Posts tagged with: strategic planning
When was the last time you revisited your vision for the business. It’s essential to think strategically.
Your vision and exit plan must agree. Strategic planning is a process, not a static step you take and you’re done.
You can apply strategic thinking to every part of your life, your business or any other endeavor. Strategic thinking is the key to achieving every goal you set because it helps you reassess and stay focused on the present opportunities leading to your long-term goal(s).
Wide Angle Lens
You need a wide-angle lens to see the whole picture, to see the big picture, to see the end game for your business.
You have a vision for your business. That’s a fact. Maybe you wrote it down and maybe you did share it with your team when they came onboard. But do you review it with them regularly? Do they know how their work and their efforts help to deliver the desired outcome (financial, customer relations, growth, product development, etc)? This attention to your vision is essential to ensure your efforts are always leading towards your desired exit plan.
A Strategic Approach to Vision
Developing a strong vision statement takes time. It can’t be expressed, refined, tested and reviewed on a 24-hour deadline. You need to test that vision statement in those exact words in the marketplace, with vendors and most importantly with your team.
It would be funny if it were not so damaging to businesses, to survey the executive team of almost any company – and ask them to explain the vision statement from their viewpoint and their tasks and responsibilities to the company. Most of the time, the different department heads, never mind their teams, have a culture of fiefdoms within the business and don’t communicate well outside their own domain. As a result you end up with lots of silos, isolating teams, instead of collaborating more in the best interests of the company.
What Drives Your Vision?
Do you know what drives your vision? Drivers give power to your vision. They are tangible and measurable elements as well as the core values you want embodied in the business, in each member of your team and in the customer experience – think LL Bean.
Only when you are absolutely clear on the vision for your business, can you declare the mission for your business. Without the strategic viewpoint of the vision, there is no foundation to sustain the mission.
Structure and Your Exit Plan
When you implement a structure and build the resources to take on all the key roles in your business (human resources, assets, organizational structure, etc); they must be aligned with your exit plan. You are building a business to be in a position to exit that business on your terms.
You must envision how the business will be managed (by you or others), the support team you need in place (adding tangible value to the business), and the structure and systems that must be in place to make you superfluous to day-to-day operations.
This becomes your goal, to ensure every detail has been assigned to someone else and you can maintain or possibly grow revenues even as you remove yourself from day-to-day activities and decision-making.
A vision and a vision statement are essential to any strong business. But even more important is how you deliver on that vision with an exit plan that lays out how to achieve the vision. However, all this planning is for naught if you don’t act. Implementation is essential. Nothing else substitutes for implementation. Therefore, the vision statement and the exit plan becomes the bookends of implementation. They must agree strategically.
Don’t start on the finish line. There are five arts to master to build wealth and exit your business. That takes time.
Strategic Planning – The Art of Direction and Decisions
Building wealth and exiting your business don’t start when you are closing in on the finish line. It’s proven that when you focus on selling your business two to five years before initiating the sales process, you will almost certainly realize a much larger return. Developing a systematic approach to growth with a focus on your long-term goals makes every decision along the way easier, even in the face of risk, incomplete information, or unexpected change.
Continuity/Succession Planning – The Art of the Changeover
A systematic approach to succession planning gives you control, choices and sufficient time to choose, train and transition management, of your business. Your job here is to maximize the value you receive when you sell or transfer your businesses. You need to identify an owner-centered approach to exit planning based on your goals, objectives and concerns.
Exit Planning – The Art of Monetizing Your Business
Exit planning for wealth is all about maximizing and preserving the transferable value of your business. It’s extremely important to integrate personal, financial and estate planning goals; and then coordinate them with the growth goals and opportunities of your business; to maximize profit and minimize tax liability on both sides. Your fiduciary objective is to transfer ownership and corporate value as profitably as possible.
Contingency Planning – The Art of Structuring Your Business For Opportunities, Possibilities And Growth
CEOs in general never take time to develop contingency plans. They are building a prosperous business not planning for a crisis or its demise. Skipping this one element of their business minimizes the value they can expect a buyer to pay for the business. You must develop those contingency plans and build the foundation elements to maximize valuation and make the business buyer ready.
Transition Planning – The Art of Reinvention
When you stop and think about it, most entrepreneurs do not measure success in terms of the financial rewards, but rather by the freedom and potential legacy that these financial rewards confer. But entrepreneurs often postpone transition planning because they struggle with how they would use their new freedom and how they want to define their legacy. You need to learn to find new purpose, community, and structure for your time; and then how to master wealth management and its new challenges and responsibilities.
Nightingale Success is a weekly newsletter offered by Nightingale/Conant. In one issue, Tom Gegax said:
“Too often leaders who lack the time to think strategically don’t use the full potential of their employees. People who think they can do it better if they do it themselves, or feel they might lose control if they delegate, create more problems than they solve.”
A key piece of the puzzle of leading a championship team is to learn to delegate effectively so that more of the detail tasks come off your plate, and the crises don’t occur as often. Then strategic planning can take its rightful place as an important use of your time at the helm of your business since effective delegation frees you up for more important pursuits that can raise profits and prepare the business for sale.
Here is a core delegation skill set with my observations.
1. Completely Transfer Ownership – Be very clear that you have relinquished ownership, that the monkey is on their back not yours any more.
2. Explain Why – Explain to employees why they are being asked to take on the assigned task – it cultivates support, confidence and initiative.
3. Get Their Wheels Turning – You must mentor or coach the delegate to develop an effective action plan, e.g. ask good questions or leading questions.
4. Determine Deadlines – A goal without a deadline is only a dream. Agree to a firm deadline to avoid any task slipping to the bottom of the employee’s priority list.
5. Ask for a ReCap – Always double check, never assume perfect understanding. Listen carefully to what they heard – that’s what they’ll do. You may need to repeat this multiple times as each new project unfolds.
6. Monitor – Do Not Hover – When you delegate you have to let go, so don’t defeat the purpose by micromanaging unless absolutely necessary (e.g. new employee, critical path factors).
7. No Take-Backs – This is hardest for the leader who knows how to do the task in his sleep. The opportunity, when the first signs of trouble appear, is to patiently coach your employee back on track rather than usurping the project yourself.
8. Play to Each Employee’s Strong Suit – Tailor assignments to people’s strengths. Know who is a big-picture thinker and know who is superb with the details.
9. Don’t Duplicate – When you delegate, don’t overlap assigned tasks. If two or more people are involved state clearly, up front, who’s in charge.
10. Distribute Evenly – This takes some forethought, but you will build a stronger championship team if you delegate some challenges to promising less-tested people and not just rely on your star employees.
You can delegate individual tasks or you can delegate responsibility for an entire project.
The more you delegate, the more time you free up for strategic tasks, developing your leadership and visionary skill sets too.
I help clients to set up processes for everything– even if they are the only one to follow the process. By writing them down, you no longer have to reinvent them every time they must be done. And as soon as you can delegate a process, it is in place and spelled out ready to give it away.
For each system, process, procedure you can get out of your head and on paper you will gain more time, not just once but every time that process needs to be repeated. For every system, process and procedure you can standardize and document, you are adding measurable value to your business that will come back to you at the sale.
When and how long to spend on strategic planning depends on the company itself. At a minimum, any company serious about achieving goals, must allocate time for long-term planning, goal setting and review on a consistent annual basis. This project must be sacrosanct.
Especially, if you are already within the 5 year window of your target exit date, there can be no exception, no excuses for not doing strategic planning.
Your annual strategic planning should tie every goal, every system, every budget and hiring decision to your exit criteria and timeline. Following this strategic plan will help you position your company as one that ideal buyers will be eager to scoop up – maybe even before your target date.
But strategic planning is not just an annual event. You must then roll it back into goals, planning and tracking each quarter, each month and each week. At this granular level, your strategic plan will drive every decision, every expense and every task each employee works on thus increasing productivity and value daily.
To ensure your planning is done in a very comprehensive and detailed fashion consider the following guidelines. Implement your strategic planning process at each of these milestones
- In the third quarter for the following fiscal year.
- In preparation for a new major venture, for example, a new department, new product, new market channel.
- Action plans are updated to be sure objectives, responsibilities, time lines and budgets are on course.
The attorneys report that historically,
only 10% of all the deals business owners want to implement, actually get to the closing table and get done.
The list of reasons why they fail is lengthy. It comes down to the owner’s preparation and stamina in mindset and skill set to get the job done.
An implementation is the realization of an application, or execution of a plan, idea, or policy. To implement a plan (e.g., a strategic plan, an exit plan, or a succession plan) is to carry it out, to accomplish all the details of the plan. When you commit to implement a plan or strategy, it’s a commitment to ensure the fulfillment of that plan by specified concrete measures.
A strategic plan and an implementation plan are not the same thing. The strategic plan tells you what to do, why, when and the budget to do it. The implementation plan spells out the details of how, the resources, timeline, requirements, etc. They are two sides of your exit planning to think through.
The key to your successful exit is implementation. Full implementation of your desired exit option, to transition to your reinvention, requires following through on a detailed, well-constructed plan. Your exit plan has many moving parts. You must constantly orchestrate all of them. Internally, you must coordinate your team, successors, experts, vendors, clients, budgets, prices. You must align the company goals, market value and corporate objectives with your personal exit criteria and priorities. Executing your exit plan cannot be delegated or outsourced. You must take charge of every step of this implementation to ensure you get to the closing table on your terms, on your timeline.
The challenge to your successful exit is also implementation. It’s a big load. Often, most of the pieces need to stay confidential and independent of day-to-day operations. Balancing your exit with daily operational priorities can be distracting and exhausting. I believe that implementation is where most business owners buckle under and can’t get the deal done because, from their point of view, there are:
- Too many balls to keep in the air
- So many new once-in-a-lifetime decisions to make
- All the changes to make in the business, in their leadership and in their business model
- So many different experts to bring up to speed – all charging full rates
- All the contacts and negotiations that take longer than anticipated
Moreover, there’s the loneliness and isolation of working through this process which takes years, especially when you try to do it alone. Our clients at This Way Out™ Group LLC appreciate the support of a virtual partner at their side through the whole process.
Continuing on with questions about your exit strategy, here are three more questions to help you explore the bigger picture and opportunity your business offers if you start planning early.
- What do you need out of a transaction or transition to have the financial independence for your next venture/adventure/retirement?
This is really two questions and to answer the first half, you need to answer the second half first.What will you do next? Do you have a plan? Do you have a project, venture, hobby in mind? Will you travel for 2 years and then build a house up in the mountains? Will you go back to school as a student or professor? Will you volunteer?Your plans for your next steps or avocation create the baseline of your financial requirements from any transition or transaction you decide on. Think through your aspirations for the lifestyle you want and the goals on your bucket list you want to fulfill once you exit this business. Clarify what you’ll be doing and what it will take to fund your financial independence. That will set some parameters on your company valuation and the structure of your exit to ensure your future.
Run the numbers so you know how much you need from the deal so you know with relative certainty that you can pursue and achieve your life’s goals. That has to include basic living expenses, health care costs, long term care costs; and any education funding for children or grandchildren, travel costs, replacement vehicles, vacation home, weddings, philanthropy, legacy planning, or tax liabilities.
- Do you know what your business is really worth on the market?
You need two numbers. In the end it’s up to you to make sure they match.
You need to know how much cash you need to take away from the sale of your business, regardless of the form the transaction takes. And you need to know with brutal honesty the market value of your business – what it is actually worth, not what you think it’s worth.
Market value always trumps what you ‘need’ out of the business. Don’t get trapped into terms you don’t like because you were only looking at the valuation number. Use independent experts to value the business before you get locked in during a negotiation. They can often show you some strategic changes to increase market value in your favor.
- What should you be doing now to minimize your future tax liabilities?
Don’t look at taxation in isolation. Revisit your business plan now and consider the tax implications for your growth curve. Expand your strategic planning to include contingency planning, succession planning, transition planning, and then run some financial models to see which options look most attractive for your future.
Whether you intend to sell your business in the next couple years, or you’ve set a date 5-10 years from now, it’s never too early to start the planning process. Planning now will help you clarify your ultimate goals you are aiming for. The business will be the primary vehicle or source of funding to provide financial freedom so you can achieve every goal you set.
Most business owners will see the title here and skip the whole thing. After all, they’re too young and too busy in the business to answer questions about their exit strategy. Why should they start planning their exit strategy now?
You’re not one of them. That means your eyes have been opened to the imperative of thinking about your exit from the outset – or at least from today forward.
You realize that you have no intention of working this hard for another 5, 10 or 20 years. You’ve built a business you are proud of, that rewards you nicely today and you want to be able to walk away on your terms on your timeline.
Sounds simple and reasonable. But for many logistical, emotional, and financial reasons, it can’t happen overnight. Unfortunately, most business owners neglect the topic, don’t consider the decisions, and leave the process to the last moment. Unlike their decisive leadership that got them to this point, they’ve sidestepped the following questions for various reasons. You don’t have to.
There are five key questions about your exit strategy you do want to spend time considering, and exploring the tradeoffs of different answers. Sometimes the answer to one dictates the answer to others, but if that one answer changes, you open up other latent possibilities you’d never thought of before. When you lay out your answers to these questions, you will be in a better position to take timely steps and integrate all the necessary elements for your exit. You will be in control of effectively negotiating a successful business transaction to achieve your optimum exit.
Here are the first two questions about your exit strategy:
1. How much longer do you want to be actively involved in the business?
Vague answers like ‘at least 5 more years’ are a way to avoid the question. Dig deeper. Maybe it’s easier to look at what you want to accomplish in the business before you’re ready to walk away. This date is important because it triggers every other action, trigger and date along the way to get there.
Most successful exit transactions take long-term strategic planning. They can’t and don’t come together in 60 days. You must start the process before you ever thought it would be necessary because it takes far more time than you imagined to line up all facets to suit you.
To maximize the value of your business when you do exit, you need to have a clear goal for the company and for your own/your family’s future.
2. Who will be your likely successor?
Have you thought about who should be your successor? Should it be your children, one of your children? Should it be your employees? Or would you look for a buyer well-suited to the business, who can take it to new heights? Maybe you think it’s in your customers and staff’s best interest to be acquired by an industry giant or your biggest competitor?
There are many options. What’s optimal depends on you, your goals, your industry, your company culture.
I’ll post the other three questions you need to answer shortly.