Strategy

Big Strategic Questions That Will Eat Your Lunch and You With Them If You Fail to Act

SharkBite.jpeg

Strategy: the word chills the spine, ignites excitement, or induces malaise like no other word I've observed people use.  When avoided, it can be quite costly but when articulated, integrated, and deployed effectively, can be extremely valuable for you and your organizations.  Strategy is simply "connecting ends with means", "connecting aspirations with capabilities", or as described in The Non-Profit Strategy Revolution "an organized pattern of behavior toward an end".  I think of Strategy like I do metabolism, I may not know everything there is to know about it but I know it's there, whether you think or act on it or NOT!  Strategies can be coherent or incoherent, articulated or unarticulated, designed or ad hoc, no matter what though, they're present in some way or another.  For most people and organizations though, if they're struggling, strategies are either unarticulated or ill-designed, and in many organizations or individuals, it's a product of a strong leader or innate characteristics of your personality or your organizations culture that contributes to your success.  The problem is, as many experience, that these ill-designed and unarticulated strategies do not stand the test of time, change of leadership, or significant change of circumstances.  Good strategies, well articulated, integrated, and deployed, can withstand all these changes but also result in vastly superior performance and bottom line results.  Sounds pretty good to me!

In my article "Going Where the Wind Blows You: The Ills of Having an Unclear Strategy", I described symptoms of poor or unarticulated strategies.  As in that article, I aim here to make strategy relevant and valuable for individuals and organizations in their transitions. This article is about recognizing when you're facing  a "Big Strategic Question", common types, and ways to think about these questions.

What is a Big Strategic Question?

These questions involve a change in circumstances that could have significant impact (both positive or negative) on your income/revenue, operational effectiveness/efficiency, regulatory or tax status, or more essentially on your ability to function well in your life or organization.  They can be a result of big changes  in market/customer base, competitive/industry dynamics, regulatory/tax changes (as we've seen recently), internal operational circumstances (change in leadership, legal or ethical lapses, etc.), or business model evolution (technology, industry available productivity improvements, etc.), and more.  Often, the answers to these questions are not immediately actionable but require architecting a coordinated set of behaviors, activities, resources, and more to fully achieve the outcomes sought in response to the Big Question.

Below are a few examples.  Use them to spurn your thinking about what your current Big Strategic Questions are and then spend some time designing a comprehensive response.  Contact Me for help if you should need it!

Market Changes

What if your customer base suddenly (or unrecognized over a longer period) shifts preferences and the way you currently provide value (products or services) no longer fits?

What if market wide shifts like higher/lower income levels, cultural considerations, or new substitute choices drive your revenues down?

Potential Market Strategic Questions:

  • How will this shift affect us? In what ways, for how long, is it temporary or here to stay?
  • What should our response be? Find a new customer segment? Shift our marketing efforts? Redesign or products/services to fit the new preferences?
  • Does this shift require improving our productivity to lower the price for the customer or does it require deeper changes like to essential components of our organizational model?
  • Our income and revenue has increased (for known reasons like inheritance, failure of a competitor and thus increased market share, etc.), how will we respond and build in a new, sustainable, lifestyle and market position with this new windfall?

Industry Changes

What should you do if your job is getting automated or your skills no longer fit the job?

What happens if your customers think they can do your companies work better than you can?

What if your competitors start competing more on price?

Potential Industry Strategic Questions

  • Should we compete on price? Do we have another advantage we can leverage?
  • Can we learn a new capability or skillset and out maneuver the competition?
  • Should we buy a competitor to gain further economies of scale and thus raise the barriers to entry?

Operational Changes

What if key operational characteristics or resources change?

What happens if the threat of natural disaster increases (as we see in Hawaii!)

What if critical elements of cost suddenly increase, like raw materials or skilled labor?

Potential Operational Strategic Questions

  • Should we improve our succession planning in the event key leadership changes?
  • Should we decentralize our operations to non-related regions so the threat of natural disaster won't have as high of an impact?
  • How should (or can) we incentivize employees in ways other than straight compensation?

Comments

As you can see, changing circumstances in your life and organizations environments require certain types of strategic questions to be asked.  The examples I include here are in no way comprehensive but are used to illustrate the point.  There is immense power in framing the question accurately and appropriately so that your response truly aligns with your values and outcomes you seek.  Good questions get much better answers, mediocre questions get diluted and mediocre responses.  Spend time crafting your strategic questions well in your life & business transitions and don't hesitate to Contact Me for help!

Resources

 

Going Where The Wind Takes You? The Ills of Having an Unclear Strategy

MoneyintheWind.jpeg

Without a clear strategy in Life & Business Transitions you're letting opportunities, money, attention, and effort blow away in the wind that could otherwise be saved or put to better, profitable use.  This post is about identifying the signs that point to an unclear, ill-defined, or poorly communicated strategy and some resources that will benefit your Life & Business immensely.

Defining your Strategy, like a vision, mission, philosophy, or principles, for many people and businesses, is in that category of "squishy, nebulous, unhelpful, or complete wastes of time".  The funny thing that I always say is "you have all these whether you design them purposefully or not, they're there and not having them clearly defined is likely costing you a lot of wasted time and money." A strategy is the framework within which you make decisions whereas a vision is the destination and guiding light, the mission is your purpose and your way of being, your philosophy is, well, for another post, and principles are those essential rules and mechanisms by which you operate. A good strategy sets boundaries, constraints, and entails focus.  It describes more about what you're NOT going to do than what you are by stating boldly "this is the position we're taking, the approach we're focused on, and who we're going to be in the marketplace, ecosystem, or "context" in which you provide our services."  This post is about identifying some of the symptoms that can likely be cured with a well designed strategy.  This goes for your life, business, non-profit, or sub-team in a larger organization.

Symptoms of a Poorly Defined Strategy

  • You look no different than your competitors or others providing similar services.
  • You don't stand out among your peers to potential buyers, partners, or donors.
  • Your prime stakeholders and shareholders are unclear about what your business or organization is doing in 5 to 10 years and are unclear about why you will or should still exist at that point.
  • Your employees and leadership don't know how to describe your clients or customers clearly and concisely.
  • You don't seem to have a high value (from the customers point of view) or cost/price advantage compared to your rivals or peers offering similar products or services.
  • When team members, managers, or key stakeholders are asked what your top 3 priorities are for the year, they have different answers or no answers at all.
  • When someone asks your clients or customers what sets you apart, they don't know how to describe it.
  • You feel as though your success is based on luck and hard work alone.
  • You can't seem to get ahead of the "busy-ness" of your business and life.
  • You don't have a clear reason or description of why you're doing business the way you are, with the resources you are, with the partners you are, and for the customers you are.
  • If you've been spending a lot of money, time, and attention on solution after solution (random improvement initiatives, various IT based solutions, flavor of the month motivational methods, glitzy marketing programs, etc.) but don't seem to be moving the dial on revenue increases, cost reductions, customer or employee satisfaction, or other important measures.
  • If it seems like anyone can get into your business and be a valid competitor.
  • If customers can just as easily (and are more than willing) to go down the road or to the next website and get a product or service just as good.
  • If you have high annual employee turnover (30% or more).
  • If your priorities in your life or business transition are unclear or constantly changing.

Signs of a Good Strategy

  • Where, how, and why you operate in the marketplace are clear to you, your customers, peers, or competitors.
  • There is a clear roadmap for your organization, it's transitions, and it's priorities for the relative long term are obvious.
  • You, your employees, family, or organization weather storms in your life, business, or marketplace relatively easily because all the participants are clear on priorities, what you are/aren't doing, and you're focused on what brings you success.

Recommendations for Crafting a Great Strategy

  • Best Recommendation: Get training and education yourself and practice often
  • Next Best: hire a skilled facilitator to guide you and/or your leadership( Contact Me here!)
  • Learn Yourself: utilize one of the following resources to learn more
  • Simplest but Mostly Just Introductory: do a web search for "strategic planning template" and find a see of them available.  These will introduce you to some of the concepts, methods, models, and tools available.  This is a good starting place.
Focus.jpeg

At Next Callings, I work hard to make sure my customers all have a solid foundation in their Life and Business transitions and having a clear, useful, and valuable Strategy is an essential element for that.  Contact Me for help in developing a clear, communicable, and valuable strategy for you and your organization.

Succession and Exit Planning 101: Key Components of a Successful Business Exit

Succession.jpeg

Succession and exiting a business are an often under appreciated and under planned for event in many businesses.  "Succession" most generically really means passing ownership or key management roles to another individual or group of individuals and when eventually, you no longer are involved any longer.  Succession and exit aren't necessarily synonymous with being bought out, from an internal or external buyer, but it often is for small businesses.  However, most people think of succession commonly associated with an owners or executives retirement or exit at the tail end of their time in the business.  This is a common mistake many businesses make and could be mitigated by following a few key practices that will benefit their businesses now as well as when succession time is upon them.

This kind of planning is critically important for business owners to secure their financial interest in their companies before, during, and after they exit.  Beyond that, it is my belief they owe it to their employees, business partners if they have them, their communities and local economies as well, to ensure successful business continuity and thriving beyond their involvement.  Their creation has turned into the livelihood of many more than just them as well as a being participant in the wider economic engine locally and even national if you think of the cumulative effect of small and medium sized business have on GDP and employment in our country.  Plan well, execute effectively is the motto here!

Here are some common failure points for small and medium sized businesses when it comes to being positioned for maximum succession success

  1. Business Structure is not optimal - talk to your attorney and CPA for this but you may not be positioned well from a purchase standpoint but also for best tax efficiency perspective.  Whether you're an LLC, C-Corp, or S-Corp, you'll need to identify your succession strategy and plan and then talk to your local experts to find out if/when you need to transition your structure.  In some cases, it can take up to 5 years to totally restructure.  You CAN still sell a business and transition ownership during that time but working ahead on this can mitigate a lot of stress and hiccups but will also make a purchase more attractive to buyers.
  2. Owner Compensation is Minimal - many owners I've met have not been paying themselves a salary or bonus in a direct way that shows up on their financials.  This isn't any shady dealings by any means but is most often associated with their particular tax structure and how they integrate with other businesses and investments in their life.  To be in the best shape possible, you'll need to clearly identify the compensation/benefits/perks of being the owner of the business and this includes direct monetary compensation.  Talk to your CPA and a Transition Consultant such as myself to find out the competitive compensation structure for your industry to be the most attractive to a buyer.
  3. No Management Beyond the Owner - some buyers might be interested in taking over management responsibilities but if you don't have any other management structure in place when you want to sell you'll turn away a huge potential buyer pool of investors and other buyers who want to own a business but not be the main manager.  Also, this also signals buyers that you as the owner probably wore MANY more hats than just a manager and so they'll want to know more depth about your responsibilities, capabilities, and skills that made your business the success it is.  Having a COO, Supervisor, or Manager a few years prior to succession/exit can make this hurdle a non-issue and probably enable your business to grow a good deal prior to you leaving, which increases your potential purchase price as well!
  4. Process and Employees Aren't Positioned Well for a Transition - if your processes aren't documented, clear, and as standard as possible, buyers will sense a potentially insurmountable learning curve to learn your unique business practices.  Get them documented and standardized.  People side, they need to have their expertise, capabilities, and value to the business clear for buyers and managers transitioning in.  Not only to keep the business running efficiently and effectively through the transition, but to provide your employees grounding and justification for their maintained employment beyond the owners transition.
  5. No Long Term Business Plan - standard practice for medium and large companies is annual strategic and long term planning to keep the machinery focused and aligned for success.  Small businesses can learn from that rhythm, especially when it comes to preparing for an exit and succession.  Buyers will want to see some past performance history but also get a clear picture of your industry, trends, market awareness, customer profiles, risks and opportunities, as well as growth opportunities in the works or waiting to be seized.  There needs to be some facts, data, and meat to this document and it can take a little time to put together.  Once you get over the initial hurdle of making one, you can update on an annual basis with much less effort and be positioned well for your exit.  Additionally, this will keep your key risks, opportunities, and plans in front of you and moving forward that can again, raise the current growth and profitability of the company and thus the potential sale price of your business.
  6. Owner Doesn't Have an "After Exit" Plan - many owners I've talked to, customers or otherwise, have great intentions, some plans and actions in the works, but also seem to be delaying their exit in part because they don't have a clear idea of what and who they'll be post exit.  If you've spent 20-30 years in your business, often you ARE your business, and so leaving it will be incredibly disruptive in many positive and also negative ways.  Looking ahead and doing some level of lifestyle design and planning will immediately help you alleviate fears and uncertainties but also give you clarity on your transition that can be shared with employees, partners, and spouses when the time is right to do so.  This is the place where I work with customers in my 16 Hour, Next Callings Experience to do just that.
  7. Not Planning for Succession Early and Often Enough - planning for business succession and exit is AS critical as proper personal estate planning.  It's immensely important but not urgent and biting at your ankles to take the time and effort required.  However, the negative consequences of not planning and positioning yourself and your business and experiencing an immediate need to depart are SO huge that you can't ignore it.  Once your business is established, has a steady market position, employees, and your livelihood depends on it, part of holistic business practices ought to be ongoing planning and updates for succession and exit.  It will benefit the business now in ways you won't foresee but will position your business for successfully transitioning and thriving beyond your involvement.
SurviveandThrive.jpeg

As an owner, one goal is to avoid being overwhelmed with adding an almost new job on top of existing responsibilities in life and business, so start early and understand the roadmap ahead for your transition.  Seek the help of qualified professionals like Transition Consultants, CPA's, Certified Financial Advisors, Valuation Experts, and Attorneys.  If you feel like you're not in the best shape for an upcoming transition out of your business or you'd like to get your succession foundation in place, please schedule a free consultation or via the Contact Page.  Next Callings operates as a project manager for these transitions as well and helps simplify the complicated, clarify the vague, and remove the barriers to a smooth life and business transition.  Contact us now for a free consultation.