Families! The trials and tribulations of succession

You have run your company successfully for years and have decided you want it to stay in the family so you’ve asked one of your children to join next month……

So many family businesses make an assumption that because they have run it successfully for years and it’s their company, whatever they do will work out ok. However there are many pitfalls that can easily become major issues, many of which I have seen happen and are circumstances I’ve learnt to successfully manage.

Scenario 1 – The chosen one

So, the company has a good and established team with years of experience and success and you decide to bring in your son or daughter straight out of University to be MD designate. You think it’s a great idea as it’s keeping it in the family. The staff who were hoping for promotion or other recognition for their hard work and loyalty will almost certainly resent this new person who they see as having no experience or expertise but who they will now be reporting to. They will not have earned your teams loyalty like you have. I’ve seen this happen followed by the businesses best people leaving and the turnover plummeting.

Scenario 2 – Which child to choose

Or you have three children. In days past, the business will have automatically been passed to the eldest but in this competitive world you need the best leader. What happens if that’s the youngest but the first in line thinks it’s their destiny? Do family loyalties come first, or the long term needs of your company and 20 employees ?. Will it all cause a major rift in the family?

Scenario 3 – None of your children are qualified

Or none of your children have the right experience and expertise. You know this but can’t seem to admit it to them. Do you bring in an ‘outsider’ or decide this is the time to let go and capitalise on your hard work by selling up to ensure a comfortable retirement. The benefit could also be some capital for your children to use as they wish and no family rifts if it is managed well, but usually you don’t manage it well as it’s your family.

Having you drafted your succession plan?

Statistics from BERR and PWC show us that only one third of family firms now get passed on to the second generation and 53% of owners anticipate a change of ownership in the next 5 years but have not drafted a succession plan. As family businesses are known as the ‘backbone of our economy’ it’s vital to our economy and family wealth that these businesses survive and you might feel strongly about leaving your family firm as your legacy.

If you want to ensure no family rifts and a successful succession plan or exit, I can help you to avoid the pitfalls. Call me, Susan on 07510 692969 for an informal first conversation, personalised support and guide to the next steps.

Progressing your business growth programme to success

There are some very good government programmes in place for helping small businesses to grow, however, if not followed through properly; they can leave the business owner(s) with a list of things to do without fully understanding how to do them or even, after a while, wondering if they are still relevant.

business growth

We have recently been speaking to a number of owners of companies who have spent time, effort, and money on programmes of work that have helped them to understand their business and the direction that they want their business to take.

They have been left with their action plans and tasks to take them there. However, because the programme has ended, there is no-one to help them to progress the action plans and no help to take them on the journey that they had planned.

Business Growth Programme Focus

Stepping back from the chaos of the everyday issues that [small] businesses endure is one of the most difficult and challenging steps that owner managers have to make; and it is so easy to get sucked back into this tactical management.

With the choice of keeping a customer happy or progressing with [say] a ‘marketing plan’, the majority of business owners will go for keeping the customer happy as the priority. With more of these choices arising, slowly but surely, the owner, unless highly self-disciplined, can get sucked back in to the state of operational chaos from where he came before the programme.

With the programme complete, the business owner can feel compelled into taking the derived set of actions. However, they may be no longer appropriate and over time will need reviewing. With no-one there to help ratify the way forward, the priorities can slowly revert to tackling the operational issues. Unfortunately the investment in the programme becomes lost and even worse the business owner may well be reluctant to try and take those necessary growth steps again as they will have lost confidence…

Business Growth Programme Reviews

A longer term approach, following the completed busimess growth programme, which imstills some regular [monthly] reviews with the business owner (reviewing management accounts, cash flow, working capital, sales pipeline, orders, marketing, resources etc.) and re-enforces or tweaks the actions and priorities, can ensure that there is a good return on investment.

If this feels familiar and you would like discuss the working approach please contact CMC via the form below.

How to get £2,000 growth funding – 50% of something is better than 100% of nothing!

At the beginning of 2014 HM Government announced a scheme to give UK businesses £30m growth funding so they could get advice, this offer currently ends in March 2015 to reclaim this money.  Time is running out, and just last month Lord Young announced changes to the Growth Vouchers scheme that will mean this Growth Vouchers Funding will now be available to any business.

This is a real offer and thanks to everyone’s feedback, the rules have been relaxed (a little).  I was at the Lord Young presentation at Enterprise Nation earlier today and they do want as many businesses as possible to get these vouchers.

Growth Vouchers will now be available to any business that has fewer than 250 employees, is based in England, is independent and have a turnover of less than €50 million.  This will mean more companies will now have access to £2,000 match funding to get strategic business advice on finance and cash flow; recruiting and developing staff; improving leadership and management skills; marketing, attracting and keeping customers; making the most of digital technology.

I recently helped 2 businesses in Surrey, get and spend their vouchers and they are very happy with this opportunity.  One business wanted advice on scaling their business while the second one wanted leadership and management advice as their staff numbers grew.

To apply for Growth Vouchers visit www.gov.uk/apply-growth-vouchers . The application process is straightforward and will take as little as five minutes; just make sure you have either your Companies House registration number or Unique Tax Reference to hand.  If you need help I can assist you – you do not even need to use the vouchers with CMC Partners.  With your Growth Voucher  you simply go the Enterprise Nation Marketplace website and find a suitable Growth Voucher approved adviser, who is say local to you.  Here is the link to me (OK a shameless plug, but there are others) https://marketplace.enterprisenation.com/marketplaces/businesses/127

Ok so it is not a free hand-out from the government, but it is up to £2,000 of matched funding – 50% of something is better than 100% or nothing!  Phil is an authorised Growth Adviser in the UK, and may therefore able to assist you in getting a voucher to reduce the costs of this advice by 50%. Contact us via this form for more information.

Case Study – Re-launch of an engineering consultancy

A business owner of an engineering consultancy, in his late 50s, called in CMC to help to move his business to the next stage, with a view to succession. Over the following year, they produced a substantial increase in profitability – from breakeven to £300k profit on a turnover of £2.0m!

How we helped with the re-launch?

We worked with the company to re-launch their:

Strategy:

To become independent of the presence of the owner/manager and his skills in the business
To specialise in a market niche driven by energy sustainability.

Finance:

Set up monthly sales meetings for all Senior Managers and Associate Engineers
Moved from focus on contracts and projects to monthly billing
Set up a proper reporting cascade with regular monthly Board Meetings to analyse performance.

Sales & Marketing:

Delegated individual sales targets to key senior people, who were given increased exposure to clients at industry events
The company name was changed (from the owner’s name) and a very successful new brand and identity created.

Processes:

Achieved ISO 9000
Installed a new network for online IT support
Opened a new office in a very favourable location.

People:

Systematic performance management and development processes introduced
People recognised for commercial success as well as engineering excellence.
The company achieved a major, prestigious industry award in the second year of re-launching!

If you think your business would profit from a re-launch, give us a ring for an exploratory chat on 01491 829 181, or contact us here.

Is your business investment ready?

Firstly we must ask ourselves what is ‘Investment Readiness’?

A simple definition: – “Providing sufficient information, credibility and trust to an investor to motivate them to invest in your firm.”

However before going outside your firm for money – you should make sure the funding you need is not already available within the firm. You already have money tied up in your business, your “working capital”. This can take many different forms: stock, work in progress (WIP), unpaid bills or assets you no longer use – to name a few common examples. In many businesses the working capital is just not working hard enough! Improving the working capital situation of the business may remove the need to raise money from outside of the firm. Here is a simple check-list to go through prior to seeking external funding:-

• Are your customers paying quickly enough?

• Are your creditors paid too quickly?

• Is there too much working capital locked up stock in the firm?

• Are there underperforming or unused assets in the business?

• Is there a way to turn transactional business into recurring revenues?

If you release working capital in these ways, the net effect will be a reduction to your operating costs plus you will have released cash to re-invest as you see fit. This is a “win-win” situation – there is no downside.

Still need the external investment?

In order to successfully raise funding, whether equity, loans, grants or other forms of finance, a firm must be in good shape and sufficiently attractive to the providers of funds. A company with higher invest-ability, that makes the providers ‘feel right’ about advancing funding, will have a greater chance of getting finance and will secure it both quicker and cheaper.

Essentially, getting a firm investment ready is all about carefully mentoring it and its people to present the right image and proposition to investors and bankers.
The need for Investment Readiness
•    There is a fundamental knowledge gap in most SMEs such that they do not know the options for financing and which sources would be relevant to their strategy
•    There is also much evidence that many SMEs do not seek funding because they are unsure about the process and resistant to giving up any equity due to anxiety about losing control of the business
•    The low quality of applications for funds results in a high failure rate, particularly those for non-bank risk money.

Key stages in the Readiness process

•    Identifying the most appropriate sources of money and discussion and analysis of the effect of any ownership dilution. The benefits and downsides of raising equity
•    Reviewing the business to identify and correct shortfalls or omissions that would impact on an investment decision
•    Guidance on investor expectations and attitudes
•    Help with preparation of the business plan and of the live presentation
•    A mock run through of the due diligence process to ensure all queries are covered, including legal, financial, management, marketing, competition
•    Mentoring through the funding and due diligence process
•    Post-investment management guidance

Route to Success

CMC Partners have being helping firms for 25 years, from the experience gathered we have written a white paper “Thinking about raising money for your business?”  It will guide the key executives of a firm through the entire process of raising finance for growth. There are many challenges – both real and imagined – along the route to success and our programme aims to address, explain and solve those challenges.

 

White Paper – How to improve your chances of a successful exit

Business owners are likely to make mistakes when selling their business. This is no surprise since many have not sold a business before. Avoid learning on the job for this important stage in your career.

Download this 10 point checklist to help improve your chances of a successful business exit

This 10 point checklist includes:

  1. Next steps
  2. Acceptance
  3. Hopes for the future of your business
  4. Shareholders
  5. Time elements
  6. Good governance
  7. Evidence of good business Pratice
  8. Understand your options
  9. The process
  10. Exit strategy

To download your copy, simply complete the form below and a copy will be emailed directly to you.

Case Study – One Ltd – Growing to Greatness

Growing to Greatness for a Talented Design and Communication Agency

CMC provided expertise, experience and mentoring to help talented directors achieve business growth and accomplish their ambition of delivering a distinctive personal quality service to profitable clients.


 The Challenge:

  • Directors had limited knowledge of sales and financial forecasting, analysing, and planning
  • Poor profit margins despite steady growth
  • Overworked team putting the directors core values and beliefs at risk
  • Directors felt restricted, overloaded and needed more freedom to excel

The Benefits:

  • Doubled turnover from £366,456 to £836,650 in 4 years
  • Significant increase in margin generated – typically 10% to 15% net profit
  • Increase in profile of clients
  • Expanded team from 8 to 19 employees, allowing profitable growth
  • Focused and confident directors with increased strategic business knowledge
  • Achieved director’s ambitions of delivering a personal and high quality service to fewer clients

Since we started working with CMC we have learnt to be more efficient and more measured. As a result of these changes, our business has been able to grow and develop in line with our goals and ambitions. Jemma Proctor and Phil Gordon – Managing Directors of One Limited

Discover how One Ltd achieved business growth which double their turnover….

Case Study – Turnaround for a winning concept – a specialist steel fabricator

CMC has helped this specialist steel fabricator to return to profitability by re-focussing on its core strengths and formalising key business processes, allowing the owner to manage the business proactively.


Business TurnaroundThe Challenge:

  • –Return the business to profitability
  • Create time for the owner to run the business and
  • stop the business running him
  • Eliminate time wasting on unprofitable estimates and tenders
  • Help to rebuild a solid customer base
  • Improve sales enquiries, pricing and tender procedures

The Benefits:

  • –Within 2 years the business returned to a profit of £50K from a previous £120K loss
  • 95% of sales are now coming from targeted sectors
  • Tender estimating and pricing accuracy has improved
  • The owner has time to think about the business and plan ahead for the future

Thanks to CMC’s good advice and clear thinking, we are in control of our business again. Best of all, we are back in the black and have a healthy order book. Grant Smith – Managing Director of Concept Balustrades Limited

Download the full story for details of this business turnaround…