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CEO Alert - Four Keys to a Great 2016
2016 is almost here. Are you wondering about your game plan for 2016, holding on to your big customers, where to find new ones, personnel issues in the home office or how the new sales guy will work out? How can you ensure that 2016 is a great year for your company? The simple way is to make sure you are not missing the four ingredients for a Successful 2016. Companies that keep meeting or exceeding their annual objectives do four things well. It doesn’t matter whether the year is 2016 or 2020, they have these four ingredients and goals get achieved. How do they do that? Would you like that certainty? Well, you need to have the four keys.
If you didn’t have a high certainty about reaching your numbers this year, chances are that you are missing one or more of the key ingredients. Many CEOs do not know that these missing ingredients are the reason they are not achieving their goals. Even missing one of these ingredients will make 2016 a less-than-stellar year. Let’s take a look at the four ingredients:
- Written Yearly Goals and Objectives: Many businesses are run without written objectives for the year. Yes, you may be surprised but this is common in smaller midsize companies where the CEO is the business owner, idea man and the most powerful person in the company – it’s all in his or her head. Since the goals are not written and shared with the employees, nobody is really working towards them. They will come into work, do the best of what is asked of them and collect a paycheck. In the absence of written objectives, there may be a ‘plan of the week’ or the ‘flavor of the month’ depending on what you heard from some expert or read in some book or e-newsletter. With every new idea that pops up (and keeps changing), the team gets bewildered and then ‘simply do what is asked of them that day’- bad recipe for marshalling everybody to work on achieving your goals.
There are companies that may have substantial revenues but lack written yearly objectives and goals. These companies neither have a plan to manage growth or decline – they’re just riding the wave. For example, IT services are growing and most companies are experiencing growth. Many of them are ‘selling to anybody that moves’. If the industry has a downturn or new competitors come into your client accounts, your revenues will drop.
- Understanding of business impediments and structural issues: Business is part science and part art. It takes many things to be structured and done right for a business to be successful in the long-run (repeatedly and with high certainty). When things are humming along (revenues are coming in or growing or you get an award, etc.), it is easy to presume ‘things are good’. ‘Success’ masks problems or at least makes you overlook them. A good quarter or year is merely an indicator of what happened (history), not of the ability of the company to continue delivering sustained value. It is akin to your health. Just because you sprinted up two flights of stairs does not mean that you will be in good health next month or next year. The better indicator is to get a full medical exam and conduct an interview with your physician about your lifestyle, diet, etc. If that makes sense to you, when was the last time you conducted a full ‘medical examination’ of your business?
As the company gets bigger, they need to establish formal processes to achieve goals faster. If you take a detailed business assessment, you will get a list of ‘gaps’. There are many tools that can help you develop a plan to fill the gaps. You need to conduct periodic business assessments of your business as a whole, and of specific functions, processes, etc. to identify structural issues and business obstacles which need fixing. There is a wealth of information on business best practices, business structure and classic business challenges. You can take business assessments (like a health checkup) to quickly identify your ‘gaps’. If you don’t know of a good assessment, give me a call and I’ll guide you to a good one.
- Detailed Implementation Plan for 2016: Very often, the owner or a few leaders within the business have goals in mind, know a few issues that exist within the business and go about working on them. Few of them set milestones or clear metrics that enable them to measure progress (or not), allowing them to make changes. Many who set milestones stop tracking them after a month or quarter. For example, signups at health clubs are highest in January when people have made their New Year resolutions. They show up religiously for a few days or weeks. Come February or March, attendance drops. That’s why health clubs have recurring membership. Do you set and track metrics for your business? Do you take remedial actions that keeps you on track to achieve your goals
I know one midsize company that has hired a VP of Marketing who has a staff of 15. However, the business owner does not have a business plan for the year. Without business goals and a clear linkage, the VP of Marketing is a cost center whose activities are not measured against the goals of the business. Same thing goes for sales executives without clear metrics and monitoring.
Let’s look an illustrative example to make the point. Take, for example, a sales group with a yearly target of $10M. If the average sale is $250,000, the group has to make 40 sales during the year. Let us spread them evenly over the four quarters – 10 sales per quarter. Now, let’s say that each sale requires you to submit 5 proposals, and each proposal requires you to have 5 prospect conversations. And, for each prospect conversation, you need to reach out to 10 prospects. So, in the first quarter, for 10 sales, you need to reach out to 10 x 5 x 5 x 10 prospects, which is 2500 prospects. There are 12 weeks in the first quarter. Your sales team needs to reach out to 2500/12 = 208 prospects each week or about 40 per day. If at the end of week 1, you find out that your sales team has not reached out to 208 prospects, you know you are not on track to make your numbers. You can wait until the end of the month and find out they haven’t reached 2500 prospects and take remedial actions. If you don’t have your 10 sales by the end of the first quarter, you know you are not on track. Is that the way you manage sales or do you panic mid-year or at the end of the third quarter and scramble for sales in the fourth quarter?
I know many midsize companies that are STUCK, neither going down nor knowing how to grow out of stagnation. These companies will face eventual demise or sale (for a poor valuation multiple). These companies still operate like a small company and do not know how to adapt to the changing business environment.
Do you read about changes in your industry but don’t know what to do about them? Or, do you lack the skills or knowledge (within your company) to understand your structural or business issues, or to keep up with the changing business environment? The cost of bringing in outside help is very small compared to the potential loss of revenues, profitability or valuation.
Let’s take the example of IT services companies that have been traditionally selling to the CIO. Applications are moving to the cloud, dramatically reducing the need for custom software development; companies are moving to shared infrastructure, reducing the need for installing and maintaining dedicated hardware; and, purchasing decisions are being made by various business functions like marketing, finance and supply chain with the click of the mouse, with little or no IT involvement. In large Fortune 500 companies, outside procurement partners are ruthlessly pruning vendor lists. All of these indicate a bleak future for a company without a clear plan to adapt, coupled with a good structure and excellent implementation. But, there are new opportunities too - the internet-of-things (IoT) is becoming pervasive, big data is exploding and mobile applications are becoming more popular.
Successful companies have figured out how to benefit from the new technologies and trends; they have completed an assessment of their business and have started addressing the structural and business issues; have clearly articulated objectives and goals for 2016; and a plan to ensure that they are achieved. They have a detailed plan with milestones and metrics – and track them. Many of these companies have formed a dedicated ‘Board of Advisors’ who provide insights on upcoming changes and how to navigate them; on ways to grow the business in the changing business environment and open doors to influencers and decision makers who can give them new business. Few midsize companies have recognized the enormous leverage of having a dedicated ‘Board of Advisors’ that leverage local experts, influencers and experienced business people. Whether you are a grownup startup or an established niche company, you can benefit from leveraging advisors – download this short paper I wrote based on interviews with dozens of midmarket CEOs that do have a Board of Advisors.
- Are you, the CEO (and your senior-most executives), working on high-value activities? I spoke to Rob Slee, the noted midmarket expert, investor and author on why so many business owners are unable to grow their businesses predictably and continue making them more valuable. He pointed out that most CEOs never graduated from doing ‘low-end work’ to ‘high-value work’ - they are involved in too many operational details. Rob says that a typical business owner spends only 5% of his or her time on ‘company value creation’ (high-end work) while they spend 35% on administrative tasks, 20% on HR issues and 40% on other tasks which can be delegated to others. Changing what you personally work on is the single biggest ‘lever’ you have to build a business that is performing well. You need to be spending most of your time working ON your business, not IN your business.
If you want to learn more about how to spend your time ‘like a true CEO’, I recommend that you read Rob’s new book (just 100 pages long) ‘Time Really is Money’(graphic on the left is based on his book), available as an e-book on
Amazon and Bn.com. In privately owned businesses, the owner is the only one focused on making the business more valuable. If the owner does not build value, the value of the business stagnates or declines – because others are focused on writing software, making widgets, marketing, sales or accounting, not on building the value of the business. Rob’s book points out in detail, what business owners are doing wrong and how they can increase the value of their business – by spending most of their time on high value activities that will increase the value of the business.
If you are an accomplished CEO working on high-value activities most of the time, do you have clearly articulated objectives and goals that have been communicated to your employees? Do you understand the structural and business challenges and working to fix them? Do you have a detailed plan on how to achieve your objectives and reach your goals? Do you have clear metrics and milestones to measure and track progress towards your objectives and goals? Do you track your metrics regularly and take remedial actions? Do you have your own ‘Board of Advisors’ whose expertise, experience and relationships help you make better decisions, open doors and grow your business? If you answered in the affirmative, you have a smooth running company that is growing and profitable. If you answered no to any of these questions, you should get started now to make 2016 a great year for you and your company.
Ram Iyer is the President of the Midmarket Institute in Princeton. He can be reached at ramviyer (at) midmarket.org or at (609)275-6300.