Critical Success Factors for Growth Presented for YEO by Rich Russakoff Bottom Line Consultants.
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Transcript of Critical Success Factors for Growth Presented for YEO by Rich Russakoff Bottom Line Consultants.
Critical Success Factors for Growth
Presented for YEO by Rich Russakoff
Bottom Line Consultants
BOTTOM LINE CONSULTANTS IS DEDICATED TO
NURTURING AND ENCOURAGING THE ENTREPRENEURIAL SPIRIT IN
INDIVIDUALS ANDCOMPANIES THROUGHOUT THE WORLD
BLC Mission Statement
Facts and Figures
28 million businesses in the U.S. 96% under $1 million in gross sales 76% less than three employees 3.6% $1-3 million in gross sales 0.4% $8-12 million in gross sales
Most employ less than 50 employees
Facts and Figures
17,000 companies have $40-75 million in gross sales and up to 350 employees
Only 2,500 companies gross more than $500 million
500 companies in the world do over $11 billion in annual sales
Facts and Figures
Over 11,000 publicly traded companies
Only 800 large capitalized companies
1500 mid-capitalized companies ($1-$5 billion)
Remaining 8,700 micro-capitalized companies (up to $1 billion) INC consulting study 1989 of 87 and 96
reasons
You Are In Control of Your Firms Destiny?
Growth Cycles
Ramp up Rapid growth Stability and maturity Gradual decline – must realign
resources
HOW IS GROWTH EXPERIENCED?
How Does GrowthL k?
How Does Growth Look?
$0
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
$8,000,000
1998 1999 2000 2001
Stage I
Stage II
Stage III
How Is Growth Experienced?
At What Stage of Growth is Your Company?STAGE 1 - Sales Driven
Focus on sales Loose structure Internal structures
are underdeveloped
Accounting, quality and efficiency are low priority
Agile/Flexible Creative Trial and error
approach Family
environment mantra “everyone does everything”
At What Stage of Growth is Your Company? STAGE 2 - Operations Driven
Fine-tuning system Focus on internal
structures and controls
Functional departments emerge
CEO delegates tasks
First critical test Supervisors are
hired/promoted
At What Stage of Growth is Your Company? STAGE 3 - Transforming: Recreating the Business
What used to work no longer does
Communication break down
Lose touch with clients
Systems become obsolete
Barriers emerge between departments
Incremental improvements are ineffective; acceleration-turbulence
At What Stage of Growth is Your Company?STAGE 3 - Transforming: Recreating the Business
CEO lacks clarity of vision for future
Reactive instead of proactive
New mantra is specialization
Internal instead of external focus
Hinge between “mom & pop” and professional
Critical test 2 and 3 fire reinvent
Possible Action Items
Identify your firms current stage of growth
Determine the current challenges you need to overcome; what is your mantra?
How can you best prepare for the next stage of growth?
Are two companies or divisions at different stages?
The Chemistry of Sustained Growth
From “Mom & Pop” to a Professional Company Who
Begins with You Vision
Set the course Focus
Rocks/Boulders Create the Team
Hire the best/Fire the pests Establish
Core values
The Chemistry of Sustained Growth
Challenge Assumptions with brutal facts
Determine then challenge Business model
Identify value drivers Create and sustain BIG MO
Sustaining Growth
Every driver of growth is accompanied by some type of limiting process, such as: Awakened competitors Over-taxed suppliers Internal capacity constraints (cash or
talent)
Sustaining Growth
The growth mindset cultivates Carefully nurtured Experience-based Invest now for future return behavior Every business is successful until it’s
not
“Managing the status quo is more dangerous
than launching into the unknown...”
8 Crucial, Constant, Continuing Tasks of the CEO who
1. Vision2. Leadership3. Empowerment4. Relationships
5. Feedback6. Entrepreneurship7. Fiscal
management8. Personal style
The CEO’s job is to shape the future of the firm by:
Creating a compelling sense of: Vision Purpose Direction
8 Crucial, Constant, Continuing Tasks
Vision: To clarify the
general, overall goals of the company, defining where it is to go Paymaxx
Action Items Clarity of Direction Through Vision
Projecting 5-10 Years in the Future
What is your market position and market share?
What is your service mix? Who are your customers? How did you grow? Setting the
vision.
Action Items Clarity of Direction Through Vision
Projecting 5-10 Years in the Future
What kind of challenges did you face and overcome?
What geographic areas is the firm operating in?
What is it like to work for the firm at this time?
Take your leadership team through this strategic exercise
Rock On…
Focus on your greatest priorities rather than trying to do too many things –who has the monkey
SWOT analysis Make up a list of possible priorities for the
next quarter (Rocks) identify key r&b Make up a list of goals and
accomplishments for 2004 Create Big Mo
Rock’s First Quarter 2002
Hire purchasing manager Create ongoing vital financial reports
for bucket system Front office reconstruction Customer service basics and beyond Complete package for container
customers
Profit
Cash on hand $XXX,XXX
Sales $X.XM
3rd Quarter Rock’s 2003 – Cash is King
Boulders 2002
No single account to be more than 25% of revenue (run rate) - J, sales team
Add or grow an additional 2 major million dollar accounts - J, sales team
Enhance and building the Four Hands brand - Mo,b,h
Customer service company-wide - M,e,j,rr
Boulders 2002
Training – follow up review process - LT,rr
Manufacturing sources other than India - B,h
Bucket system in force
Possible Action Items
Perform SWOT analysis Identify the four to five most
important priorities Limit rocks to no more than five or
create theme Assign appropriate ownership of
each rock to a leadership team member
Possible Action Items
Determine who else will be involved in the “crushing” of the rock, as well as specific deadlines and time frames
Monitor progress during weekly/monthly meetings
Get rocks crushed each quarter to build momentum
Possible Action Items
Make up a list of goals and accomplishment for 2004 (Boulders)
Determine goals for at least three years out
8 Crucial, Constant, Continuing Tasks
2. Leadership: To focus the right resources on
accomplishing these goals people, technology, capital, strategic
relationships, advisors
4 C’s of Leadership
1. Competence2. Concern3. Communication
Skills4. Consistency
Face The Danger
The World’s Greatest Management Principles
What gets measured, gets done
You get more of the behavior you reward
8 Crucial, Constant, Continuing Tasks
3. Empowerment: To aggressively select and develop
team members able and committed to achieving the vision (Establish core values)
Hire the Right People, Put them in the Right Place
First Priority - great is three times better than good – great time to find great people
Profiling - Eclipse Build a bench - CEO and everyone’s
job Hire great attitudes/values – fire bad
ones - Emma/Mona
Hidden Costs of Employee Turnover
Recruiting Interviewing Testing Training
Lost knowledge Organizational
disruption Ramp up time Finding the right
fit
Possible Action Items
Critically assess your staff’s skills and attitudes
Let people go who are holding your firm back
Consider a profiling system Start a rolodex for potential future
hires xx
Core Values
This is how we do business This is our culture When your values are clear, your
decisions are easy Maxon’s Establish core values
Maxon’s Core Values
Focus on the solution Strong sense of urgency Accountability for actions/results Seize new opportunities Professionalism and integrity
Maxon’s Core Values
Be a positive force Proactive attitude Constant improvement and learning Unselfish team orientation Exceed expectations
8 Crucial, Constant, Continuing Tasks
4. Relationships: To forge coalitions with peers,
subordinates, and important outside decision makers
Action item – identify today’s and tomorrow's most important relationships
8 Crucial, Constant, Continuing Tasks
5. Feedback: To listen carefully to clients, staff and
other relevant persons, as well as the public
Management by walking around (Internal)
Lew Gerstner at IBM (External) “Ask, don’t tell”
8 Crucial, Constant, Continuing Tasks
6. Entrepreneurship: To enhance current and find future
opportunities How will/does your firm make money?
Brutal Facts /Business Models
Problems/Solutions/ Change Nothing stays the same – Growth may
demand new models-different people, paradigms and perspectives – SW Air - EMA
Critical numbers – by profit center-region-employee customers one project
Constant search for brutal facts – Maxons nobody selling
Four Hands: Brutal Facts 1999
In order to grow Four Hands needed: Timely financial information and
analysis More inventory More people More capital
Generating lower profit margins
Four Hands: Brutal Facts January 2002
Dependency on: 1 Country 2 Major Customers 3 or 4 Vendors Highly Leveraged
Law Firm: Brutal Facts 2000-2002
Veterans’ Legislation Physical space for growth Wrong person managing admin
staff Attorneys not handling enough
cases Amount of time spent per case
Brutal Facts
How precarious is your business? Does it rely on too few:
Products Customers Distribution channels
Brutal Facts
How focused is the business? Are there too many:
Products Markets Initiatives
Brutal Facts
Are you running on empty with too few opportunities?
One of the greatest obstacles to growth is inertia.
“SUSTAINED GROWTH ULTIMATELY REQUIRES THE
COURAGE TO ABANDON ONE GROWTH PATH FOR ANOTHER.”
RUPERT M. TOMAKSO
Brutal Facts
Business Models
Critical Questions Is the cost of acquiring new clients
growing? Is your market niche growing? Are your differentiators shrinking?
What Is Your Business Model?
Can you continue to grow the business and remain profitable? “Cash is King” again Top line growth Bottom line profits
The Business Model
Faster Better Cheaper
The Business Model
Scalable Brave new world Containers direct – faster, cheaper,
brave new world, scalable
Business Models
Business Model - Starbucks
Scalable -1,200 stores - 2002 Chain- licenses, not franchises
In-store branding – $20M in 20 yrs on advertising- P&G – spends $30M annually - top 100 brands SB-88/PG-92
Creating coffee experience; take commodity out of product
Business Model - Starbucks
International growth - 5000 locations on four continents
Regionalized financial reporting- spots trends/best practices
Relational capital-customers/suppliers/staff –Part Time employee stock options – reduced turnover from 175% to 65%
Strategic relationships with Kraft
Jack Welch
Allocate resources based upon return, not on need
If you don’t have a competitive advantage, don’t compete
Change before you have to
Face reality as it is, not as you want it to be
Possible Action Items
Begin a process to learn more about other models that you might adapt xx
Determine if your model is still viable
Determine your weaknesses and/or enhance your competitive edge
Possible Action Items
Set aside time to identify your Brutal Facts
Determine what action items you must take to protect and grow your business
Implement and continue to re-examine, implement, identify
8 Crucial, Constant, Continuing Tasks
7. Fiscal Management: Ensuring consistent cash flow and profitability Top line for ego; Bottom line how to keep
score No cash flow, no business / banks/ factors/
partners/ investors/ accounts receivables/ margins/ money management /user friendly financials/ identification and charting of value drivers
Assessing the Best Wayfor Your Company to Grow
What is the cost of capital/growth? (time & dollars): Self financing growth Debt service Giving up equity Mergers and acquisitions Your business focus
How do you guarantee ongoing cash flow?
Sustaining Growth
Value Drivers: Profits resulting
from creating hard to duplicate benefits to customers are a sustainable renewable resource
What Creates the Perception of Value/Higher Multiples?
Rate of growth Current
profitability Future profitability Quality of
management Credit history Balance sheet
Industry trends Quality of
competition Learning curve Market branding Deal structure
What Creates/Drives Value Drivers?
Revenue Run Rates from all-profit centers
Solid recruiting; High retention rates High gross margins High net income High growth rates Good management; solid
Infrastructure Diversified customer base
Identifying Value Drivers
What is your revenue per employee? 500 largest companies worldwide -
$289,000 average revenue/per employee
U.S. Entrepreneurs - $100,000 average revenue/per employee
Microsoft - $285,000 average PROFIT/per employee
Value Drivers/Critical #s
# of calls # of intakes # of cases signed
up Cases per attorney Cases per case
managers/ assistants
# of cases going to hearings per month/office
# of cases going to hearings per month/attorney
% of cases won Time it takes to
collect funds Time it takes to
have hearings and settle appeals
Measuring Critical NumbersWholesale Warehouse Operation
Current Inventory - $1M Gross profit - 40% Turnover - 2x Net profit - 5%
Goal for continued operation Inventory - $500K Gross profit - 45 % Turnover - 4x Net profit - 15 %
Changing Value Drivers: Four Hands
Container model From number of dollars shipped And number of containers shipped Number of containers directly delivered
to customers
WITH 10% BOT TOM L INE PROFIT:$100 MISSPENT
REQUIRES $1000 IN ADDIT IONAL REVENUE JUST TO PAY FOR THE MISTAKE
Carelessness and Mistakes are Expensive
Possible Action Items
Identify your current value drivers and determine others
Compare your profit and gross revenue per employee with industry averages
Have appropriate value drivers calculated and presented to you on a monthly basis
8 Crucial, Constant, Continuing Tasks
8. Personal Style: By personal example, to set an overall
tone of integrity, competence and optimism a box of nails
Possible Action Items
Determine if you are stuck in the past or not actively focusing on reinventing: Yourself Your company Your future
Possible Action Items
Identify your personal areas of strengths and weaknesses to determine if there are areas where you need to: Hire great people to handle tasks where
you lack strength Start focusing on area's you have
neglected Eliminate tasks you are currently doing
that should be turned over to others xx
Possible Action Items
Stop doing what won’t get you there Create Big Mo through vision
systems chemistry Create a culture that embraces
change
THE ONLY WAY TO SUSTAIN SUCCESS IS TO RE-INVENT IT
Don’t Fix the Past, Create the Future
Face The Danger
PLEASE FILL OUT THE EVALUATIONS AND BRING THEM UP FRONT
Thank You
P R E S E N T E D F O R Y E O BY R I C H R U SS A KO F F
B O T T O M L I N E C O N S U LTA N T S1 5 0 0 C E D A R B LU F F D R . , R I C H M O N D , VA 2 3 2 3 3
P H . ( 8 0 4 ) 7 4 1 - 5 7 7 1 FA X (8 0 4 ) 7 4 0 - 3 3 8 3R I C H @ B O T T O M L I N E C O N S U LTA N T S . C O M
W W W. R U SS A KO F F. C O M
Critical Success Factors for Growth
Goal Setting
Good leaders don’t manage people – they manage goals
CEO coaching Help people achieve mutually agreed
upon goals Make sure goals are realistic and
obtainable; “Smart goals”