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


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


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


Make up a list of goals and accomplishment for 2004 (Boulders)

Determine goals for at least three years out


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


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


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


4. Relationships: To forge coalitions with peers,

subordinates, and important outside decision makers

Action item – identify today’s and tomorrow's most important relationships


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”


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


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


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


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


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. Personal Style: By personal example, to set an overall

tone of integrity, competence and optimism a box of nails


Determine if you are stuck in the past or not actively focusing on reinventing: Yourself Your company Your future


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


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”

critical success factors for growth presented for yeo by rich russakoff bottom line consultants

Documents

growth experienced

growth look

stage istage iistage

million500 companies

microcapitalized companies

gross sales76

gross salesmost

gross sales0