doug tatum

Prepping the Princess for the Party: Is Your Business Ready to Sell? Part Six

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HOW TO NAVIGATE THE "NEW NORMAL" TO SELL YOUR COMPANY

This week on “In Process: Conversations about Business in the 21st Century,” we reach the final podcast in our series dedicated to the topic of preparing your business for sale.

There's a “new normal” in the marketplace. Too much money, chasing too few deals. We’re also now seeing a fairly dramatic reduction in the number of companies above 100 employees. That shrinkage, if you will, accounts for a lot of the competitiveness. And, the impact on the market? It's driving the capital downstream.

In the final installment of our six-part podcast series, show hosts Evelyn Ashley and John Monahon speak with Doug Tatum, chairman of Newport Board Group, a national partnership of CEOs and senior executives who advise emerging middle-market companies and assist private-equity firms to invest in and grow portfolio companies. Doug is also the author of “No Man’s Land: Where Growing Companies Fail,” a leading text about growth companies that has been translated into several languages and has won four National Best Business book awards. 

“If you take the notion that we're in a cheap capital environment―both interest rates and equity―then I think the new normal, or the new financial calculus in the capital markets or private equity, is that it's just cheaper to buy customers than it is to win them through a traditional sales channel, which is more expensive and takes too much time,” said Doug. “If you can't find a platform company of any size to buy or they’ve already been bought, then you end up performing add-ons or what we refer to as bolt-ons. We’ve got research that shows as much as 85 percent of every deal in the United States is now an add-on, if you include private-equity firms buying from each other.”

Companies looking to navigate these uncharted waters need to be aware of today’s requirements and have in place a set of good fundamental principles in order to make a successful sale.

During the course of the podcast, entrepreneurs, business owners and C-level executives will learn about the:

  • Concept of fractional C-level officers
  • Succession planning process
  • Best practices for selecting a successor
  • Lessons-learned from the sales process
  • Qualities you should look for in a purchaser

Learn more about selling your business in today’s marketplace by streaming the conversation in its entirety in the player below, or download it to your mobile device via iTunes. Don’t miss a single episode, subscribe to our show “In Process Podcast” on iTunes to receive this episode as well as future episodes to your smartphone.

Growth Dilemmas: Don't Be A Victim of No Man's Land

This week on In Process, we're revisiting a topic with many intricate parts: how to scale your business. Hosts Evelyn Ashley and John Monahon sat down with author and entrepreneur Doug Tatum a few weeks ago--author of No Man's Land and Chairman of the Board for The Newport Board Group--to talk about the issues that can kill good businesses as they expand.

"It's a fascinating opportunity to look at the checkerboard of U.S. company demographics," says Tatum, who works with a research institute at the University of Wisconsin that tracks every company in the United States over multiple decades. Tatum says that while the number of companies as a whole skyrocketed in the recession, the number of companies with more than 100 employees dropped dramatically. This is where we start to see "no man's land," a period in companies' growth that generally occurs between 20 and 100 employees. 

"too small to be big, too big to be small" 

The conversation about growth and adjusting to scale revolves around what Tatum deems The Four Ms:

  • Market - How does a company relate to its customers & grow? What is the value proposition?
  • Management - Who is the inner circle? What is the culture like at human scale vs. financial scale? 
  • Model - How does the business make money? How will that change as it grows?
  • Money - Where will you find the financial fuel to get to the other side of a growth spurt?

These commonalities across all businesses are what inspired Tatum's book. "There really is no shortcut," he says of finding a successful business model at a larger scale. Tatum stresses the importance of objectivity in identifying what factors will allow your company to grow--in the early stages, that's usually through some form of innovation. Sometimes, your customers are the driving force behind innovation--Tatum laughs about how often companies make promises to customers that they, as businesses, are obligated to keep, ultimately forcing growth. 

"In the early stages of a company, what you're really doing is making a series of promises," explains Tatum. The entrepreneur's job is managing those promises versus managing the organization's priorities. The problem arises when the company's growth reaches the physical limits of the entrepreneur--he or she can't work any harder, longer, or smarter, so growth sputters and the company begins to suffer. 

What are you good at?

"It is remarkably difficult to keep a business simple for customers to do business with," Tatum says. As the entrepreneur delegates fulfillment of promises, you'll recognize No Man's Land kicking in when sales stop growing and customers begin to complain. To side-step this growing pain, it's critical that business owners consider what it is his or her clients applaud them with: What is the value proposition? Is it scalable? 

Tatum also discusses perhaps the most emotional (and most ignored) issue facing expanding comanies: outgrowing original management. 

 

"You can grow yourself out of business if your model isn't scalable." 

 

 

 

"It's okay to stay small and make money," stresses Tatum. "You can grow yourself out of business if your model isn't scalable." 

If you're going to get to the next level, the ticket to the inner circle has to be performance, not loyalty. 

Listen to this episode of In Process for more details on refining your inner circle, scaling your business and preparing for success at all stages of growth. For more episodes like this one, subscribe to In Process on iTunes.