“The higher a monkey climbs the more you see of its backside.”
 Attributed to US General J Stilwell
monkey-butt

I am sick and tired of seeing the vanishing monkey’s backside. Not that a monkey’s hindside bears a particular appeal.

It’s a good metaphor – companies continue to watch their growth potential disappearing.

It’s tough out there in the market. Business owners fighting on multiple fronts: cash flow, demanding customers, social media marketing, innovation. Any military commander will tell us fighting multiple fronts is not a good option if one wants to succeed.

 

Yet business growth remains the measure of for most companies. Apple Inc just announced the first drop in revenue since 2003. It appears, not even the mightiest are prone against a drop in growth.

I want to highlight 3 points that are fundamental to business growth – in fact they are very obvious:

1 Growth for self-preservation
Companies exist to make a profit. A profit ensures existence tomorrow. This means to compete better than their competitors. Be better, faster, smarter.

Like any living being, companies have a self-preservation instinct – it must grow and adapt to survive.

2 Growth driving increased profitability
In principle, jumping on the growth wagon means applying economies of scale.

Again, Apple Inc designed this to perfection. Higher iPhone revenue meant lower manufacturing costs on a massive scale and thus delivered increased net profit.  Now iPhone revenue has dropped by 10 million units (compared to last year). Reverberations on the stock market are afoot.

3 Growth – a tough ask for many
Whilst we most of the time hear and read the success stories in the business world, there are a lot businesses out there that are doing it tough, real tough.

However, there is light on the horizon:

Changing the source of Growth

Growth 2009 to 2015

Companies seem to invest more (% to revenue) into R&D (including buying technical knowledge or information abroad) nowadays and focus less on broad-brush marketing.

Six years ago, companies R&D share was 37%, last year it was 52% – it appears that more work is being done to produce high quality products.

In sum: Most businesses have to fight ‘tooth and nail’ to keep growing. I generally advise my clients to grow slowly, use the learning curve to get better at what they already doing. Consolidate the core value proposition, and then expand. Doing the homework via R&D.

Need help with growing your business
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money 1Most Small Medium Enterprises (SME’s) face tough choices on how-to-grow:

Keep ticking over and consolidate the current business.
But be limited by own funding access.

2 Seek investors to grow into new markets, develop new products and services.

Seeking and accepting investors, means ‘giving up’ control.

This may be hard to accept for business owners.

On the other hand a pro-active investor may bring highly sought after expertise into the business.
This decision point is a tricky one for business owners.

I’d recommend the following 5-steps before embarking on finding investors:

1 Set goals
What is your ambition? Are you prepared to relinquish some control?
I have worked with businesses that sought investors but were not quite clear why they were considering getting investors on board.

To fix negative cash-flows or reducing debt may not be the best motivation to engage investors.

Set 2-3 main goals on why you want to get investors on board, e.g. do you want to set up business in a different location because you believe (and can show) that you can create value with your unique business proposition?

2 Clear strategy
Position your business clearly by naming your 3 key strategies going forward based on your performance to date.

The investor of today does not profit from yesterday’s growth  W. Buffet

State what was achieved so far and what the future holds:

  • point out the growth potential
  • support this with research
  • and a suggested marketing strategy

This ensures that potential investor can verify that you have thought about the future. It is vital to convey confidence in your value position. This in turn provides potential investors with a real level of comfort.

3 Getting ready
‘Getting ready’ is often underestimated. Meaning to get your internal processes in order:

  • fully understand your internal activity chain
  • streamline your financial reporting
  • fine tune your business dashboard (if you use one)
  • and your personnel management

Once a potential investor is showing interest in your proposition, you want to put your ‘best foot forward’. Demonstrate that the to date performance is no fluke. Your business processes are sound.
Sure they can be improved but they are good enough for now.

The better prepared you are the more confident the investor will be about you and the business opportunity.

4 Value
Price is what you pay. Value is what you get W. Buffet

Be realistic when you value your business – There are many approaches in establishing an accurate valuation for your business. Finding the best method for your business will provide you with the best measure of value.

5 Passion
Add passion to your investment proposal. You have done the foundation work. Now you’re into marketing mode.
Stay away from clichés such as ‘unique opportunity’ and ‘once in a life time…” etc., bring your own flavour or secret sauce into it.

Convey the energy that made you set up the business in the first place.

Include the sacrifice, the struggle, the joy and the commitment. And of course the future opportunities.


Tip: Have an exit door
Always leave the exit door ajar. An investor will jump on the wagon (or jump off).
Consider you own future in the business. Perhaps you wish to reap the benefits of your
hard work and increase your personal liquidity. Or you would like to retain a minority interest as a shareholder and hand over the management.

Contact me for a FREE Consultation

 

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colorful-duckSome people claim that Value Creation is a Lame Duck and is an obsolete approach to our nowadays digital world. Well, I am not so sure.

I may be a dinosaur but I do believe that value creation tools are still as valid as they have always been.

What gives me confidence?
I am confident because I have used the Activity Chain Analysis Business Tool to do precisely that: identify and fine tune the value creation process.

So what – give us a specific example?
One of the best examples I know: IKEA – the Scandinavian furniture designer that sells products that are simple, practical and at low cost to the consumer. I would estimate that 90% of German households have a least one item from IKEA.

What makes IKEA unique?
IKEA develops consistently outstanding products with unique design that fit nicely into the IKEA logistics (flat cartons).  The innovative idea that the customer collects the package after purchase and assembles it at home. Although it can be a frustrating experience too!

How do they do it?
Constant review of their Activity Chain. The whole economic basis of IKEA’s is focussed on targeted cost. The relentless pursuit of optimising all processes in the company.

“Wasting resources is a mortal sin at Ikea” Ikea founder Ingvar Kamprad

Activity Chain Analysis in action
If IKEA encounter a problem in their Activity Chain Analysis, they attack it and turn into an opportunity.

“Solve big problems in small steps” Ingvar Kamprad

A strong focus on cost-optimised manufacturing. Yet they still sell attractive furniture for the mass market.  A fine balancing act indeed. IKEA also optimise processes with their suppliers and communicate closely with their customers.

Can I also use Activity Chain Analysis?
Yes, you can. The principles apply to small and big. Manufacturing or service industry. Online or ‘bricks and mortar’.  All organisations can benefit from this powerful analytical tool.

Want to know more about the Activity Chain Analysis Business Tool?

 

 

 

 

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