The Business Wealth Builders

Phil Symchych, Alan Weiss

• Publisher: Business Expert Press
• Year: 2015
• Print ISBN: 9781631572906
• eBook ISBN: 9781631572913
• Topic: Business
• Subtopic: Small Business
• Index: Business

This book provides pragmatic advice for business owners of privately-held, small and medium enterprises (SMEs) on how to grow business, increase top line revenues and bottom line profits, enhance the value of their companies, and build their business wealth

PART 1

The Big Impact of
Small Business

CHAPTER 1

Mindset: It’s not Personal,
it’s Business, or is it?

Is your name on the sign? Are you the founder, successor, or majority shareholder? Does your personal wealth and future depend on the success of your business?

Just like Cargill, Ford, or Hewlett Packard, many great companies have succeeded beyond their founder’s greatest expectations by following the same path that you and your business are on today. Maybe you are one of today’s high-growth successful companies like EMW Industrial, Knight Archer, or McKenna Distribution with futures that are limited only by the energy and enthusiasm of their owners and managers. In today’s dynamic global environment, the most critical growth factor is your mindset. (I worked with a $1.2-billion construction firm in Detroit that was begun as—and still retained—subchapter S legal status!)

Your mindset drives your business in pursuit of success. In school, our teachers taught us that there is usually one correct answer. In business, there is seldom a single right answer. In fact, you have likely experienced two outcomes to your business decisions and actions: either “that worked and we should have done it sooner” or “that didn’t work but let’s learn from it and move on.” The first outcome is about speed and the second outcome is about leverage. Combining speed and leverage is optimal for growing your revenues, profits, valuation, and wealth.

Our main premise is that your wealth is tied to your earnings, and more specifically, your EBITDA (earnings before interest, taxes, depreciation, and amortization). Therefore, maximizing earnings will maximize your wealth. Many businesses may be able to increase their EBITDA without growing top-line revenues. Other businesses can increase their valuation without any growth at all and we’ll discuss these options in later chapters.

The Meek Shall Not Inherit the Earth:
It’s About Speed and Leverage

Meekness is not a viable business strategy! You’re competing with companies across the street and around the world. The faster that you can respond to your prospect’s or customer’s request, the more likely that you will win the business. If you can leverage both your customer relationships and your production capacity, you can quickly grow your business and build your wealth. If you can’t, well, your competitor probably can. Zappos and Amazon have shown us how this is done on a large scale, but myriad numbers of auto parts stores, beauty salons, dry cleaners, and clothing stores are engaged in speed and leverage daily, as are your own direct competitors.

Speed

Today’s cars are capable of driving double the speed limit in many places and some that are designed for Europe’s unlimited highways can go even faster. Yet, speed limits are the rule and are put in place to protect everyone from acting rashly and to control the roads.

But there are no speed limits in business. Speed depends on you.

Take this speed test to determine how quickly you can grow your business. Low means it takes most of a year; medium means within 90 days; and high means this week (Table 1.1).

Your growth speed will be limited by the slowest variable in the table below. If you go faster than the slowest variable, it can be very dangerous to your business and your wealth. What’s the safe rate of acceleration to increase your sales and production without running out of fuel, that is, cash?

Table 1.1 Speed test

How quickly can you:	Low	Med	High
Increase sales
Increase production
Fund your growth with cash or debt
Provide information on the above factors

Figure 1.1 EMW revenue growth

EMW Industrial grew from $20 million to $35 million in one year. That 75 percent revenue growth was achieved because of management’s ability to implement pricing strategies, attract and retain talent, control larger projects, and obtain their banker’s support in funding that growth (Figure 1.1).

Your business is an organic entity that wants to grow. Many midmarket companies have the Fortune 500 as their best customers. As the major corporations focus on their core competence and outsource the back office and everything else, that creates significant growth opportunities for midmarket companies. However, the big companies need you to deliver massive quantities on time and on budget.

To do that, you need to scale up. You need to think like a larger company while preserving your strengths of speed, flexibility, and customer responsiveness.

Race cars are extreme because they’re powerful, aerodynamic, and driven by slightly crazy people who like to go really fast. There’s also a pit crew and management team monitoring all of the car’s conditions in real time. Your business is like a race car because you can use power (cash), aerodynamics (information), and good management to accelerate to top speed (Figure 1.2).

Figure 1.2 Business growth accelerators

Businesses can accelerate their growth by doing three things. First, they can add power with strong cash flow that fuels continued acceleration. A highly profitable business can fund its own growth. Most businesses in growth mode will need external funding. If you want to build your wealth, you need to pull money out of your company as it continues to grow so financing makes lots of sense (more about that later).

Second, businesses can improve their aerodynamics by reducing their drag on profits and shutting down their low-margin products and services. Every business has winners and losers. At the time of this writing, Apple recently had a record quarter in terms of revenues and profits from sales of a new iPhone model (37,000 sold every hour for 90 days!). This model cannibalized sales of its older models but generated higher revenues and profits than its competitors, Samsung and RIM, who were slower to release new products. Are you cannibalizing your own products? Are you at least stopping the money losers?

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Case Study: Speed and Leverage

The first bars to offer “happy hour” in a neighborhood with inexpensive food and drinks (or “ladies’ night” or whatever) not only draw the largest crowds of the competition, but also retain those crowds even after the competition copies the offer.

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Finally, giving your management team access to real-time information so that they can make better decisions, faster will accelerate your growth. The most critical piece of information isn’t financial as those are usually lag indicators (meaning they’re not “real time” and don’t aid in speed), it’s your production numbers: How much did you produce today? Rick Pay, an operations expert in Portland, advises his clients to focus on “Shipped On Time.” If you can’t produce it and ship it, you can’t sell it.

Therefore, successful, high-growth companies that create strong profits and build wealth for their stakeholders utilize three common factors to achieve speed and leverage: management, information, and cash.

What is your main growth barrier: marketing, production, or cash? Identifying the key barrier and resolving it will accelerate your growth. As you resolve one barrier, one of the other factors will become the new barrier. As Eli Goldratt observed in his book, The Goal, it’s normal to see new bottlenecks appear in production as you resolve other bottlenecks.

Leverage can be internal or external. An example of internal leverage is to identify internal best practices and share those throughout your company. Car dealers, who spend millions advertising to get new customers in the door, do this very well. The most profitable car dealerships focus on problems such as when a customer has a breakdown and then they go out of their way to help the customer.

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Wealth Building Blocks: “Best practices” are normally best found internally, not outside your business. Identify what you’re doing well in some places, and make sure it’s done well in all places.

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I was driving to an important board meeting two hours away when I heard the unmistakable gloom of a flat tire. I called (hands-free) the dealership (while still driving on run-flat tires) and requested a tire repair. The dealer, Dilawri BMW, didn’t fix my tire right away as this would have made me late for the meeting; instead, provided another vehicle while they took care of my car.

That kind of proactive approach to solving a customer’s problem creates significant leverage with the customer. It increases loyalty, referrals, and repeat business. This story is in newsletters, in speeches, and now, in this book. That’s excellent leverage for Andy Kistener and his great team at Dilawri.

Industry trade associations could immediately improve their value by helping their members share best practices. They have members of various levels of success. Many members may see each other as competitors and reluctant to share information or be...

Table of contents

• Cover
• Half Title Page
• Title Page
• Copyright Page
• Dedication
• Contents
• Acknowledgments
• Disclaimer
• Introduction
• Part 1: The Big Impact of Small Business
• Part 2: Control and Confidence
• Part 3: Build Your Business Wealth
• Part 4: Special Cases
• Appendices
• Index