Posts Tagged ‘growth businesses’

Entrepreneurial Wisdom

Wednesday, November 21st, 2018

Would you seek to cross the Atlantic without a substantial support system? Might bet is you’d loudly shout “no”. Yet there are daily, entrepreneurs, some having early success, who insist on taking even more perilous risks with their own business ventures and won’t take advice from anyone. They intuitively know better. That is fine until the seas get so rough that faced with imminent capsize, they scream “help”. Why be so churlish? Get the best qualified help you can afford, pay them on equitable terms and that them as a partner in your future success. 

Delusional Co-Investors

Thursday, February 15th, 2018

 

 

“Who are you today?” I meet a great many $30mio-net worth plus co-investors in growth businesses, who arrive as free spirits but quickly find themselves as “prisoners” in their own mind. Convincing themselves that they are a smart investor in ultimately a profitable growth business, management team and market when recent performance and future indicators suggest the exact opposite. To a certain extent, you can understand entrepreneurs travelling through what I term a “delusional growth zone” (burning ambition and unmatched results) but you’d hope private investors and those advising them would avoid enduring extensive self-imprisonment.  In my experience, “letting go” is a lot harder and painful for wealthy investors than most people ever imagine or discuss. Here is the rub: you cannot improve your situation unless you are willing to be intellectually-honest with yourself first (rational assessment), to not “fear” the consequences of moving on (ego) and to embrace rebounding from failure (accomplishment). This really isn’t about them, it is about you.

© James Berkeley 2018. All Rights Reserved.

FOG

Tuesday, October 25th, 2016

 

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Time and again, particularly in growth businesses, I see leaders proudly trumpeting their unplanned but hugely gratifying successes that they have achieved. When I ask about what decisions they will make today about planned future growth, their default is to say that we are in “pause mode”, and recall past stories of investing too early in entirely different businesses, at entirely different stages of growth. “I know it sounds silly, we know that we need to invest first and then enjoy the returns but we are not in that mindset, at present.”

The effects are the “stop-start” impact of growth on the top and bottom line. Sales pipelines that are at one moment overflowing and another running dry, revenues that have a strong couple of quarters followed by leaner quarters and increased volatility in profits. The volatility creates a sense of unease in management’s own thinking and often investor unease in management’s ability to achieve their projected profitable growth targets, as originally agreed. Confidence is a fragile vase, once shattered hard to put back again.

We all know that we must grow our businesses but coming to terms with the consequences of growth is seismic for some entrepreneurs and executives. From an investor’s perspective, management’s fear of growth (“FOG“), is as debilitating a condition for an organisation’s future as the actual consequences of the growth investments made. The consequences of investing too late or not at all, are rarely even considered after the event by management (the great business development hire you never made, the business you could have acquired, the market opportunity you could have secured and so on).

Understanding what are the causes of “FOG”, are fundamental to growing a thriving business. Why is it that management are unable to take prudent risk? Why cannot they put in place appropriate preventative and contingent actions? Why have they stopped trusting their own judgement?

The answers give you a more profound understanding of the management team, the beliefs that govern their actions and the results that in all probability will arise for investors.

There are, of course, rational consolidation moments in periods of high growth, to ensure growth is manageable and healthy or when there are dramatic macro environmental changes taking place in a designated market. What I am suggesting entrepreneurs and executives think about is the irrational moments, management’s self-inflicted fear of growth and the consequences for their key constituents. Are they afraid of the dark or the “monsters” that may appear in the dark?

© James Berkeley 2016. All Rights Reserved.