Program Objectives
The following list represents the Key Program Objectives (KPO) for the Appleton Greene Business Transitions corporate training program.
Business Transitions – Part 1- Year 1
- Part 1 Month 1 Business Evaluation – Business Transitions is a forward-looking program designed to build value for the next evolution of the business. Business Transitions begins with establishment of a baseline for where the business is today. Business Transitions are affected by the value of the business viewed by industry standards and balanced against the perceptions, desires and needs of the owners and stakeholders of the Company itself. To accomplish this, a suite of tools will be utilized. In this session, we will be introduced to, and learn each tool for use and application throughout the Business Transitions program. These tools are; Porter’s Five Forces, SWOT, 5 Whys: Root Cause Analysis, VMOST Analysis and Pareto Principle. Each of these tools will facilitate analysis into each area and identify areas and create a roadmap for improvement and change to build value. Porter’s Five Forces: Porter’s Five Forces is a model that identifies and analyzes five competitive forces that shape every industry and helps determine strengths and weaknesses. Five Forces analysis is frequently used to determine corporate strategy and can be applied to a whole business or portion of a business to understand competition and position a business for success. SWOT (Strengths, Weaknesses, Opportunities, Threats): The primary objective of a SWOT analysis is to help organizations develop a full awareness of all the factors involved in making a business decision. 5 Whys: Root Cause Analysis: Part of the Lean management system, is an effective technique for to find the root cause of any problem and then build a solution to protect the process from the reoccurrence of that problem. VMOST Analysis Model: VMOST analysis, also known as MOST analysis, is a framework and evaluation technique for organizational strategic planning; while also being very effective for application to departments or business functions. VMOST analysis aligns goals, objectives and process throughout the entire organization with that of the entire business. In addition to the vision (V) and mission statement (M) elements, the components of the acronym VMOST are: objectives, strategies and tactics. Pareto Principle: This principle is based on the theory that 80% of outcomes, both positive and negative, result from 20% of the inputs. Applying this principle and looking at the collected data in a Pareto chart provides an excellent visual for areas of focus and potential improvement. These tools and techniques, along with other evaluation and measurement tools to be introduced, will be applied throughout the Business Transitions program.
- Part 1 Month 2 Financial Performance – The objective of this module is learning the language of financial statements. Reading and understanding financial statements goes well beyond gross profit, net profit, assets and liabilities. Once the language is understood, our focus will be on reading, understanding the company’s financial position today and looking forward into the future. Value will be looked at from the prospective of both financial and strategic third parties. Financial parties value your company’s future profits stream, i.e., the likelihood of those profits continuing. By contrast, a strategic party estimates the value of your company in their hands. The math a strategic party does starts with estimating the financial performance of your company when added to their existing business, i.e., the accreted earnings performance. This is looked at as both your company remaining independent and fully integrated into their platform. In each case, factors including market share, sales revenue, margins, proprietary products, earnings, cash flow, management, people, suppliers, future outlooks and many other factors are considered. Thus, a baseline for all value drivers must be established. The results of this analysis will set the baseline for improvement over the course of Business Transitions. To accomplish this evaluation, our first look will be from a financial statement and financial ratio analysis. We will focus on the reading and understanding of financial statement and how the income statement and balance sheet fully interact and ultimately generate the statement of cash flows. A good understanding of the numbers is essential for decision making during the program and measurement of progress throughout and after the program. Once a good understanding of reading and working with financial statements is in place, the objective will then be methods and techniques for development and implementation of financial controls. Financial controls include; financial analytics, checks and balances, approval and signing authorities and reporting systems, both historical, current and forward looking.
- Part 1 Month 3 KPI Dashboard – The objective in this module will be to understand Key Performance Indicators (“KPIs”); what they are, how to design, measure and report them and how to apply them for managing the business. Using KPIs will start the transition from past tense decision making to forward looking decision making. KPIs also become the basis for management to keep their primary focus on the business versus in the details of the business. This is an essential mindset to be learned and adopted to build value and move towards the business transition. After the process is learned, KPIs will be established and the methods for how those KPIs will be measured and the frequency and timing of data collection and measurement will be defined. Finally, a method for reporting on the KPIs will be established. Reporting is most often done via dashboard. We will explore dashboards, their strengths, weaknesses and uses. Ongoing assignments will be for the development of KPIs for the business, building the dashboard and applying the information on a continuous basis for key decisions.
- Part 1 Month 4 Abdicate Delegate – The objective of this module is to learn and apply techniques for effective delegation. To build value and prepare for an effective Business Transition, successful delegation is an absolute essential. Building upon KPIs for the ability to manage, we will explore techniques to delegate work effectively and successfully. We will explore several techniques and methodologies proven successful over time: 98/2 Delegation: The process of identify the 2% of work that management must do, because it cannot be delegated and requires their personal input; Discover your Picasso Work: An alternate method of identifying the unique value-add that key management possess and must personally apply to create that value; Four Quadrant Analysis: An analytical process to categorize tasks for levels of delegation possible. Having learned these techniques, the next goal will be to perform this analysis at appropriate management levels within the business. Delegation is a continuous process that should be reviewed and reimplemented on a regular basis. To build value and position for the business transition, management must constantly be focused on spending their time on the work that consistently adds the greatest value to the business.
- Part 1 Month 5 Systems Processes – The objective of this module is to measure the extent to which the business is run by processes or by people and to then effectively understand how to build processes, define policies and implement them within the business. To build value and position for a Business Transition, the business should be structured as much as possible, so that processes run the business and people operate processes. This is done through the implementation of effective business processes, also referred to as systems. Borrowing an acronym from the franchise industry, an industry built on processes or a system; System is an acronym for Save Yourself Time Energy & Money. This module will focus on learning to develop, implement and operate systems, processes, procedures and policies for the business. Business owners and management often create a hub and spoke organization, with them at the hub. What this means is that all decisions flow into and out of the hub, and management becomes the bottleneck in the business. Our objective is to learn how to effectively stop this and transform into a process driven organization. As part of our learning process, we will explore various process driven techniques, including; Lean, Kaizen, Kanban and more scaled down, simple to implement solutions. Our objective being to obtain meaningful results within an easy to learn and implement framework. From there, management will define and document the processes in the business as they exist and the apply the various techniques to look for improvement within those processes on a continuous basis.
- Part 1 Month 6 Growth Potential – In this module we will look at growth potential. Businesses with greatest growth potential have the highest value. Business growth will be measured across all relevant aspects; customers, markets, products, people, longevity, market share sales revenue, margins and net income. Each of these will be further analyzed to determine level of performance and opportunities for improvement. Opportunities for growth will also be explored; geographic – are there new markets available? Vertically – can existing capacity effectively handle more customers? Horizontally – are there other products or services that could be added to the company’s offering to increase overall value? Key questions and areas to explore: Can the business be replicated in additional geographic locations and would performance be similar or superior? What other products or services would your customers buy from you? What adjustments would be necessary to handle 10x current volumes? Would new marketing channels allow the business to reach a new customer group? Would a self-service model or other method allow smaller customers to be profitably serviced? Is it possible to create a license strategy? Where and how would $5,000,000 be invested to add the most growth and profitability to the business? Based upon the analysis, alternative proposals for durable growth will be developed. The alternatives will be vetted using one or more of the analysis techniques. Based on that analysis the growth plan will be established. This plan will include goals, objectives, a project plan with timeline and budget. As part of the planning process, we will also develop processes, procedures and policies; training, KPIs, financial controls and reporting. The plan will establish the structure for continuous measurement and evaluation of this project to be used throughout Business Transitions and by the business going forward.
- Part 1 Month 7 PRSP – In this module learn to develop a Proven and Repeatable Sales Process or PRSP. Sales and topline revenue growth are key to building value. The important aspect is to not only understand that sales is a process, but to define the process that not only generates revenue growth, but to then implement that process so that it is repeatable. Repeatability is essential for accurate planning, budgeting and forecasting. The PRSP plan will include goals, objectives, a project plan with timeline and budget. As part of the planning process, we will also develop processes, procedures and policies; training, KPIs, financial controls and reporting. The plan will establish the structure for continuous measurement and evaluation of this project to be used throughout Business Transitions and by the business going forward.
- Part 1 Month 8 Neutrality Structure – In this module we will analyze the dependence of the business on suppliers, employees and customer concentration. Maximizing business value for a Business Transition requires that the business not be overly reliant on any one customer, employee or supplier. Suppliers: If a business is dependent on one or two key suppliers then the business is at their mercy. Cultivating several suppliers positions the business to never be dependent on anyone supplier. Diversifying suppliers, even at the cost of losing some special pricing discounts is essential for building value. Supplier diversity is more valuable in the long run than saving a little money currently. Employees: If the business is too reliant on any one employee, there is significant risk if that employee chooses to leave and at a disadvantage when it comes to negotiating compensation. Customers: If the business is too dependent on any one customer, the business will be highly unstable with the loss of that customer. A stable customer base requires diversification, typically no single customer represent more than 15% of total revenue. As we work through the neutrality analysis, we will consider the following factors: Rank your employees from easiest to most difficult to replace. Create a plan to become less dependent on the hardest to replace; How could you create a bench of potential hires for key roles in the event of an employee defection? Identify your most important raw materials. What other companies could supply them? How could you achieve the same or superior pricing and terms from an alternate supplier? Rank your customers by the percentage of your overall revenue each represents. How can sales be increased to smaller customers or how would additional customers be secured to lessen customer concentration? Based upon the analysis, alternative proposals for reducing and hopefully eliminating dependence and creating a valuable neutral position for the company. Based on the analysis the various diversification plans will be vetted using one or more of the analysis techniques and the diversification plan will be established. This plan will include goals, objectives, a project plan with timeline and budget. As part of the planning process, we will also develop processes, procedures and policies; training, KPIs, financial controls and reporting. The plan will establish the structure for continuous measurement and evaluation of this project to be used throughout Business Transitions and by the business going forward.
- Part 1 Month 9 Cash Generation – The objective of this module is to understand the ability of the business to generate cash. Cash flow, gross margin and profitability have great effect on the value of your company. The more cash required to be injected by a third party into a business, the lower the value. The inverse is also true: the less cash required from a third party, the greater the value. A value driving goal should be to create a business that accumulates cash as it grows. One way to do this is to create a positive cash-flow cycle, i.e., collecting payment sooner from customers while at the same time lengthening time to pay suppliers and expenses. In this section we will analyze the businesses’ billing and collection practices to gain a full understanding of the company’s cash cycle. Installment billing. Is it possible to front end loan the amounts billed and collected? Is a subscription or membership model possible? What changes in the current business model would be required? Turn a service into a product. Is it possible? What would be required? Inventory. Is just in time a possibility versus stocking and carrying inventory? How could levels be reduced? Is it possible to change payment terms on carried inventory, delaying payment until usage? We will look for method and practices to improve the cash cycle as well and then analyze the proposed changes with one or more of the analysis techniques. Based upon the analysis, alternative proposals for positive cash generation will be developed. These alternatives will be vetted using one or more of the analysis techniques. Based on that analysis a plan for cash cycle improvement will be established. This plan will include goals, objectives, a project plan with timeline and budget. As part of the planning process, we will also develop processes, procedures and policies; training, KPIs, financial controls and reporting. The plan will establish the structure for continuous measurement and evaluation of this project to be used throughout Business Transitions and by the business going forward.
- Part 1 Month 10 Recurring Revenue – In this module our focus will be on the power of recurring revenue. Having a predictable, recurring revenue stream is one of the largest builders of value for any business. Next most is reoccurring revenue followed by one time sale revenue. Our objective will be to identify the types of revenue currently existing within the business and to then understand and identify methods to create or transform existing revenue streams into higher value revenue streams to build value. Opportunities for recurring revenue include, but are not limited to; consumables, subscriptions and contracts. There are variations on each, but those are the primary categories. Regardless of the method and regardless whether the recurring revenue is within the company or adjacent to the company; recurring revenue builds value by: Increased lifetime customer value; Smoothing out demand; Reduced market research cost; Less receivables and increased cash flow; Customer retention. As we analyze this section, we will consider: How could revenue streams be moved up the value building hierarchy? Could a consumable element be added to what is sold? How could customers be engaged in a long-term contract? Would some customers prefer to be billed automatically over manually submitting a regular payment? Could a maintenance contract be added to the sale? Based upon the analysis, alternative proposals for creating recurring revenue will be developed. These alternatives will be vetted using one or more of the analysis techniques. Based on that analysis a plan will be established. This plan will include goals, objectives, a project plan with timeline and budget. As part of the planning process, we will also develop processes, procedures and policies; training, KPIs, financial controls and reporting. The plan will establish the structure for continuous measurement and evaluation of this project to be used throughout Business Transitions and by the business going forward.
- Part 1 Month 11 Defensible Position – The objective of this module is to understand and implement methods to create defensible business positions. Warren Buffett is famous for investing in companies with a protective “moat” around them. The deeper and wider the moat, the harder it is for competitors to compete. In addition, an enduring competitive advantage also gives the business more control over pricing, which increases both profitability and cash flow. Having a defensible position builds value. In order to maximize value, commit to a product, service, or a bundle that does one thing well. The objecting being to identify and build an offering so irresistible that it builds value for the business. To build value, analysis will be performed to focus limited business resources on becoming excellent in the company’s niche and build value. Is there a layer of service that could be added to differentiate the offering? How can products and services be better branded? What is the one thing that customers care most about? What is unique about the business? How can the business capitalize on that quality? If you can’t identify something unique about your offering, examine what your competitors are doing and what consumers aren’t yet getting from any source, and weigh the benefits of offering it. Based upon the analysis, alternative proposals for creating defensible positions will be developed. These alternatives will be vetted using one or more of the analysis techniques. Based on that analysis a plan will be established. This plan will include goals, objectives, a project plan with timeline and budget. As part of the planning process, we will also develop processes, procedures and policies; training, KPIs, financial controls and reporting. The plan will establish the structure for continuous measurement and evaluation of this project to be used throughout Business Transitions and by the business going forward.
- Part 1 Month 12 Customer Satisfaction – TThe objective of this module we will be measurement and improvement of Customer Satisfaction. This attribute measures both the extent to which your customers are satisfied and your ability to assess customer satisfaction in a consistent and rigorous way. Being able to objectively measure the satisfaction level of your customers is essential to maintaining customer loyalty and building both repeat and referral business. The Net Promotor Score (“NPS”) methodology, based around asking customers a single question that is predictive of both repurchase and referral, has been proven to be the most effective measure of customer satisfaction. In this session, we will study the NPS, develop our question and create our NPS survey and run a project to survey customers of the company. The main reasons for use of NPS, beyond its proven reliability are; it’s easy, it is common language for third parties and it is predictive. Beyond the initial survey, we will develop a methodology to continuously measure customer satisfaction and benchmark future performance against past performance.
Business Transitions – Part 2- Year 2
- Part 2 Month 1 People Plan – The objective of this module is understanding organization structure, roles in the structure and people in the roles. Great companies have great people. As important as it is to have great people, it equally important to have the right people in the right roles doing the right job where their performance and contribution is of the highest and greatest value to the business. Achieving these objectives builds value and positions the company for a business transition by not only driving company performance, but also reducing turnover and typically, increasing productivity. During this module, we will explore various personality profiles and staff assessment tools such as DISC, Myer-Briggs for example, and how to implement them and gain value from them to build value. We will also study job benchmarking and aptitude testing. Each of these tools will come together to develop and create hiring processes that improve the quality and success of future employees. The next step is to apply and integrate these concepts into the organizational structure and the management, staffing and hiring plan for the company. Part of the hiring plan will be employee development plans, utilizing the tools and techniques gathered within this module and based on the systems developed for the business. The result is to have plans for hiring, training and development of new employees and internal transfers to new roles that is quick, efficient and successful in placing people in their best roles, providing every opportunity for them to be successful and the ability to advance as appropriate.
- Part 2 Month 2 Operating System – The objective of this module is to define the operating system for the business. The operating system defines the mission, vision and values of the company, standards of performance and quality. In this module, we will explore and learn methods for creating the Operating System, integrating each element previously learned and explored throughout Business Transitions. We will explore and learn about performance culture and a philosophy known to as House of Quality. We identify and learn how to integrate knowledge gained through previous modules of Business Transitions into the business operating system. The objective is to be certain the business has a firm plan to execute and implement knowledge gained throughout Business Transitions.
- Part 2 Month 3 Testing 123 – The objective of this module is to create and implement testing and evaluation plans for the techniques, systems and methodologies learned and implemented throughout business transitions. We will look at systems in place and running, management team working in sync, operating system and culture in place and adhered to and that financial controls are in place and working. To evaluate, we will explore building test plans, plans that not only test under normal conditions but also under stress conditions. The objective being to see what it takes to break any system. This will identify new weaknesses which need to be resolved through rework of the system.
- Part 2 Month 4 Due Diligence – The objective of this module is to learn and implement techniques for performing self-directed due diligence for the business. Due diligence is having complete business documentation in place for the business, as well as all systems, procedures, plans, records and studies. Due Diligence, when performed by an outside third party is time consuming and their objective is validation of claims and representations made by the company, as well as looking for reasons that history of the business is or is not representative of the future performance of the business. By the business doing this itself on a continuous basis, the business will build its value and save time. Items we will explore in due diligence: Creating, managing and maintain a data room based on a thorough due diligence list; Diversity – the company’s history, practices and policies. Diversity is now recognized as a driver of building value; Environmental, Social and Corporate Governance (ESG). ESG is relatively new and growing driver of building value; Sustainability. Similar to ESG, sustainability is a relatively new and growing driver of building value.
- Part 2 Month 5 Transitions Preparations – The objective of this module is preparation of materials for marketing the business to potential acquirors or investors for raising capital. Investors each have mandates and we will learn how to identify potential sources, how to reach them and how to effectively communicate with them. Subjects to cover: Teaser – how to create an effective one pager to capture attention; Non-Disclosure Agreement – reasonable language and expectations; Investor Deck(s) – how to create effective and compelling investor decks; Potential Sources; Transaction Types: Debt, Equity, Majority Recap, Minority Recap; Debt: Bank, Mezzanine, Structured, Sub-Debt; Equity: Angel, Family Office, Private Equity, Public Markets, Preferred Equity, Equity; Advisors; Attorneys; CPAs; Investment Bankers; and Brokers
- Part 2 Month 6 Transitions Finalization – The objective of this module is the finalization of the Business Transitions process and execute on the plan. All of the preparation work is in place and changes will have been implemented. Note, Business Transitions is not a static process, but one that may and/or should be repeated on a regular basis to maintain momentum in the business. Regardless, at this point all preparations have been made that the business may move forward with the next evolution of the Company, whether that be continued operation in its transitioned state, raising capital for growth, acquisitions or recapitalization purposes; or an exit, whether that be sale to a third party, hand off to the next generation or an ESOP. Regardless of the chosen path, expertise and services of additional professionals and experts may be required. In this module the objective is to identify the process, tools and techniques to identify, qualify and select those experts and then how to engage and work with them to achieve the desired results. We will explore the advantages and disadvantage of each transition strategy, the documentation required and risks and benefits of each. We will discuss the need and integration of potential third party sources beyond financial resources, including specialists in specific legal structures and tax structures. We will also discuss how to identify and qualify the experts to assist in structuring and documenting the internal transition. And finally, how to manage the Business Transitions, whether internal, external or capital raise; including negotiations, timing and expectations.