members, they face the danger of falling into the “entitlement vs. the best qualified” trap for the key positions in the company.
This is why the business owner needs: (1) a professional valuation of the business, (2) a key strategic advisor that can act as both coach and quarterback. (see our blog post “Drafting a Dream Team for Strategic Succession Planning”), and (3) a strategic succession planning process that includes three key types of readiness assessments:
- Financial – degree to which the owner is dependent upon the business for funding their retirement
- Mental – degree to which the owner’s identity is tied to the business
- Business readiness assessments – degree to which the business is packaged and ready for sale
These assessments represent the framework for crafting an exit strategy and succession plan that is based in sound business principles and practices. I’ll be discussing each of these in greater detail in upcoming posts.
It certainly would be tragic to see the blood, sweat, tears and commitment of a business founder not survive into the second generation of the business or beyond. But it would be a travesty if upon exit; the business could not support the retirement and lifestyle goals of the owner.
JC Jones has a team of strategic succession planning experts, including certified valuation experts that can help your design and implement a success plan. For a confidential discussion of your situation, click here, or call us at 877-899-4072.
Author: PJ Guisto
Top Control Priorities for Cyber Security Based Attacks Occurring Today
The SANS Institute - a cooperative research and education organization with more than 165,000 security professionals around the world – recently released a list of 20 IT Control priorities. They deemed these controls necessary for “addressing an organization's high water mark when assessing the enterprise-wide potential security risk of confidentiality, integrity, or availability of interconnected systems and information within the organization's enterprise environment.”
Identification of these control issues that pertain to both government and commercial environments, was the result of a consensual effort between the Department of Defense (DoD), various government agencies, the FBI, and private forensics experts among others. Their task was the identification of controls effective for blocking currently known and future high-priority attacks.
The 20 Critical Controls identified include:
- Inventory of Authorized and Unauthorized Devices
- Inventory of Authorized and Unauthorized Software
- Secure Configurations for Hardware and Software on Laptops, Workstations, and Servers
- Continuous Vulnerability Assessment and Remediation
- Malware Defenses
- Application Software Security
- Wireless Device Control
- Data Recovery Capability (validated manually)
- Security Skills Assessment and Appropriate Training to Fill Gaps (validated manually)
- Secure Configurations for Network Devices such as Firewalls, Routers, and Switches
- Limitation and Control of Network Ports, Protocols, and Services
- Controlled Use of Administrative Privileges
- Boundary Defense
- Maintenance, Monitoring, and Analysis of Security Audit Logs
- Controlled Access Based on the Need to Know
- Account Monitoring and Control
- Data Loss Prevention
- Incident Response Capability (validated manually)
- Secure Network Engineering (validated manually)
- Penetration Tests and Red Team Exercises (validated manually)
| Get the entire SANS Report, including a recommended Action Plan and Mapping between the 20 Critical Security Controls and National Institute of Standards and Technology Special Publication 800-53, Revision 3, Priority 1 Items here. |
According to SANS, “the control areas were developed to help organizations prioritize their efforts to defend against today's most common and damaging computer and network attacks”. We do recommend, however, that when conducting an IT Controls audit, your organization also take into consideration non-technical control needs, including overall policy, organizational structure, personnel issues and physical security
The IT Audit experts at JC Jones can help in the identification and remediation of your organization’s IT Controls. For a confidential discussion of you situation, call us at 877-899-4072, or click here.
Posted by
Matt Smith on Mon, Apr 23, 2012 @ 08:19 AM
Author: Matt Smith
Take This Quick IT Health Check
Somewhere at the intersection of emerging technologies, cost pressures, the need for continual improvement of service delivery, and increasing demands for efficiency, there’s a CIO (and the entire IT Department) who can’t sleep at night.
It’s not only a matter of doing more with less.
What’s keeping them up at night is finding ways to continually align their services with the company’s growth and business objectives in a way that delivers strategic value.
Given these strategic, operational and management challenges, it makes sense to conduct a periodic IT Health Checkup to validate your company’s IT capabilities, and its alignment with the business. Your company’s IT program requires the necessary and appropriate combination of people, process and technology in order to ensure its alignment with company strategy and business objectives.
Here’s 20 ways to determine if your IT capabilities are aligned with business objectives:
Frankly, if you answered “NO” to any of these, then it’s likely that there’s room for improvement in aligning your firm’s
IT capabilitieswith your strategic plan and business objectives. This process begins with a much more detailed assessment than presented above to pinpoint specifically and accurately where change or investment is needed to achieve the alignment. Then, it will be possible to establish a plan and improvement program that will systematically address obstacles and permeate the entire IT organization and its culture.
The IT experts at JC Jones can help to this end. We perform IT Health Checks, and work with small and mid-market public, privately held and non-profit organizations. For a confidential discussion of your organization’s situation, call Matt Smith at (315) 247-3122, or click here.
Posted by
Jeff Jones on Wed, Apr 18, 2012 @ 10:04 AM
Author: Jeff Jones
Having the Right Advisory Team is one of the Most Important Aspects of the Exit Planning Process
A privately-held business is typically the largest asset that an owner or family will possess and the primary source of income for the owner and family. The business is a means for paying bills, as well as accumulating and transferring wealth. In addition, it’s a source of pride / legacy for the owner in terms of product, company, and employees.
Over the next decade, millions and millions of business owners will be seeking to exit their business, and monetize that asset to produce the lifetime income they need to support the lifestyle they’ve dreamed about. However, the sad reality is that most will fail in achieving this goal for lack of a sound exit strategy and proper planning. In fact, according to the ROCG 2007 Survey of Business Owners, the average business owner spends 80 hours annually preparing an annual business plan and only 6 hours in total preparing for their exit.
Exit planning requires owners/businesses to assess readiness on multiple levels: financial, mental and Business Readiness. In future posts, I’ll be talking about each of these, but today, I’d like to talk about the “foundation” piece for exit strategy and planning – assembling the right advisory team.
Having the right advisory team is one of the most important aspects of the planning process and ultimate execution. Putting this team together should not be approached informally by asking for the help of friends and relatives – it’s critical that you surround yourself with experts - the best of the best!
In fact, we recommend that your team look like this:
Each player on your team has specific roles and responsibilities. At its center is an overall strategic advisor or quarterback/coach that can bring all of the pieces together and help you manage the complexities involved in making the transition.
The process of planning for the management and financial succession of business ownership and control needs to be built with specific focus on the personal goals and time frames of the owner(s), and the responsibilities to the on-going organization and its employees.
It all starts with getting the right team assembled.
For a confidential discussion of an exit strategy for your business, please call me at 585-820-0460, or contact us here.
Posted by
Ron Castor on Mon, Apr 09, 2012 @ 08:27 AM
Is It Possible to Raise Prices Without Taking a Competitive Beating?
Many companies are looking to emerge from the recession, rebuild profitability, and get back to business as usual. Certainly, they are going to continue to focus on costs, but may have already cut costs to the bare minimum.
So, how can your company grow your bottom line without bringing back top line volume and filling the plant? Is it possible to raise prices without taking a competitive beating?
Volume growth brings cash flow challenges and across-the-board price increases can be a slippery slope — threatening immediate and long term profitability goals.
The real answer is not volume growth or across-the-board price increases (we call them “peanut butter spreads”). Both approaches can be more harmful than helpful. The real answer is price revenue enhancement - continually increasing gross margin by strategically adjusting prices up or down, product by product and customer by customer.
Price revenue enhancement is about looking for those gems in your products and services that when your customers want them, they really want them! As a result, their prices are “sticky.” In other words, because they “stick,” you may be able to raise them significantly without losing volume — possibly bundling them with other product and service sales where prices are more sensitive.
Is a price revenue enhancement strategy right for your company? Call John Bellardini at 877-899-4072 or contact us here to arrange a confidential discussion.
Posted by
Ron Castor on Tue, Apr 03, 2012 @ 08:41 AM
Price Revenue Enhancement is Not Rocket Science
Recently, a client of ours increased their bottom line 6 percent of net revenues in the first month after implementing a strategic pricing strategy.
Price revenue enhancement is not rocket science. But it is not all that easy either. Price revenue enhancement is all about understanding your - customers, products, and competitors at a detailed level. It requires detailed analysis by customer and product to identify: (a) what products cannot be price-adjusted without impacting sales volume to the point of negating the gain from margin improvement, (b) what products are opportunities for price increases without impacting sales volume, and (c) building and implementing a plan to make it all happen.
The amount of analysis you need in your organization depends on the complexity of your business, products, pricing, customer buying patterns, channels, and the like. Depending on the complexity, the tools you need could vary from back-of-the-envelope calculations to spreadsheets to use of sophisticated and complex specialty software.
Experience shows that a well planned and executed price revenue enhancement program can provide significant cash inflows to your organization without consuming significant resources and working capital.
Before you go after new and bigger sales orders to get your business back on track, before you consider an across-the-board price increase or reduction, think about price revenue enhancement.
Is a price revenue enhancement strategy right for your company? Call John Bellardini at 877-899-4072 or contact us here to arrange a confidential discussion.
Posted by
Jack Canty on Mon, Mar 26, 2012 @ 08:28 AM
Author: Jack Canty
Exiting a Business Requires Well Thought Out Strategies
Privately held businesses are typically the largest asset and primary source of income for an owner or a family. A key question for the aging baby boomers is how to convert their illiquid, primary assets to cash? How will they transfer their wealth to the next generation and protect their legacy?
Meeting the personal goals and timeframes of business owner requires a well thought out exit or succession plan to monetize their business into cash. The plan must be built upon evaluating alternatives to ensure the business value is maximized. This may include assisting in the development of succession plans to ensure a smooth transition to the next generation or current management team, packaging the business for sale and evaluating different alternatives in light of the business owner’s personal objectives.
During the process the business owner’s readiness must be assessed on a variety of levels:
- Financial Readiness – How much liquidity will I need?
- Mental Readiness – What is a reasonable time frame to transition my role?
- Business Readiness – How prepared is my business to operate without my direct involvement?
A key aspect of the planning process requires the business owner to engage experts to advise him or her. This is not the time to be getting advice from a neighbor or friend. Surround yourself with an advisory team you trust to help you develop a plan that aligns with your personal goals, assess your readiness for transitioning your business and evaluate the alternatives to be considered to maximize value.
So, what should this advisory team look like?
- Business/Valuation Advisor – Someone who can help evaluate alternatives to ensure the business value is maximized.
- Banker – A relationship manager who can assist with banking and financing relationships to structure a transaction, and investment and wealth advisory services to assist with investment options post-liquidation event.
- Lawyer – A legal advisor to assist in issues associated with transferring ownership and minimizing personal exposure.
- CPA – An advisor to assist in analyzing the tax impact of options being considered.
If you are a business owner contemplating a liquidation event in the next 3-5 years, now is the time to get started. Remember, succession plans do not materialize overnight and emotions run high during a buy or sell transaction. A well thought out plan with clear and realistic objectives in mind will help business owners feel good about their decisions when it comes time to transition to the next phase of their lives.
Outside expertise is critical to maintaining discipline and focus when exiting a business. The succession planning experts at JC Jones provides this expertise, and we welcome your inquiries.
For a confidential discussion of your situation, call us at 877-899-4072, e-mail Jack Canty, or click here to start a dialogue.
Posted by
Bob Baker on Mon, Mar 19, 2012 @ 08:14 AM
Practical Perspectives and Challenges for Beginning a Business Restructu
ring Process
Author: Bob Baker
Turnarounds by their nature are tough business. This is equally true for both profit and not for profit entities. A business model or mission that once was fine is no longer working. A change is needed to maximize value as much as possible. Moving the organization to a new spot, whether that is a “fixed” business model or the end of the entity, is difficult. The Board of Directors has a critical role and a vested interest in this transition.
When an entity finds itself in a non-sustainable position, the Board of Directors’ first role is to assess the organization leadership. Even when management has identified the problems, leadership change, or at the very least temporary augmentation, is often required. Most management teams do not have the experience necessary to cross the turnaround river. A good example of this is at Eastman Kodak where the BOD hired a national restructuring firm to lead the restructuring efforts.
In the situation where someone from outside the organization’s management recognized the problem, the Board of Directors should seriously consider a new leader. Something changed that jeopardized the business and the senior leadership team did not identify it and/or communicate it to the Board of Directors. This would be equivalent to asking “Physician, Heal Thyself”.
The speed of the management change depends upon a number of things, but the number one driver is the organization’s cash position. Actions taken when the next payroll is in jeopardy of being funded are different than when the company has the cash to run for six months. In the case where there is a cash crisis, it is critical to make the change or augment resources quickly. Bring in people with experience dealing with these situations.
Unfortunately, too often in a crisis situation the organization does not have the information available to understand the extent of the challenges. Particularly at a time of crisis, the Board of Directors must be insistent that the leaders (incumbent or new) have the information necessary to understand the underlying issue(s) and communicate effectively with the Board of Directors and other key constituents including financial institutions, suppliers, customers and employees.
The final and ongoing role of the Board of Directors is to ensure that there is adequate monitoring of the turnaround and business restructuring efforts. Senior leadership must have the tools and the skills necessary to achieve the challenging steps necessary to transition the business. The plan will evolve over time, but there should be a crystal clear understanding of the steps immediately in front of the organization as well as a solid view over the horizon for the steps to come.
For more information on the turnaround and restructuring services offered by JC Jones, call us at 877-899-4072, e-mail Bob Baker, or click here to start a dialogue.
Posted by
Matt Smith on Mon, Mar 12, 2012 @ 08:24 AM
Benchmarking Your IT Costs
A Six Step IT Assessment and Strategic Planning Process
Author: Matt Smith
Today businesses are more and more dependent on Information Technology (IT) to play a key role in meeting organizational goals. Often senior management receives input from managers and users that current IT capabilities are problematic and not aligned with what the business needs. Also, this situation will typically bring the company’s IT spend into question.
Here are 8 warning signs that your IT capabilities are in need of repair:
- Increasing volume of complaints from internal and external customers about IT issues impacting company operations (i.e. company customers not being serviced in a timely or complete manner)
- Increasing IT costs without clear benefits for the resulting IT services.
- Key IT initiatives that are not on time or budget.
- Majority of IT resources providing day-to-day support resulting in growing and pent up user demand. New projects are limited because IT is busy supporting the status-quo.
- Current IT capabilities not scalable and/or ineffective supporting a changing and growing business.
- Company is not competitive using technology and falling behind.
- An ineffective web and internet strategy, resulting in low volumes of traffic to the website and missed opportunities to convert web visitors into new business.
- Audit firm IT General Control concerns, particularly if they have received Board level visibility. Examples, a serious separation of duties problem or key operations problems due lack of testing for a recently deployed system.
Even one of these danger signs can be a considerable issue for your organization. When you have many of them, it is time to take action!
The consequences for an organization when IT is under performing or not aligned with the business can often be significant. Inefficiencies in operations will limit the ability to drive costs out of business operations (e.g. SG&A). Lack of current tools can present a lack of competiveness in the market place. The best examples here would be on the front and back end of operations (Sales and Logistics).
Benchmarking IT Costs …. Also, IT spend and the value to the organization is often questioned. Why are we spending so much on IT? A periodic benchmark of IT costs is advisable to compare your IT spend to your peers in your industry. IT cost ratios, typically represented as a percent of sales, can be very revealing. While a high ratio speaks to an obvious area of concern, a low ratio can suggest the company is under-investing in IT.
When is the last time you performed a thorough evaluation of your company’s IT capabilities, and developed a comprehensive IT Strategic Plan, with a particular eye on aligning IT with your business objectives? JC Jones recommends that an assessment and planning process be conducted by a cross-functional team led by a senior business executive. A cross-functional team approach - with IT as a supporting member of the team - ensures all constituents are involved in the process of establishing a plan for achieving alignment, making sure that all customers have their needs (and issues) addressed, and for getting the maximum amount of benefit from your firm’s investment in IT.
At a high level, the assessment and planning process results in establishing IT Strategies and Actionable Tactics. Here’s a six step outline that can serve as a starting point for the effort:
Confirm company business strategy
- Define business drivers and mandates
- Establish mission, values & stakeholders
- Review IT alignment with company strategy
- Conduct Strengths-Weakness-Opportunities-Threats (SWOT) Analysis
- Identify and frame strategic issues
- Match IT and company strategy
- Formulate broad strategies and consensus
- Develop specific tactics
- Short term
- Long term
- Review and adopt strategies and tactics
- Define implementation process, budget and plan
- One year
- Three year
- Develop communications and follow up process
With the proper input from all “customers”, and a step by step plan for assessing and fixing problems, you’ll find that your company’s budget for IT, becomes more than just an expense – it becomes an investment with a measurable return in terms of lower costs, higher productivity and more satisfied users.
If your business has any of these warning signs, please call us at 877-899-4072 or contact us here for a confidential discussion of your situation.