How To Win in a Financial Crisis

Businesses face difficult challenges when enduring a financial crisis. But what highly successful businesses have discovered is a financial crisis can also provide many opportunities. If the right opportunities are pursued, market share can experience sharp increases. This gives companies the push needed to move ahead of industry leaders. With the right strategies, a business has the ability to maximize success during a financial crisis.

Unique Opportunities
A financial crisis provides unique opportunities in regards to regulations. While government regulations may have previously been stringent, a financial crisis can create a shift. Often times, companies are able to get around normal boundaries which can greatly increase the opportunities available.

Foreign Ownership
Companies often identify potentially lucrative opportunities in other countries. But because of foreign ownership constraints, the company’s options are at a standstill. A financial crisis often provides opportunities to bend the rules. Foreign ownership rules may be relaxed which allows businesses to execute successful business plans for expansion.

Stronger Negotiation Abroad
After time, many businesses become complaisant on their views regarding regulations. When a financial crisis occurs, management needs to adapt new attitudes and think creatively about regulations. Instead of accepting current rules, executives need to explore the effects of expanding the limits. If you challenge regulations, you may be able to gain entry into new markets. This can provide an advantage over the competition.

Taking on Industry Leaders
During difficult financial times, industry leaders are often hit hard. Difficult economic conditions often shake consumer confidence which can have a negative effect on these leaders. This provides a unique opportunity for small and emerging companies to penetrate the market. Smaller market competitors can capitalize on this opportunity by moving in and building a stronger market share.

Opportunities for Expansion
Many companies have ambitions to expand but have been limited by stringent regulations. Yet, as regulations begin to relax, companies are apprehensive about expanding during a financial crisis. Although this strategy may be counterintuitive, there are huge rewards for successfully expanding during a financial crisis. A company can take advantage of relaxed regulations that wouldn’t otherwise be available. And because many other companies aren’t willing to take the risk, it gives your business a strong edge against the competition.

Merger and Acquisition Deals
When a financial crisis hits, companies will often table discussions of acquisition or merger deals. Taking advantage of a merger or acquisition during hard times can actually turnout to be a successful strategy. This can be a great time to find deals that will create value and assist in expanding a businesses’ market share. The key to this strategy is finding the right deals and not overpaying. If you take advantage of the right opportunities, the payoffs can be huge.

Wagering Risk During Hard Times
When financially rough times occur, companies often clam up, holding all of their assets closely. But if you take a look into history, companies that make successful bold moves during a financial crisis can positively change the path of their company. Making strategic moves during a financial crisis can be risky. For companies who are up for the risk, the rewards are big. Work closely with management to develop winning strategies based on the economic changes.

Consider Your Positioning Strategy
During poor economic times, high-end goods providers typically experience drastic affects as consumers hold onto their money tighter. Companies that experience success in a financial crisis are usually those selling discounted goods. A company should develop strategies to tap into the marketplace changes. Closely evaluate your price points, marketing and packaging. This can assist in generating creative strategies to position your products closer to the market’s needs.

The Value of Quick Response
Those companies who come out of financial crisis ahead of the competition are usually quick responders to marketplace changes. Eliminating processes that slow down a company’s ability to respond to economic change quickly will add to your success. Work closely with senior management to quickly create and execute strategies.

Corporate Culture Changes
When companies design new strategies and quickly implement changes there is often a shift in corporate culture. Because managers often become comfortable with a set approach to business, there may be some resistance to change. Executives need to quickly gain management and employee buy in to make the new strategies a success.

A Call for Strong Leadership
In a financial crisis, companies need a leader that is resilient and can successfully implement change. Having a strong visionary that is willing to throw all of the old rules out and adapt new winning strategies is critical. Making these changes can lead a company down a path full of opportunities which can yield high payoffs and rewards.

Resources:
Dominic Barton, Roberto Newell, and Gregory Wilson. “How to Win in a Financial Crisis.” The McKinsey Quarterly 2002.

VERCOR is a middle market investment bank that creates liquidity for small and middle market business owners. For more information visit http://www.vercoradvisor.com/.

Are You Maintaining your Company’s Value in an Uncertain Economy

The global economy might be plagued with accounts of slumping business valuations. VERCOR managing principal, Mark Jordan, stresses it is still possible for companies to preserve and increase business value in the current economic climate.

Most known for guiding hundreds of business owners through the merger and acquisition process and his book, “Selling your Business the Easy Way,” Jordan continues his tutelage with the webinar, “Maintaining your Company’s Value in an Uncertain Economy.” The webinar provides business owners advice on how to preserve and increase business value and boost sales price a despite the economy.

Understanding the Short and Long Term Views
Jordan’s advice to business owners is to evaluate short and long-term views of mergers and acquisitions. While short-term factors such as tax rates and access to financing are critical, business owners should weigh long-term factors more heavily. This will remain a business strategy of choice due to valuable benefits including access to additional markets, greater economies of scale, and the ability to gain new talent.

Understanding Value Drivers
The merger and acquisition consultant also stresses the importance of understanding value drivers and their strong tie to the sales price of a business. A company’s strengths and weaknesses are a few principal factors to consider because they shape business value. Jordan notes it is important to consider a product’s uniqueness. ”Do not worry if you have opportunities for improvement. A seller actually appreciates a company that has some areas of opportunity,” he adds.

Enhance Value Drivers
Jordan also dispenses advice on how to enhance value drivers to boost a company’s sales price. A primary way to determine a company’s strengths is through customer and employee feedback and by understanding strategic planning for all business units. The business advisor recommends choosing a board of advisors. “A board can provide unfiltered feedback and vision planning which can make the company more effective,” suggests Jordan.

Jordan is confident that webinar attendees and all business owners can gain direction on preserving and increasing their company’s value in a tight marketplace. He states, “With proper guidance, business owners can navigate their way through this complicated maze and elevate their sales price.”

VERCOR is a middle market investment bank that creates liquidity for small and middle market business owners. For more information on the webinar, “Maintaining your Company’s Value in an Uncertain Economy,” visit www.vercoradvisor.com.

Is Your Business Ready for the Future? Get on Track with These Four Steps

While most business owners agree it is sound business practice to create and maintain a strategic plan, few businesses have one. Mark Jordan, managing principal of the middle market investment bank, VERCOR, reveals that only five percent of companies have a formal business plan in place. He warns that a lack of a business plan can affect the sales process. “Even if the sale of your company is years away, effective planning can make a huge difference,” states the merger and acquisition consultant.

Jordan has assisted hundreds of companies through the merger and acquisition process and most recently published the book, “Selling your Business the Easy Way.” He takes his advice a step further with “Preparing to Sell your Company,” a webinar that provides companies valuable planning information to give their business the competitive advantage in the sales process.

Preparing a Smart Base Camp
Jordan explains how preparing a “smart base camp” can create solid footing for a business. This includes designing specific actionable steps that will position a company for a successful sale. Even if business owners are not anticipating selling for 10 years, it is important to plan. The webinar provides detailed steps to assist with preplanning efforts.

Understanding the Value Pillars
When selling a business, business owners must also understand their core competencies. “This allows you to communicate how your products or services have a special place in the market,” states Jordan. The expert advises business owners to perfect the financial aspects of their company to display their performance to potential buyers.

Determining the Value of your Company
Determining business value is another important component of selling a business. Although there are several ways to assess a company’s value, Jordan explains that using the market value calculation is most accurate. This includes researching values of comparable businesses and talking to potential buyers.

Using a Scorecard to Evaluate your Business
To increase marketability and sales price, Jordan recommends businesses owners evaluate their companies. Criteria should include management compensation, opportunities for business growth and the ease a company will transfer to new ownership.

Jordan looks forward to providing a blueprint for companies to position their business for a future sale in the webinar. He warns, “Business owners are facing a time of uncertainty. For prepared business owners, it can be a time of great opportunity. Business owners cannot afford to be without a plan.”

VERCOR is a middle market investment bank that creates liquidity for small and middle market business owners. For more information on the webinar, “Preparing to sell your company,” visit www.vercoradvisor.com.

Where do middle market business owners fit in the economic downturn?

Turn to the front page of any newspaper across the country today and you can read about our seemingly endless economic woes; the wall street free-fall, government bailout plan, the credit crunch and of course, lagging consumer confidence and spending power.

While it is easy to focus on the short-term factors that can affect your business, it is critical that business owners in the middle market continue to focus on long-term business drivers that improve overall business value. Factors such as growth, innovation and effective cost management can positively affect overall business value in the long run.

Forward thinking middle market business owners know long-term value drivers, and not stock or credit markets, determine the overall business value and eventual sale price of a company. That is why they continue to pursue long-term strategic objectives with the same vigor today as they did before the economic downturn.

VERCOR, a middle market mergers and acquisitions firm, has successfully helped business owners create liquidity through acquisitions and selling their company for over two decades throughout various economic cycles. We help business owners focus on the long-term factors that affect their overall business value while enabling them to continue focusing on the day-to-day operations of their company. We have relationships in place to help maximize capital when it is the right time to acquire a business or when you get the right price to sell your company.

The good news is that, despite the economy, now is still a good time to consider selling your company. This is because:

-Valuations in some middle market sectors are still at historic highs
-Sales prices are not based on the stock market, but the value of individual businesses
-There are more buyers available than there are quality deals
-VERCOR is there to help you determine the fair market value of your company and will persevere until the deal is done

Now is also a good time to acquire a company in order to grow your customer base, reach new global markets or gain access to a broader talent pool. This is because:

-Opportunities for organic growth are slowing
-Finding and retaining top talent is a long and challenging process
-VERCOR is there to help you source acquisition targets that are the best strategic fit for your business

Great things are still happening in the middle market despite the economy. Middle market companies are growing; they are innovating and moving forward to long-term success.

Mark Jordan is the managing principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of Enhancing Your Business Value…The Climb to the Top, Selling Your Business The Hard Easy Way and co-author of The Business Sale…A Business Owner’s Most Perilous Expedition. He is also the author of numerous articles. For more information email him or visit www.vercoradvisor.com.

Remember the Map

For the vast majority of business owners, external factors and random events dictate the path they travel on their business journey. They may have a general idea of where they are going, but for the most part their plans are reactionary. They readily admit they need a road map but so often fail to ever take action. After consulting with hundreds of business owners around the country, I have observed the most common reason is know-how. They simply lack the knowledge of how to research, organize and prepare, and use a business plan.

Before we tackle the know-how, we should start by gaining an understanding as to how a business plan will really benefit your organization. It will provide goals, an outline of how to get there, and a system for measuring your progress.

Case in Point
To illustrate let’s look at "Frank," an owner of a small manufacturing company that was established over ten years ago. Frank’s business was a steady performer and provided a healthy income. Recently, Frank invented a unique tool for a specialized niche in the utility industry. The tool was a "one of a kind" and certainly appeared to have great promise. Frank began to spend all of his time on fine-tuning his product design. Armed with a working prototype, he set about marketing his product. He quickly found out there was no market for his product. In the meantime, his core business suffered greatly as he needlessly pursued this particular product. Had he gone through the development of a business plan first, he would have quickly seen there was no real market potential for his product. His company is still trying to recover from the year he wasted.

In addition to saving you from wasting time and resources, there are at least four main purposes in developing a business plan: You need additional funding, you need to make strategic decisions regarding starting, buying, or growing a business, you want to improve the operations and organization of your company, and you are considering selling your business.

Action Step
Purchase business-planning software or engage a professional to begin the process of preparing a plan.

Research is the first and most important component in developing your business plan. To conduct your research effectively, you need to first determine the topics to be discussed. Your topics will provide the framework and direction for your research. With your framework in mind, utilize as many resources as possible from a diverse background including industry associations, competitors, employees, and the Internet.

After your research is complete, it is time to organize and prepare your plan. While there is no requirement as to how you organize it, most plans contain the following sections: an Executive Summary outlining goals and objectives, Company History, Corporate mission and goals, Management team history, Your service or product offering, Market potential, Marketing plan, Financial projections, and Exit strategy.

As you prepare and organize your plan, commit to presenting accurate and realistic information. Insure your ability to defend your assumptions and projections. Some of the more common mistakes made by business owners in preparing their plans are: Presenting unrealistic financial projections, Showing an unrealistic growth plan, Overestimating sales, Underestimating or belittling the competition, and Providing too few details.

Your final step is committing to use your plan. Your plan, of course, is of no benefit if upon completion it goes on your shelf. You should review your plan at least semi-annually and update it at least annually.

You can’t build a reputation on what you’re going to do - Henry Ford.

Once you begin to use your plan, learn a lesson from the many businesses in the marketplace that never succeed. Those that fail or stagnate usually trip up in one of the core areas of finance, sales and marketing, management, or operations. In finance, they typically underestimate start-up costs or cash flow needs, overuse debt, fail to understand the difference between profit and cash flow, or make overly optimistic assumptions. Failures in the sales and marketing area usually revolve around underestimating the competition, inaccurate assessment of market potential, inability to promote the product or service, unrealistic estimates of length of time to penetrate the market, or lack of understanding of customer needs. The breakdown in management most commonly occurs due to lack of experience, divergent shareholder goals, wearing too many hats, and lack of structure. Operational problems develop as a result of poor location, too much overhead, wrong equipment, or poor utilization.

Mark Jordan is the managing principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of Enhancing Your Business Value…The Climb to the Top, Selling Your Business The Hard Easy Way and co-author of The Business Sale…A Business Owner’s Most Perilous Expedition. He is also the author of numerous articles. For more information email him or visit www.vercoradvisor.com.