Posts Tagged ‘advice’

A Vulnerable Seller

Monday, November 13th, 2017

Here is something counter-intuitive for a great many sellers of high-growth and mid-market privately-held businesses. If you want to maximise the price on exit, you need to maximise your vulnerability. Yet most sellers have spent years doing the exact opposite.

Vulnerability is largely a function of a seller’s self-worth (“I won’t allow the sale outcome to influence how I think about myself”), giving yourself permission to be vulnerable and the quality of your support system (friends, family, advisers and acquaintances). Hence any transition plan in the lead up to the start of the exit process, needs to address all three aspects, in advance, alongside:

  • Any fractured personal relationships (spouse/partner/family members)
  • Any past, present or future “private promises” made by the business to fellow shareholders, managers and family members (financial or no-financial)
  • Any private grievances (key clients, key business partners, key suppliers) or events (disputes, potential regulatory breaches etc.) that might reasonably give the buyer cause for alarm in due diligence or god forbid, post-sale.

You are rightly proud of the business that you have built. You have had proprietary control of the reins (people, capital, resources). Your control has given you power (discretionary authority) and protection (preeing eyes). The “4 P’s”. Now a buyer (strategic or financial) is being asked to make an informed judgement on the value of your business to their ideal future. What is the sum of your pride, your proprietary control, your power and your protection worth to them?

A buyer can rarely understand it (quality of your people and management, quantum of uncertainty, competitive threats) clearly without you being voluntarily vulnerable (trust). You cannot negotiate successfully without putting yourself in a position of vulnerability (willing at any point to walk away from a proposed deal), irrespective of the  consequences (financial, non-financial, business or personal). That requires a mix of internal and external attention as early as possible in the transition process. If appropriate, hiring someone, who has successfully dealt with those issues in their own business and who can help navigate you through the process. Almost certainly, not an internal figure, nor your corporate finance adviser. Someone, whose skills, behaviours and expertise are strongly aligned to your discrete personal and business needs.

© James Berkeley 2017. All Rights Reserved.

Fake News: HR

Tuesday, May 2nd, 2017

A KPMG co-promoted piece, in an otherwise interesting London business magazine, The Informer, carries a sub-title, “Meet the game changers having real influence on business strategy”. It references the creation of the Chief Human Resource Officer title, and its’ rising importance “as the person who enables the business strategy alongside the other “C” roles.” It cites as hard evidence, two people in a Harvard Business Review article, Mary Barra (CEO of General Motors, lasted 18 months in HR part of a 25+ year career) and Anne Mulcahy (past CEO of Xerox, lead the HR function part of her early management development). Prizes, if you can name any others, who came close to that position or truly “enabled” business strategy in an organisation you worked for or advised? I can give you 500 CEO examples, who spent most of their career in sales, marketing, finance or operational management responsibilities.

Then it states that the proportion of HR functions in FTSE 100 businesses led today by a career HR person has risen from 69% to 80%, “demonstrating relevant experience is vital in the current climate”. Since when has deep experience in a silo function been critical in a complex and ambiguous environment? Shouldn’t critical people decisions and accountability be in the hands of the line mangers directly responsible for implementing an organisation’s strategy? I have met and advised hundreds of HR leaders in some of the world’s finest businesses. I can count on two hands the number of individuals, who were outstanding.

This sort of article does consultants a disfavour because a large, respected consulting brand doesn’t ask the tough questions about clients, who pay it billions of dollars. It trumpets weak evidence and it suggests an alternative that is largely without merit.

© James Berkeley 2017. All Rights Reserved.

 

A Fool’s Wisdom

Wednesday, March 23rd, 2016

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In this Trumpian era where people are encouraged to say anything however crass or non-sensical to get noticed on social media platforms, I see so called business advisers increasingly adopting the tactic.

Today on Hotels the global hotel industry’s foremost media blog, a guest contributor and acclaimed expert, writes a two part post suggesting the industry is retarded if it doesn’t adopt a nickel and dimeing strategy! His point is that hotels need to follow car rental and airlines in better educating their customers about the hidden value they are providing, the best way to accomplish that is to charge them for every extra. I read the posts twice to check it wasn’t April 1.

What the writer fails to consider is how much more customers would pay if the product was better. It is this type of poverty mentality that kills growth businesses.

Don’t be drawn into a fool’s wisdom just because it is seemingly coming from a highly credible source. Ridiculous advice really says more about the source’s credibility than the advice itself.

© James Berkeley 2016. All Rights Reserved.