What Truly Grows a Company?


What truly makes a company grow? What made my previous company, NuVo Technologies, achieve a compounded annual growth rate of 59 percent over five years? While the work of growth may not be easy, the answer of how to grow is remarkably simple: Growth happens because of great people with a strong plan.

Yes, It Really IS the People

Julie Jacobson, the respected editor of CE Pro (a consumer electronics magazine), once asked me, “David, what’s the key reason for the growth of your business?”

Without hesitation, I answered, “People!

“O come on, that’s so cliché,” she said.

Perhaps. But it’s the only true answer I could give her.

To become strong (and stay strong) a company needs motivated, aligned, and diverse people who bring the strength of many disciplines. Engage those people through a positive and transparent culture, and it’s like high-octane fuel. The way you build that culture is to communicate the company’s goals and vision.  And then back it up with strong values and consistent behavior.

People are your most important raw material. You also need a strong foundation. That comes in the form of a clear plan.

A Plan Provides Path and Purpose

Early in my career, I worked for Thornton Environmental Services, a creative and exciting small business that sold landscape architectural services and contracting. The owner, Gary Thornton, embraced Walt Disney’s creative thinking methods and, consequently, innovated one of the most successful commercial and residential design build firms in the region. Creative thinking is like brainstorming on steroids. But you don’t stop there. You then hammer those creative thoughts with realism and filter the ideas into actionable detailed plans for achievement.

As I moved forward in my career, I continued to learn about the importance of planning. At Loth MBI, an interior design and office furnishings company that grew to over $45MM, I got hooked on strategic planning. We participated in “Strategic Eight” planning, facilitated by Bill Menke in association with the Greater Cincinnati Chamber of Commerce. This provided a process that allowed us to:

  • Engage different disciplines within the organization to assess externally and internally.
  • Plan through creative team brainstorming.
  • Convert ideas to defensive and offensive plans to minimize risk and exploit opportunities.
  • Measure our actions as we moved forward to our desired results.

 

By the time I became CEO of NuVo, I knew that strategic planning was a non-negotiable part of growth. That’s why I engaged one of the best strategic planners in the community to facilitate our process. Even though we were small (under $5M and 18 people), our team fully embraced the approach. It was their plan, and consequently, they began to use phrases like “our plan,” “we need to,” and “I’ll help you.”

When new employees came on, we gave them a fully transparent review of the long-term strategy and short-term action plans. Team members made decisions . . . and good ones at that.  They knew the values and principles of the company as well as the vision and short-term goals. My team confidently made decisions because they KNEW the direction of the business and how to align accordingly.

The organization’s annual cycle of planning encouraged team members to observe outside changes in the business—such as emerging competitors, new technologies, risks on the horizon—and bring them confidently forward to leadership.  In fact, employees on the front line often said, “We need to review this situation in our strategy session.”  That was music to my ears because, at that point, I knew I was on the right course for growth.

Are you interested in growing your company on a continuous compounded growth rate above industry norm and distance yourself from your competition?  It’s really a simple concept: (1) Hire great people, then involve them in your strategy, and (2) Provide unwavering support and turn them loose.




Top Tip for Small Business: Form an Advisory Board


Years ago, I started a corporate interior design and office furniture business in the Greater Cincinnati area. I had years of experience growing sales for an $18M office furniture business, but this was different. This was scratch-made, and for the first time, I was the CEO. I had plenty of passion and more than enough adrenaline, but I knew that I still needed help to succeed. My father had always coached me to listen carefully to those with experience, so it felt natural to seek out people with more wisdom than me.

To that end, a friend suggested I contact Richard Siegel, a partner at the law firm Keating, Muething, and Klekamp. I was intimidated. After all, Rick was Chief Legal Counsel to one of the largest banks in the region as well as a board member for Comair, a regional airline out of Cincinnati, Ohio. I humbly reached out, and Rick agreed to meet with me.

At no expense and with genuine concern, he suggested to me that I form an Advisory Board. “Pick the best and the brightest people you can,” he suggested. Not knowing how this worked and being a new business, I asked if I needed to pay them. Not necessary, he assured. “People are interested in helping,” he told me.

That was the beginning of extraordinary insights and guidance that assured my success in the next two business enterprises. So, here is my prescription for a killer board.

Recruit the Best

Successful people want to give back and are interested in being involved in emerging businesses. So don’t be afraid to aim high in who you ask. Network amongst your business peers and recruit the most respected and successful individuals you can. Seek diversity in experience, culture and thinking. These are some possible experience areas to seek:

  • Finance (banker or large corporate CFO)
  • Merger and Acquisition (investment banker, or M&A attorney)
  • Government and Policy (state or regional chamber)
  • Sales and Marketing (executive)
  • Specialty (services, technology)

Organize productive meetings

You’ve got the best and the brightest, so you need to respect their time and efforts.  Distribute financials and other detailed information in advance of your meeting.

Limit your meetings to 90 minutes and provide a detailed agenda and theme. Start on time and end on time. Be studied and prepared on your business. The meetings will force you to examine your business from a high-level vantage point—an added benefit to quarterly board meetings.

Be Transparent

While it’s natural to want to make a good impression, remember that your advisors are there to help you solve problems and seize opportunities. It’s good to share your accomplishments, but if that’s all you talk about, they won’t be able to help you figure out how to advance your business.

Get down to the serious business issues of the business. Lay all of your cards on the table and be honest about the challenges, frustrations, and missteps you’ve had. These men and women live in reality and are successful because they’ve been there too and know how to overcome risk and problems. They will recognize you as a strong leader if you are willing to expose the worst, seek counsel, and then act on suggestions for improvement.

Be Appreciative

Top business and community leaders are highly compensated in their fields, your board members aren’t on your Advisory Board for the money. They are there to make a difference and give back. Their satisfaction comes from being involved. That said, be demonstrative in your appreciation. Introduce them to others as “my board member.” Bestow the title of Board of Directors. If you can afford it, offer a stipend of $1,000 to $1,500 per meeting. Consider inviting them to a post-meeting dinner. You’ll be surprised at the stream of suggestions and nuggets that flow in a casual setting.

In my third company, we achieved a very successful divestiture of our business. My board member, Rick Siegel said, “David, the smartest thing you ever did was to surround yourself with a strong board.” He may have forgotten that he was the originator of the concept . . . but I did not.




Artificial Intelligence and Grandkids


Artificial Intelligence and Grandkids

This informational blog was written by one of my best friends.  He’s a mathematician, computer scientist, and was involved in building out the global infrastructure for the internet we all use today.  In my high school circle of friends he was considered our “Spock”.  He’s responding to an interesting blog I sent him on Artificial Intelligence (AI) that was stirred up from my CES 2016 Reflections of IBM’s initiative on Artificial Intelligence.  It’s a bit lengthy so you may want to download the pdf or print it for reading while on a flight or other casual moments in your life.  I think you’ll find it quite stimulating.

 Baby Alex

 

Artificial Intelligence and Grandkids by Anon

 Far be it from me to downplay the risks of linear thinking in an exponential world;  however, in my opinion, the arguments presented for Artificial General Intelligence (AGI) and Artificial Super Intelligence (ASI) are overly aggressive.   I suspect it is much more likely that something spectacular (not predicting whether it would be a positive or a negative) will occur on the biological front, versus solely on the technological one; perhaps a blend of both.

As a reference, here are the definitions from the article:

AI Caliber 1) Artificial Narrow Intelligence (ANI): Sometimes referred to as Weak AI, Artificial Narrow Intelligence is AI that specializes in one area. There’s AI that can beat the world chess champion in chess, but that’s the only thing it does. Ask it to figure out a better way to store data on a hard drive, and it’ll look at you blankly.

AI Caliber 2) Artificial General Intelligence (AGI): Sometimes referred to as Strong AI, or Human-Level AI, Artificial General Intelligence refers to a computer that is as smart as a human across the board—a machine that can perform any intellectual task that a human being can. Creating AGI is a much harder task than creating ANI, and we’re yet to do it. Professor Linda Gottfredson describes intelligence as “a very general mental capability that, among other things, involves the ability to reason, plan, solve problems, think abstractly, comprehend complex ideas, learn quickly, and learn from experience.” AGI would be able to do all of those things as easily as you can.

AI Caliber 3) Artificial Superintelligence (ASI): Oxford philosopher and leading AI thinker Nick Bostrom defines superintelligence as “an intellect that is much smarter than the best human brains in practically every field, including scientific creativity, general wisdom and social skills.” Artificial Superintelligence ranges from a computer that’s just a little smarter than a human to one that’s trillions of times smarter—across the board. ASI is the reason the topic of AI is such a spicy meatball and why the words “immortality” and “extinction” will both appear in these posts multiple times.

The very steep “S” curves up-and-to-the-right are, indeed, representative of what has occurred within relatively narrow technology areas;  but, these can’t simply be extrapolated onto more general topics that happen to make use of one or more of these technologies.

Consider the timeline proposed in the article for AGI in 25 years (roughly 2040) and ASI in 45 years (2060).  Now, imagine us (you & me) spanning that AGI timeframe backwards and forwards (i.e. 25 years ago and 25 years ahead) which makes us 35-85 years of age, roughly;  and it’s not unreasonable to think that we might well see all of that.  That’s a 50 year window.  On the ASI timeline, plus or minus 45 years, that 90 year window extends our age from 15 to 105.  We probably won’t see all of that, but we will see most of it.  That takes us from 1970 thru to 2060.  So, what’s my point?  For now, just remember AGI 2040 & ASI 2060.

First, as an example, let’s look at commercial aviation; a fairly technological field, that leverages computer technologies, material sciences, meteorological advances, robotics, fiber optics, satellites, aerospace developments, etc, etc.

The Wright Brothers did their thing just after the turn of the century, the first commercial flight was in 1920, jet engines were introduced in 1952, the SSTs (aka Concorde) came online in 1976 (and were retired in 2003).  Incremental improvements in range, capacity, conveniences (e.g. phones onboard, and now WiFi), fuel economies, lighter/stronger materials, fly-by-wire versus hydraulics, navigation, fewer cockpit crew to name a few have certainly been made in the 95 years since commercial flight began, with most of them occurring in the last 25 years or so.  But, it has taken 95 years to get here, and there really isn’t anything significant on the horizon to warrant a radical change in expectations.  There are lots of reasons for this, including safety concerns for human life; but, commercial viability is just as critical a factor, if not the ultimate controlling variable.  The SSTs failed because they couldn’t turn a profit, so the return on investment was perpetually negative.  It takes billions of R&D dollars and several years to develop a new jet engine that is only marginally more effective than its predecessor; there are no orders of magnitude improvements, which is the definition of exponential.  Therefore, the payback period for this investment is measured in decades (like 30 years), so the overall project” life, from inception through retirement, is 50+ years.  With that reality as a backdrop, there is no incentive to pursue anything more dramatic; nothing that would yield in 25 years the type of quantum leap required to achieve AGI, let alone ASI.  In fact, there is an incredible disincentive at work to inhibit anything that might disrupt the commercial viability of the “incremental, proven, technology” path.  (If one goes down a military and/or spycraft path, the dynamics are somewhat different, particularly with regard to absolute protection of human life and commercial viability, but the dollar figures are as large or larger, and competing priorities for those dollars provides enough of a commercial-like environment that the end result roughly parallels commerciality.  And, for those things that are truly breakthrough, but kept secret, if any, they won’t see the light of day for a long time in anything that is truly general, like technology-only based AGI.)

There are actually several examples of this commercial disincentive impact in history; some are described in “The Innovator’s Dilemma”, which you’ve read, I believe.  The corollary is also laid out in that book, whereby disruptive technologies obliterate established technologies;  but, I would argue that those fall within a narrowly defined area.  It is exactly this narrowness that makes the extrapolation of disruptiveness to AGI and ASI fallacious.

Artificial Narrow Intelligence (ANI) exists today.  I, personally, don’t like this label since it conveys a notion of more than what is really happening.  In the retail consumer world, the term “smart” is applied (to phones, cars, homes, credit cards, etc), which is just as misleading.  All of these things rely on computer programs, which are nothing more than an accumulation of rules that have been codified by someone(s) based on what they can imagine and then describe in mind-numbing detail.  Every one of those rules, when dissected to its most basic level, is a series of absolutely binary branches in a logic tree.  Despite all of the advances in the components of computer technology over the years since ENIAC was introduced in 1946, 70 years ago, it still comes down to ones and zeroes (true/false, on/off, yes/no, black/white).

There is no 1/2 or 2/3 or 17/59 or whatever in a computer; there is no “hmmm”, there is no “what if”, there is no “sorta kinda”.  There is no thinking, wondering, trying, and imagining … there is no intelligence.  They are not smart; in fact, they are incredibly stupid.    A person can be considered insane if he does the same thing over and over, somehow expecting the result to change.  A computer, by contrast, can’t be considered insane because it will do the same thing over and over and over and over without any expectation … it just does what it’s ones and  zeroes dictate … nothing more, nothing less.  To date, all that has happened is to make a whole lot more, and much faster, ones and zeroes available at such low cost that everybody can have some.  Until such time as computers can really do a “what if” on their own, we will be constrained by what humans can imagine and describe with enough clarity to put it into ones and zeroes.  If we did want a computer to take control of the world’s resources and eliminate humanity in the process, we’d have to figure out all the steps needed to do that, program it into a computer (or lots and lots of them), convince all of humanity to not do anything to try to stop it, and then let it try.  The likely result would be the computer crashing due to some physical   failure, or the program either halting or entering an infinite loop, because we humans would have overlooked something in the process and failed to account for it in the instructions we gave to the computer; so, it would do exactly, and only, as it was instructed.  (I haven’t included any discussion regarding “learning” computers, like IBM’s Watson, since it doesn’t really alter the underlying principles above … humans still have to instruct the computer on how to do “pseudo” learning.)

Granted, we do have an increasing variety of sensors (e.g. lasers, accelerometers, microphones, photo-optics, spectrometers, etc) affordably available to us to translate environmentals into ones and zeroes on our behalf; but, at the end of the day, it’s more of the same stuff.  So, as things stand, cheap computers enable our tools to be more effective; but, they are just tools.  (Appropriately marketed, some people might buy smart hammers; some did buy pet rocks!)

The article mentioned advances in nanotechnology and the possibility of nano-robots doing material manipulation at the atomic level.  Not sure I can say much about this other than to point out that not a lot has changed in quite a while when it comes to elements on the periodic table and/or the interaction between them.  And, while we’ve gotten pretty proficient at fission reactions (e.g. nuclear power plants and bombs), we still haven’t cracked the code for any sort of practical fusion reaction, which is where some of the theoretically interesting things lie.  More importantly, I think, is what’s happening at the sub-atomic level; which, by the way, is far outside of what is even being postulated for nano-bots.  Quarks, muons, leptons, “God particles” aka the Higgs boson, etc are very new observances in the grand scheme of things.  But, we can only infer their existence by measuring distortions in a micro-universe and comparing the collected data against theoretical models.  (This is another one of those things that costs billions and takes years to make even the tiniest of inroads.)  And, even if we could grab hold of one of these sub-atomic things, we couldn’t measure it because the act of touching it changes it, at least according to the theories.  On the “God particle” front, the exciting news is that those chasing it are pretty convinced that they have proven its existence.  Their predictions were that it would have one of two behavioral patterns, each of which pointed to a competing, yet well-defined theory of the deep structure of the universe; however, the data indicates that its behavior is right in the middle, so it might point to a completely different fundamental structure, or it might mean that both exist, somehow.  (Wow, maybe they’ve found something that isn’t black or white, which could be interesting as a basic building block for a truly thinking computer!!!  Okay, I just jumped light years past Mr. Spock, so not by the year 2060.)

Biological computing is being dabbled in.  The concept is fascinating as it leverages the self-replicability and adaptability of cells (think stem cells) to grow, repair and “learn”.  I use the term learn because what happens in our brain as it develops/grows is cellular at its basic level, and it encompasses learning and thinking, not to mention emotions and the five (or six) senses, and other pretty phenomenal capabilities … in other words, intelligence.  Cells are clearly not limited to zeroes and ones, they can and do represent multiple states, particularly as they relate to other cells and stimulants (e.g. hormones,  enzymes, electrical fields, light, temperature, oxygen, etc).  If one could harness all of this, a truly intelligent computer could be envisioned … today we tend to refer to this as a brain.

I would argue that what we are doing today is essentially hybrid computing … that is to say, along with our brains we use computing technology to help it manage and solve complex problems more efficiently.  However, the interface between our brain and the computer is incredibly primitive (we type on keyboards, or speak a limited vocabulary, or a limited dialect); though there are promising developments in the area of what I’d call bionics, where “smart” limbs are responding to bio-triggers to effect action.  Controlling the functioning of a bionic arm by simply thinking about the desired actions is a great example.  Over time it is reasonable to expect that cognitive interfaces to computational devices will achieve practical levels.  This is where I think we have the best chance for getting anywhere close to AGI.  Voice synthesis and recognition technologies are roughly 40 years old, and they aren’t that sophisticated, so cognitive control and feedback mechanisms at a practical level (don’t forget the feedback part since that’s the only way the results of the computer’s work can be cycled through the brain for intelligent thinking, what-iffing, and the issuance of further commands to the computer) are a long way off.  Not 2040 or 2060, and probably not before 21xx.  To be clear, I am not suggesting a disembodied brain a la sci-fi movies;  but rather, a progressive evolution of the man-machine interface continuum to the level where the elegance of the interactions is such that it feels natural (a lot of that, by the way, simply means that it has become habitual).  The difference between typing on a keyboard and “asking Siri for help” is an excellent example of this progression.  I would argue that a bi-directional audio (speak/listen) interface between man and machine falls short of AGI, and certainly doesn’t qualify for ASI.

Viruses have been mutating for hundreds of millions of years, perhaps one of the best, truly exponential examples in the universe;  their ability to try literally billions of combinations simultaneously is fueled by the absolute number of viral entities on the planet, the diversity of their host populations, the interactions between these hosts (e.g. mosquitos, humans, birds, pigs, ticks, deer, etc, etc) and human facilitation with such things as air travel, antibiotics, our penchant for exchanging bodily fluids, and, ultimately, their total focus on their own survival without any concern for any other being on the planet.  They are, in many ways, the embodiment of the uncontrolled computer in the article.  And just to make things more interesting, we cook up more esoteric variations in the lab with genetic engineering that may not have ever occurred naturally;  which we end up introducing into the wild, either intentionally (“controlled” human trials) or unintentionally (“oops, we lost a couple of vials”).  There’s no question that we do not now, nor will we in any expected number of lifetimes, understand this homegrown alien world to the level needed to effectively manage/control it.

Meanwhile, the most basic behaviors in nature continue, as they must.  That is: most animate beings are genetically programmed to eat, sleep and procreate, while viruses are programmed to eat, mutate and replicate.  By the way, this might be the best use of the word “programmed”, as it is really the original description of natural behavior … computer lingo merely derives from our attempts to imitate life.

So, given the negative human impact we’ve seen from viruses in the past, it isn’t hard to imagine that a particular series of mutations could wreak havoc upon us, even to the point of extinction.  On the positive side, though, in this age of biotechnology, genetic engineering, leveraging what we see/find in the laboratory called nature, and pure discovery, we are fairly well positioned to detect and respond to biological threats as they arise, via quarantines, sanitation, preventatives and curatives.  Further mitigating against the odds of viral-based apocalypse is the fact that viruses hold no malice, have no intent, and can’t learn to leverage trends … what they do is totally random;  we, on the other hand, generally act with learned intent, which gives us a slightly better than random chance of success.

At the end of the day, it isn’t about biology or physics or computer science;  these are merely abstract terms we utilize to describe the vantage point from which we are viewing a slice of the universe.  Once we get down to the subatomic level (i.e. the things that make up electrons and neutrons and positrons), there is no distinction.  Viruses are doing things at this level (we call it molecular biology, though we should probably call it subatomic biology) and they are doing it randomly … so, they don’t know what they are doing.  We, meanwhile, are knowingly messing around at the subatomic level, but we don’t really know what we are doing either.  Should these two “idiotic” efforts unwittingly collide in a bad way, all bets are off.  On the other hand, should these two “idiot savants” stumble together into something wonderful, then there could be a real “aha” moment.

Why the subject line: Artificial Intelligence and Grandkids???

Let’s ask them the same questions posed in the article in 25 years, when they’re out of school, and it’s 2040, and they’ve moved on to something more elegant than Siri, and they don’t even remember what a keyboard is (unless it’s in black and white and has octaves)!  Maybe they’ll have an answer.  Some will undoubtedly declare that AGI has been achieved.  Maybe so, but I doubt that it will have reached the level described in the definition provided.  I’d say that 2140 is a more reasonable target timeline.  As for ASI, that’s a whole different ball game … I couldn’t begin to hazard a guess for when, if ever.

That’s my two cents, adjusted for inflation …

Anon




CES 2016 Reflections


When I was a kid, I saw Stanley Kubrick’s movie, 2001: A Space Odyssey. This sci-fi movie made a big impact on me, especially the idea of Artificial Intelligence (AI) as a part of lives in space. After attending this year’s Consumer Electronics Show (CES), an event I have attended for 18 years, I’ve realized that AI is indeed here on earth!

Over the past two years, the Consumer Technology Association economists and researchers have been pointing to the emerging technologies of the Internet of Things, Big Data analytics, and the Rise of the Machines (Artificial Intelligence). These explosive trends are now a reality, with many companies fully utilizing them.

In her keynote speech, Ginni Rometty, the CEO of IBM, highlighted many of the gains in AI. You may remember that IBM’s Watson outperformed humans on Jeopardy in 2011. Five years later, this technology is being fully exploited. Under Armour, the sports apparel company, has adopted IBM Watson technology to utilize sensors and big data to inform you in advance what activities, diet, number of hours of sleep, and lifestyle fits you best. After all, if you buy their products, you probably care about your physical performance and are interested to know how you compare to other athletes your age and weight. This type of technology helps people set goals for themselves and set benchmarks that match their stage in life.

Even more valuable is how IBM has enlisted AI to help save and enhance lives. Medtronic announced a partnership with IBM to develop new ways to tackle diabetes. By accessing and crunching huge volumes of data of anonymous medical records and applying the learnings to your personal metabolism, Medtronic plans on providing proactive advice on your specific exercise, diet, and sleep. Getting personalized counsel like this will (hopefully) prevent crisis situations and save lives, enhance people’s quality of life, and save the health care system (and taxpayers) a lot of money.
What else was stunning at CES? The innovation focus around the world.

The CES Eureka Park area was densely packed with global start-up companies. France had more than 100 startup firms in attendance. In 2014, I attended CES Unveiled Paris. It was clear then that the French government had made a commitment to support innovation – and that continues. Israel also made a strong showing – once again punctuating the high level of innovation in relationship to their population.

Eureka Park, French Quarter

CES 2016 “French Quarter”                                           

The double take of the whole show happened at the Consumer Technology Association party. There I was, among hundreds of technology enthusiasts, enjoying good company and good food – and lo and behold, CEO Budge Huskey of Coldwell Banker Real Estate is introduced as a CES sponsor.  This is so unusual given the real estate industry’s past lack of acceptance that home technology adds value to a home.  Coldwell Banker’s sponsorship was exceptional proof of a big change in focus and awareness. At last, the mass market is awakened to the Internet of Things and the Smart Home.

Gerzberg shapiro huskey rodarte

L. Gerzberg, G. Shapiro, B. Huskey, D. Rodarte

I’m thankful to be informed and connected to the brightest business leaders in the Consumer Technology industry. I have the relationships, keen sense of market and skill set needed to help you take your business to a new level of growth and profitability.




Sell? Maybe Next Year! (But Act Now Anyway)


Three years ago my partners and I sold our business. We were all of a similar age, all boomer-generation business owners, looking at third acts and not wanting to pass up opportunity. We had long envisioned selling the business. That doesn’t mean it was an easy decision. I, for one, had serious reservations about stepping out of the business as it was still growing. However, we had learned a lesson (rather painfully) when we didn’t act on a fabulous offer that came right in front of the 2008 financial reversal.

sell

If you’re a boomer-generation business owner, you’ve likely done serious heavy lifting to build your company. Stepping away just may not feel right at this time. I get that. But I know this: now is absolutely the time to pre-plan, align your leadership, and be positioned for both growth and a full value deal in the future. After all, if a phone call comes to you and the person on the other end has an opportunity, you want it to go your way.

Today’s investment environment has serious money on the sideline. Private equity companies are searching for great deals with lots of available Other People’s Money (OPM) and interest rates are at historic lows to support leveraged deals. Quality synergistic buyers have been retaining earnings and need to expand market share and put their capital to work. Tony Schneider, Investment Banker at BKD Corporate Finance says, “We’ve been seeing strong multiples on premium properties over the last couple of years and with the economy likely near the midpoint of a run up, our clients are recognizing it as prudent to act now rather than on a downturn.”

With that in mind, here are three ways I suggest you act now, even if you don’t want to sell until later.

Align now

If they’re top quality (and paying attention), your senior leadership recognizes that your day for divesture will come. In fact, they may be wondering about your plans and have some insecurities. When the time comes to entertain a bluebird offer, or you make a decision to go to market, you’re going to need them by your side. Due diligence by a potential buyer is both exhausting and difficult to disguise. Instead, be proactive. Set up Long Term Incentive programs that share an ever-expanding pie of value. Help your senior leadership feel not just included, but truly invested. That way, you can secure and incent them for everyone’s success in the future.

Optimize now

It’s pretty extraordinary to find a small to midsized business that practices formal strategic planning with action plans spelled out. Practicing advanced planning methods not only impresses a potential buyer, it also reduces your business risk, sets in motion continuous improvement, and develops a high performance culture and leadership team. Private Equity firms universally seek value businesses that generate cash flow and a track record of multi-year success. They also generally NEED key management in place. Strategic buyers also value management – but even more than that, they’re looking for reduction of risk along with a synergistic acquisition.

Prepare now

What about that phone call? The one with the opportunity? If an acquirer is seriously interested, and you’re ready to act with a Letter of Intent, the next step will be due diligence. That means a review of the past three to five years. If you haven’t been archiving and documenting your business, don’t have proof of management expertise (planning and execution), and have not attacked and mitigated risk, you are setting yourself up for a hefty discount. The value of your company simply won’t be as strong without that kind of documentation.

At my previous company, each year we conducted formal strategic planning with an outside facilitator. We constantly looked to reduce risk and seize high yield opportunities. We created a leadership team that fully ran the front line. When asked to populate a data room for due diligence, our team completed 99 percent of all items in two weeks. Certainly we had negotiations. But our position was strong – and that reassured the buyer that we were a premium asset.

By aligning now, optimizing now, and preparing now, you are acting now. Then, next year, maybe you can sell!