A twelve-part blog series outlining how to save, turnaround, and grow, your struggling or failing professional client service consultancy, architects practice, design studio, marketing communications (marcomms), PR, digital or creative agency business.
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Total Business Turnaround
Part 01 | Planning
Without planning, no business can succeed. You need to know where you are, where you want to be and how you plan to get there and that begins with your business plan. Of course, with today's economy and the immediate demands it places on you and your team, strategic planning may be the last thing on your mind. After all, it is hard to do the kind of big picture thinking it takes to work ‘on’ your business when you have to work ‘in’ it all the time. That, however, is precisely what you must do.
You can survive the turmoil by establishing and pursuing a goal worth achieving. This means examining your aspirations and expectations, your investment and how you plan to exit, the numbers you need to see to make it work, possible buyers and the value of your company, turnover, profit, and your business plan. All of these are important factors in determining winnable goals for you and your company.
Aspirations and Expectations
You begin by examining what you want to achieve. Once you have determined that, look at your business and see what you can reasonably expect from it. Will your business, as it stands, fulfil your aspirations? Does it exceed them? Does it fall short? Remember: In all likelihood, you will, at best, only achieve to the level of your expectations. You can avoid this by examining and basing your plan upon an honest assessment of:
Your expectations – What your business realistically can do.
Your goals – What you really want to accomplish.
Your education – The experience and skill your team and you bring to the problem.
Your focus – The way you use that knowledge and experience.
Your Investment and Your Exit
People change over time and so does the way they see things. You and your partners may have a very different perspective on your business today than you did at the start. Keep in mind that times of difficulty and upheaval create the perfect conditions for change. For you and your partners, this may mean a change in how invested in the business you wish to be or even how you plan to exit from it and under what conditions.
The Freedom Calculator
For most people, economic freedom and freedom in general are almost one and the same. It is merely a matter of what you want to do with your money. The Freedom Calculator takes relevant data including your living expenses, dream realisation and re-investment figures and gives you a Capital Critical Mass that, at a reasonable 5% - 10% per annum managed investment return, will allow you to live the life of your dreams.
Target Buyers and Investors
If a listing on the alternative stock exchange is not practical, then you need to find investors or even buyers for your company, which might include your existing management team, if you wish to reach your Exit Point.
You need to identify the gaps between your services and those of your competition.
Consider joint venture partnerships, finding suitors among your larger competitors and your clients, and modelling your business on their best practices to create a match.
Target Company Sale Value
While the sector your business is in, the current market conditions, and how strong a competitor you are all play a role in determining the value of your company, your business can realistically be valued as a multiple of profit or turnover, or a combination of both. Research into this area will help you solidify your aspirations and expectations and understand the key issues that potential investors consider. This will also help you tailor your business plan, investment presentation and negotiations to achieve the best possible outcome.
Target Turnover and Profit
Calculating your Target Turnover and Profit with data including target company value, an estimated industry earnings multiple, profit figures, target turnover and current turnover, provides an overall structure to the plan as well as a timescale. Any potential investor wants to know what return they may make for their investment over a given period of time and what the risks involved are. This also allows you to figure out the growth you will need to achieve over a fixed period of time in order to reach your Exit Point.
Company Valuation Methods
You can use your projections with the Discounted Cash Flow Method to determine a reasonable, ballpark value of your company. Along with the Discounted Cash Flow Method you should consider your pre and post-money company value, investor equity, negotiation, incentives, areas of increasing value, goodwill, and multiples of earnings. All of these play a part and should be part of your calculations. Remember valuing your business is an art, not a science. However, it is better to be up to speed with the various methods so you are prepared to justify your own valuation of your company.
The Business Plan
When you are developing your business plan, you need to assess the roll you are to play in the business, how involved you will be and what you want to get out of it so you can concentrate your efforts right where they need to be. You must also take into account the functions of the business—the service it provides and the support it gives to you and the other owners—as well as the need for a healthy combination of inward and outward focus.
Finally, you need to be able to ensure consistent planning and follow-through in order to keep from making mistakes that sap time, energy and money from the growth of your business.