Listen to CMC Partners at The Business 2019 – Mergers & Acquisitions for SMEs – Is it a viable option for growth?

Come and Listen to Atreya and Simon at The Business Show 2019 – 16th May, 2pm

Acquisitions is hard business. And it’s not all just about the big boys. Join Atreya and Simon  at Businesses For Sale Live to get to grips with the potential SME businesses have in growing through acquisitions.

For a CEO or Owner of an SME business the decision to invest in buying another firm can often be life-changing with the potential to alter the course of the firm and the opportunities for employees, for better or worse.

Company leaders should look for reasons and have a reasoned understanding of why they should acquire. Alternatives to acquisitions should also be strongly considered and evaluated.

Sources of financing the deal is critical – getting the numbers wrong can put a healthy company into critical care.

Key takeways you wont want to miss:

  • The potential and benefits to growing your SME via an acquisition
  • How to successfully plan, prepare and execute acquisitions to maximise the potential
  • Learn from successful SMEs acquisitions through targeting companies

Join CMC Partners at The Business Show 2019 in London Excel on Thursday 16th May at 2pm. Atreya and Simon will be presenting in the Businesses for Sale Live seminar area , located by their stand 1086.

Book your Free ticket here.

Check out the other seminar they’re presenting on increasing the value of your business.

We look forward to seeing you there!

Listen to CMC Partners at The Business Show 2019 – Increasing Your Business Value

Come and Listen to Atreya and Simon at The Business Show 2019 – 16th May, 12pm

When you have made the momentous decision to sell your business one of the next steps is to start thinking about a valuation.

It’s not just about coming up with a figure and sticking it on the market. Like any seller you’ll want to maximise your return, and, there are likely to be a few things you can do now which could increase the value of your business in the long term.

Key takeaways you won’t want to miss:

  • How to value your business
  • Key drivers to that will increase your valuation
  • Key preparation tips for a successful sell
  • Attractiveness of the business to a potential buyer
  • 6 step process to selling your business

Join CMC Partners at The Business Show 2019 in London Excel on Thursday 16th May at 12pm. Atreya and Simon will be presenting in the Businesses for Sale Live seminar area , located by their stand 1086.

Book your Free ticket here.

Check out the other seminar they’re presenting on Mergers and Acquisitions for SMEs to grow.

We look forward to seeing you there!

IoD Webinar – Mergers & Acquisitions for SMEs – is it a viable option for growth?

On the 12th April, 12pm Atreya Chaganty, Partner at CMC Partners will be presenting an IOD webinar to business owners and directors on whether mergers & acquisitions could be a viable option for their business growth.

How well do we understand the Mergers & Acquisition (M&A) activity of SME businesses? Should SME firms acquire to grow? How and when should SMEs plan and execute acquisitions? These are some of the questions Atreya will discuss when you tune into this webinar.

Who should join the webinar:

Business owners or directors who are exploring ways to grow their business or are simply curious of the benefits an acquisition could bring.

This webinar is free of charge and open to both IoD members and non members. 

Key takeaways, you won’t want to miss:

  • How acquisitions can grow your business 
  • Risks involved versus the rewards 
  • How to prepare for an acquisition
  • Whats involved
  • Financing options 
  • How to make it work post acquisitions 

Click ‘Join Webinar’ to join Atreya at 12pm on Friday 12 April. He loos forward to welcoming you. (don’t worry if you can’t attend this time, sign up anyway to receive a recording afterwards)

Join Webinar

Sales strategy for growth

In my post last year, ‘Not all growth is equal’ I discussed the options for business growth. Comments from readers led me to look at sales strategy for growth.  Whether you choose new products to existing clients, product expansion, or new clients with existing products, market expansion, you will need a sales strategy.

Establish your broad sales strategy and objectives

Decide how you want to position your business and your products or services. For example, if you launch an innovative new product, you could aim to sell small volumes at high prices to early adopters or opt for rapid market penetration to deter competitors.

For a new business, a key objective might be to quickly build a core customer base. Or you might concentrate on acquiring a single large customer to boost your profile.

Decide which groups of customers to target

As you build up a customer base, remember that retaining existing customers and winning repeat business is usually much easier and less expensive than selling to new customers.

The easiest new customers to sell to are usually ones who are similar to your existing customers. However, building a broad mix of customers is less risky than relying on a small number of similar customers.

Sales methods and channels

Evaluate the best method of selling to customers

Selling face-to-face is often the most effective method, particularly for complex sales, but it is time-consuming and expensive. It is usually only worthwhile for high-value sales or to build a long-term relationship with a customer.

Retail, direct mail and telesales are more cost-effective for lower-value sales. They can also be a good way of generating repeat business once a relationship with a customer exists.

Selling via your website can be the cheapest method, once the initial set-up costs have been considered.

You could opt to combine some or all of these sales methods in order to reach a wide range of potential customers.

Remember that it can take several months to build credibility and get access to a key decision-maker, particularly for high-value sales to large businesses.

Sales resources

Initial sales will often be the responsibility of the business principal, decide when you need to recruit a dedicated sales team

If you think the business is missing out on opportunities because of a lack of selling resources, or if you are uncomfortable selling yourself, you probably need a sales team.

The number of salespeople and the skills they need depends on how you sell, your markets and the sales targets you hope to achieve (see Sales planning).

Employing salespeople with existing customer relationships can reduce the time needed to break into a new market.

Clearly define the skills and experience you require in your sales recruits.

Give salespeople the tools they need, some form of database is essential for holding information on customers and prospective customers. Consider using customer relationship management (CRM) software.

Make selling easy

Simplify systems so that salespeople do not spend their time on unnecessary administrative chores. Use standard documents wherever possible: for example, proposal letters and standard contracts.

Sales planning

Involve your salespeople in the planning process

Imposing plans and targets without consultation rarely works.

Salespeople can provide up-to-date market information and suggest the best way to approach customers.

Identify the key drivers of sales performance

Externally, these will include the overall level of demand among your customers and what your competitors are doing.

Internal factors will include your marketing activities, any change in prices, the size of your sales team and how you sell.

Develop a small number of key performance indicators that will help you manage the sales team – for example, the number of new enquiries they generate, or the amount of time spent calling customers.

Make sure that targets are realistic, measurable and time specific.

Managing sales performance

Track sales progress on a weekly basis

Monitor key performance indicators and levels of actual sales. Discuss the information with your sales team.

For high-value sales, ask salespeople to assess the potential value of each sale they are working on and the likelihood of success.

Regularly review performance against objectives and budget, use feedback to refine your sales strategy and your overall business plan.

Client Video – Driving consistent revenue growth and profitability in a more structured way

Watch this video to hear how Worcestershire based Business advisor, Bob Brown has worked with this CEO to drive consistent revenue growth and profitability in a more structured and planned way as well as helping to clarify the vision and work towards the owners personal objectives.

Business: Mental Health Staffing Solution Provider

Number of employees:

Before I meet Bob, growth was chasing me, reacting to the business. It’s now very different with a scaleable strategy and a plan on how we grow the business.’ Trevor Mapondera, CEO Nurseline Healthcare

‘Bob’s enabled me to drive my business which has consistent revenue growth and profitability in a more structured way. He’s taken away the loneliness of running a business because it feels like we are doing it together’ Trevor Mapondera, CEO Nurseline Healthcare

‘Bobs helped me to focus on the things that make a difference to my business’  Trevor Mapondera, CEO Nurseline Healthcare

It wasn’t about Bob but about trying to create a hero in somebody else’  Trevor Mapondera, CEO Nurseline Healthcare

Managing SME Business Risks

Managing risks of an SME business

Ah, risk! That unsavoury word that conjures both clear and muddy impressions in the minds of a business owner. Risk is an integral part of our personal lives. Almost every activity of our daily living has inherent risk – driving, eating, giving birth. However, we have built mechanisms, through safety procedures or self-control, trained medical practitioners, regulations, etc. to safeguard us from such risks.

Running your own business, in many ways, exposes you (and your business) to many risks. A key element of managing your business is to protect it from failure. The nature of risk your company is exposed to also typically changes as your company grows and evolves in its own life cycle. Many risks however have the potential to adversely impact businesses of any size. Events that are rare but carry highly disproportionate impact, such as Brexit, for e.g. have widely sweeping implications for most businesses.

Hence understanding the types and nature of these risk is critical to ensure long term survival of your organisation. Consider some of the following risks your business could face:

Customer Risk

This involves risks of customers deserting your product (customer churn) or service in favour of your competitor’s. Credit risk is another common factor – customers could either delay payments or not pay at all. Customers are entitled to complain if they feel the product is not delivering to promise – rising customer complaints can be substantial risk. Customers expect the process of engaging with your business i.e. researching your products, buying, getting support to be increasingly through a digital medium  – not having digital channels for your customers to interact with your brand or business could result in customers moving to your competitor

Supplier Risk

Disruption of supply chains can affect your production process. Suppliers could go bankrupt or deliver faulty parts or input services hence effecting your downstream manufacturing or service delivery operations. Logistics disruptions could delay shipments and impact your ability to complete customer commitments in time.

Market Change Risk

Competition in open markets can be relentless. Inability to keep up with technology could add significant costs and risks of disrupting your manufacturing or service delivery process. You could quickly lose customers if you do not have digital channels such as mobile apps or ecommerce facilities, as discussed earlier. Changing market regulations governing your industry could be another highly potent form of risk.

Employee Risk

Quality employees make a quality company. Inability to attract high quality calibre can quickly erode your competitiveness. Inadequate training or a corrosive culture can often result in your top performers leaving the organisation.

 Financial Risk

We often associate risk with money matters. The above points show that business risk is significantly broader. However, managing financial risk is ultimately the key to survival. Managing your cash flow risks will ensure that you have adequate money to fund your working capital requirements while maintaining necessary capital expenditure to invest in growth. Export/import requirements could create currency risks. Level of leverage (debt) and interest rates can unduly increase interest payments and forcefully impact profitability and even ultimately solvency.

One cannot wish away risks. In fact, actively seeking risks is a crucial first step in managing them. CMC Partners works with owners of SME businesses in identifying and managing business risk systematically and then helping put a plan for mitigation. Business owners who are able to master the skills of managing risks ultimately create well run, profitable and valuable businesses.

Growth-and-Profitability of an SME Business

Are growth and profitability of a business linked?

Growing profitably is the holy grail of good management. Research has consistently shown that as companies grow their revenues, they become more profitable, on average. Businesses with 50 or more employees typically generate 6x more net income than smaller firms. This begets the question – what links growth with profitability? For Small and Medium Enterprises (SMEs) often, sometimes with scarce resources to deploy, the answer to this question could unlock significantly business value.

Multiple components of a business need to be balanced to achieve profitable growth. Consider the following:

Scale Economies

Very simply put, this is a concept where your cost per unit of product manufactured or service delivered falls as volumes (or sales) increase. A software company incurs product development costs initially during software design and development. However, the costs of producing additional copies, as more and more customers demand the product, continues to fall per copy of the product sold. Of course, here we assume that the costs to acquire customers (such as marketing and sales, for e.g.) do not increase faster than your other expenses. The same principle holds true for manufacturing or any other sector, for that matter. The more you sell of the same product or service in the same market, other expenses being same, the more profitable your business will be

Customer Growth

As an SME owner you must have experienced the struggle (and joy) of winning your first customer. Your sales effort to now acquire your second customer, however, just got a lost easier. As more customers buy your product it becomes easier to convince yet more (new) customers to do so, i.e., the more you grow the more customer acceptance you get.

Competitiveness

Many companies build competitiveness by investing in strong Research & Development, or making products easy to use, or investing in strong marketing and sales capabilities or superior customer service. Building these elements of competitiveness need investments. The more profits you have the larger is your ability to invest in areas that you have strategically identified as your competitive factors.

Financing

Every business, whatever stage it is in, requires some form of financing. Many SME owners chose to invest their own personal funds. Others raise either angel or venture capital. For most traditional SME businesses borrowing capital from a bank (debt) is an available path. However, banks require collateral. A business with a strong or growing balance sheet with assets on it will convince banks to lend more. The more you grow, the more profits you generate. The more profits you generate the stronger is your ability to raise more money to generate more growth. It’s (kind of) a cycle that feeds on itself.

Strong Management and Teams

As companies grow complexity of managing the business grows. There are more customers to service, more products and services to build and deliver. In other words – more work to be done. As a founder or owner you alone cannot support all these growing demands. You need to hire managers. Strong managers like to work for companies in which they can see growth and professional fulfilment for themselves. Growing companies become attractive to good managers.

CMC Partners works with SME and owner-managed businesses in identifying pathways to generate business growth and value. Working directly with the owners we help identify hidden sources of growth and competitiveness in the business. We also help manage profitability of the company that ultimately increases business value.

Growing a Enterprise Software Business

Case Study – Transforming, Increasing Value and Selling an Enterprise Software Business Successfully

A family-owned, enterprise software business, with double-digit revenues

CMC provided this family owned, enterprise software business with business realignment, cost restructuring and sales growth experience. Working directly with the founders and company board in setting a growth path for the company. The transformed business was then sold successfully at an enterprise value over 3 x more than originally valued prior to CMC Partners engagement.

The Challenge

The client is a leading provider of specialised enterprise software for the telecom industry. While the management team had managed to penetrate the market controlled by larger software manufacturers, they were unable to scale the business cost-effectively. The business was stagnating at 4% revenue growth with a market growing at almost 10%. The Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) levels were almost a third of industry averages. A deeper investigation, by CMC, of the company’s strategy and direction revealed the following core problems:

  1. The sales team was taking a very product feature centric approach to selling. Almost no one in the organisation understood the concept of value selling
  2. In addition, there were inadequate sales professionals to provide effective customer and market coverage, resulting in lost sales and insufficient touch with the customers. Over 50% of revenue was coming from a single customer increasing risk due to customer concertation
  3. Product management function was unable to effectively plan the roadmap and deliver regular version updates to their customers
  4. Insufficient partners with the right skills and training to deploy the software making customer adoption difficult and expensive
  5. Operating expenses were rising faster than revenues
  6. Sales were growing much slower than market and competitors

The Solution

CMC Partners worked with the founder and the company board and through a strategic audit of the company identified the core problems described above. Through a series of detailed functional workshops and conversations with the company founder the following steps were agreed for implementation:

  1. Appointing an experienced Sales VP who brought in a value-selling approach
  2. Series of sales training workshops conducted by specialists brought in by CMC
  3. Hiring of 50% additional sales personnel and reallocation of territories amongst sales reps for better account management and customer coverage
  4. Tying sales incentives to targets and performance
  5. Introducing offshore and nearshore development resources to right-size product development costs
  6. Establish a product roadmap planning and version release process based on high priority customer requirements and market demand
  7. CMC Partner and client founder, board and senior team members to set up a monthly business review

The Outcomes

CMC Partners guided the founder in systematically executing the above action plans. Specialist resources, such as sales trainers or experienced head hunters were brought in as required to recruit new talent who then drove many of the agreed actions. The following was achieved:

  1. Revenues increased at an annual rate of 15%, double the historical run rate
  2. Dependence on the single large customer was brought down from 50% of total revenues to less than 25%
  3. Operating margins increased from an unhealthy 6% to a respectable 18%
  4. Two major new product versions were successfully released adding to the follow-on potential of cross-selling new services

Successful Business Sale

As these changes were rolled out and the company began demonstrating solid growth and vitality the client received informal interests from prospective trade buyers. CMC Partners worked with the founder and board to understand what the shareholders intended to do as a result of market interest in acquiring the firm. CMC Partners advised an investigation process for determining the feasibility of selling the company. We worked with the client in establishing shareholder objectives, an expected value for the company and then formally proceeded to engage with buyers.

CMC Partners acted as the project manager in the company sale process. The firm was ultimately sold to a competitor who was looking to increase market share. The transaction delivered value 3x more than the market was willing to offer prior to the business transformation engagement with CMC Partners.