B2B CFO^® (602) 296-6888

Business exit strategies can take many forms. However, there are really only two primary objectives in any deal. One, the buyer wants to MINIMIZE the consideration paid relative to the after-tax cash flow of the purchased assets or operations, and two; the seller wants to MAXIMIZE the after-tax cash proceeds from the sale. Since both objectives are essentially opposite, having the right exit strategy plan puts the business owner in the driver’s seat. It will not matter if the deal is an asset sale or a stock transaction, as long as the entrepreneur has contemplated and implemented the best business exit strategy.

There are various exit strategies, so determining which is best depends on the entrepreneur’s goals and the successful implementation of a business plan designed to achieve those goals. In a stock deal, liabilities are assumed by the buyer and the existing asset’s basis remains the same. Depreciation continues for the remaining life of the assets and accounting methods don’t change. Licenses and contracts are easier to transfer and are often the key to the future value of the business. In an asset transaction, liabilities are limited and often left for the seller to eliminate. Buyers generally only accept “free and clear” title to the assets they purchase, which gives them a fresh start when establishing an asset basis, usually at fair market value. Asset depreciation starts over with a new asset life, and different accounting methods may now be implemented. However, licenses and contracts may be more difficult to transition.

Under either method, valuation is critical. Purchase price determinations are often based on “multiples” such as a multiple of EBITDA (Earnings Before Interest, Tax, Depreciation, and Amortization). Sometimes a purchase price is a multiple of revenue, net income, or even tangible net worth.  There are many ways to calculate a purchase price. One critical measurement is the discounted cash flow of the company. A buyer will most certainly want to calculate the future cash flow to help determine the cash value of an acquisition, and the seller will want to know what that value is in today’s dollars. However, at the end of the day, the only thing that matters is the fair market value of the business as determined by what a willing buyer will pay a willing seller. Entrepreneurs can put themselves in the best position to negotiate valuation if they have done their homework on their business exit strategy.

Are you ready to sign the papers? Not so fast! If you have not analyzed the future impact of the deal, the terms, and the on-going obligations, you are not ready. Buyers will conduct some form of due diligence and sellers, yes, the sellers, should also do their own due diligence on the buyers. There will be representations, guarantees, and covenants made by both the seller and the buyer. It is important for each party to thoroughly review and understand the post-closing commitments. Perhaps most critical to the buyer’s success in a deal is the post-purchase integration plan. A plan that clearly integrates the business, the people, and the assets is crucial, especially if the seller has any interest, monetary or not, in the future of the business. Clearly understanding the terms of the deal, the post-closing commitments, and the plan of integration will also prepare the parties in the event disputes arise.

Once a price is determined, a business exit is not complete without the payment. While it may seem like cash is the most common form of purchase, and the one that the seller wants the most, a buyer will often structure a deal using cash, stock, or a combination thereof. Often buyers want sellers to take structured deals, sometimes in the form of earn-outs, earn-ins, notes and performance contingencies.  This is where tax strategies are critical. IRS rules change frequently and the creation of goodwill, non-competes and other intangibles have many business and personal tax consequences. Only a solid business plan that contemplates a pre-determined business exit strategy will include these issues.

According to a recent survey[1], family-owned businesses in the United States account for over 64% of the nation’s gross domestic product. Yet, over 50% of those businesses fail to last beyond the first generation. Successful business owners who want to pass along their business to family members know there are certain “big-company” fundamentals that apply to their business.

For example, big companies spend a significant amount of time, money, and resources on strategic planning, but when surveyed, less than 54% of family-owned businesses had a written strategic plan. Big companies have a management succession plan. Only 30% of the family-owned businesses surveyed said they have spent any time on a succession plan. Big companies have outside (non-employee) directors helping advise them, yet only 33% of family business owners surveyed said they have outside directors on their boards. On another front, most companies spend a great deal of time searching for qualified people to staff their businesses. However, 64% of family business owners do not require family members entering the business to have the qualifications or related experience necessary to be successful.

So here are a few “secrets” of successful family-owned businesses preparing a path for an exit or transition in the future:

• Develop a shared strategic vision of the business and communicate that vision.
  • Business is easier when everyone knows the score. Commit to a consistent and effective communication process among family members and employees.
  • De-mystify the sacred cows.
  • Use outside data (market data) to find out and verify what is going on.

Most businesses will change their strategies four or five times before it gets passed on to the next generation. Doing what is best for the business, employees, customers, and community may preserve it for the next generation.

• Establish a board of directors and recruit outsiders to participate
  • Mentors need mentoring and leaders need mentoring. Insiders cannot be objective and are certainly not always independent in their thinking.
  • Outside board members who are successful business people or financial experts, can provide balance for the company’s direction.
  • Outside board members have a fiduciary responsibility to provide their advice for what is best for the company.

Of the businesses surveyed that already had a board of directors which included outsiders, 77% said they strongly agreed that the board made a positive contribution to the direction of their business.

• Cultivate a climate that develops good leadership
  • Founders must find ways to give feedback to employees, foster growth via success and failures, and build a culture of opportunity.
  • Foster a philosophy of fair family and employee compensation. Family businesses should not confuse the flow of funds or mislead family members into believing they are worth more.
  • Adopt a transition planning process early.

Family business owners must know what “hat” they are wearing when they come in contact with other family members both at work and at home. Social engineering is an important part of a functioning business unit.

“Finding the Exit,” and ensuring a smooth transition between generations requires many sound business fundamentals. It is important to make sure the assets are protected to ensure the well-being of both generations.  Often, a well-thought-out buy/sell agreement can help “in-the-business” and “out-of-the-business” family members make the transition. Buy/Sell agreements lay important ground work ranging from establishing the price to detailing how other family members might acquire ownership.

“Finding the Exit” can be difficult, but finding the best way to move toward the exit starts by contacting your trusted business advisor at B2B CFO^®. We have the financial and business expertise to guide a business owner through the process and can work with the other professionals needed to make an exit a smooth transition.

Vladimir St. Phard, President of Customized Benefits Solutions, Inc. also provides education for business owners with his eNewsletter. The following article about cost shifting initiatives to reduce benefit costs is from his December 2009 eNewsletter.

Cost-Shifting Initiatives In an effort to reduce benefit costs, many employers are implementing the following cost-containment strategies for 2010:

Rewards For Good Health Offer financial incentives to employees who have healthy habits and lifestyles or those who participate in wellness programs at work. Penalize workers with higher premiums for engaging in unhealthy activities such as smoking. Offer discounted rates for those who participate in wellness programs and maintain good health.

Preventative Care Benefits Offer full coverage for employees who seek preventative medical care and preventative drugs without a deductible, including vaccinations, exams and screenings for diseases such as breast, colon and cervical cancer, and blood pressure and cholesterol.
Onsite Health Centers Offer onsite health centers and staff health coaches to provide advice on personal health needs.

Catering to Individualized Needs Offer voluntary benefit options that meet personal and family needs such as homeowners, automobile and group life insurance. Also, offer discounts on vision, dental, massage therapy, chiropractic care, health club memberships and weight-control programs.
Communication Tools Provide online tools for employees on health education and estimation on their health care expenses.
Health Care Savings Accounts (HSAs) Offer HSAs with a high-deductible health plan (HDHP) as a way to promote consumerism and reduce costs. Reduce plan options.

Analyze Dependent Coverage Pay close attention to the spouses and dependents that employees enroll for benefits. Some companies require employees to pay higher premiums if their spouse can obtain health coverage through his/her employer. Conduct an eligibility audit to prove that dependents are considered legal dependents and remove ineligible dependents from the plan.

Align Your Goals Weave business goals with health goals and devise a way for individuals or departments to lose weight, start exercising and/or stop engaging in unhealthy habits. Utilize marketing techniques that will motivate employees to take action.

Co-insurance Instead of having employees pay a copayment of $10 or $15, require them to pay a percentage of their health care expenses (known as co-insurance). This may make your employers more aware of their expenses as well.

Encourage the Use of Generic Drugs Suggest that employees utilize the generic form of their prescriptions (if available) to save your organization and them money.

Take time this year to ensure that you are saving as much as you can be. Implement these new health options to reduce costs and have a healthier workforce.

One key aspect to building value in a company is that of optimizing gross profit. Gross profit  is what you have left after the direct costs of the sale of a product or service, such as materials and direct labor, are paid for. It is expressed as a ratio of sales and should be as high as possible depending on the industry - certainly above 50% and sometimes as high as 90% in service companies. 

Gross Profit is a key metric for every business to manage, as it impacts both how fast your company breaks even and the amount of profit that can be earned once that happens. Every business has overhead costs such as rent, office, payroll that are relatively fixed and these have to covered before you can become profitable.  In other words, gross profit directly impacts risk and return. The levels of gross profit margin can vary drastically from one industry to another depending on the business. For example, software companies - which are selling services - will generally have a much higher gross profit margin than manufacturing companies - which may have significant labor, inventory and overhead costs built in to the cost of their product.

To illustrate how gross profit margin affects break even and profit, consider a company with $300,000 in fixed overhead expenses. If the firm's gross profit margin is 50%, it would need to generate sales of $600,000 to cover overhead. If we were able to increase gross profit margin by 2 points to 52% instead, break even would decrease by $23,000 or approximately 4%. The company would then start earning a higher profit of $0.52 on each dollar in sales after revenues reach $577,000, rather than just $0.50 on the dollar after $600,000.

Inadequate gross profit indicates problems with prices that are too low and/ or direct costs that are too high, and therefore problems with break even and profit. When a company is generating adequate sales but gross profit margins are low, it signals an issue in one or both of these areas. This lack of understanding often leads to decisions that only worsen the company's position, such as attempting to increase sales via lower prices, leading to even smaller gross profit margins - so-called "making it up on the volume"

Gross profit optimization often does not get the attention it deserves. Companies should be aware of the factors that will impact gross profit margins and pay close attention to them.

A B2B CFO advisor can help companies find a benchmark for gross profit margin using competitor data and industry averages to provide a targeted goal. They can also help measure and manage the factors impacting gross profit margins as they change over time. A B2B CFO can help analyze gross profit by product or service, and highlight low margin products, or help restructure service delivery to optimize gross profit.

Call David Kirkup, Partner at B2B CFO, for a complimentary "Executive Company Physical" and a plan for how to get where you need to be at 404 348 0326 or dkirkup@b2bcfo.com.

Your company and your SBA Loan

In the past 18 months the US has experienced a vast decline in business and business outlook.  This has affected the large (GM, BofA, Merrill Lynch) as well as the small mom and pop store on mainstreet.  Daily I talk to business owners who have seen 30 to 50% or more declines in their sales activity.  Unfortunately it seems to have affected the smaller businesses – and those who have SBA loans – more than others.

Businesses and their bankers are now faced with difficult decisions, and those decisions may affect the small business owner for the rest of their life.  What should you do?  What are the options and alternatives?  The information below will help you through that process.

What NOT to do (Courtesy of Dan Betts):

Realize that there are three factors that are affecting your approach to solutions:

·         Stress and Worry – Taxes, Payroll, Guarantees and Family concerns.

·         Lawyers - Enough said

·         Innocent Mistakes – making the wrong move might cost you more, so you do nothing.

Doing nothing is not an option.  The only way to get beyond the stress and worry is to develop a reasonable plan that can be acted upon and to know the consequences.  Lawyers can be an important part of the final solution but they can’t, and won’t, make decisions for you.  Once you bring lawyers into the process, both sides “lawyer up” and you lose alternatives.

What NOT to say (courtesy of Jasonlees.com):

·                 It’s not my fault, the economy is terrible!

·                 Your bank got government money, so you should help me!

·                 If you give me another year, the business will get back on track!

·                 Your bank will lose money if you shut me down, so it makes no sense to do that!

·                 I didn’t realize you wanted me to make a payment, I thought you were working on a modification/deferment.

You are dealing directly with a banker, your banker in most cases, who trusted you enough to recommend the loan.  What HE is looking for is a businessman who knows enough to formulate a reasonable plan that the banker can recommend to his boss, or the “Special Assets” department.

What a SBA Loan isn’t:

            It isn’t like having a rich uncle guarantee your loan.  Don’t pay - no harm, no foul.  The guarantee is for the Banker, not the Borrower, so that the Banker has enough of the risk taken out of the loan that they are willing to make it.  If a banker can, he would rather write a conventional loan any day than a SBA loan – it takes less work.  But the SBA requires the bank to do everything that they normally would to satisfy the loan BEFORE the guarantee will pay.  If they can avoid the time, trouble and expense of collection actions, they will – but they need the borrower to provide them with reasonable evidence that the course of action won’t result in recovery.  Your plan is a key part of that evidence.

The common thread is a plan.  You need to develop a plan that answers the following questions:

1.     How much free cash flow (cash flow before debt service) does my business generate?

2.     What is the condition of the collateral of the loan?

3.     Based on the two answers, of the three basic alternatives, what makes the most sense?

At B2BCFO, we support our clients with proactive financial planning and reporting for their businesses, in a way that most CPA firms are unable to provide.  I and my fellow partners have over 25 year of experience dealing with real business issues.  If you were a B2BCFO client, you would be dealing with problems while they were still on the horizon – through budgeting and forecasts – so that problems are avoided.  Call now for a top to bottom business diagnosis.  The report is free.  The comfort is priceless.

David Buslee is a B2BCFO partner located in Southeastern Wisconsin.  He can be reached at (262) 271-2522

 This was a phrase uttered countless times by Ed Sullivan, an institution on Sunday nights. The Ed Sullivan Show ran from 1948 until 1971 (originally called Toast of the Town and renamed in 1955). Comedian Alan King once quipped, "Ed does nothing, but he does it better that anyone else on television.” The show was even immortalized in song, Hymn for a Sunday Evening, from the 1960’s musical, Bye Bye Birdie.

One lasting memory of mine is the plate spinner that would appear on the show (that and the puppet named Topo Gigio, an Italian mouse). The juggler had long, flexible poles and he would start to spin plates on top of them. He continued adding plates to the remaining poles. He didn’t have any trouble keeping the first few plates spinning. As a plate would start to slow down and wobble, the juggler would go back and vibrate the pole until the plate regained its momentum to stay in place a little while longer.

When the number of plates increased to 10 or so, he did a great deal of running around. Once in a while a plate slowed down enough that it fell and broke. He would quickly start spinning another plate on that pole. When the number got up above 15 or more, a few more plates would crash to the ground until finally, he gave up and they all came crashing to the ground.

I am sure many business owners can relate to plate spinning. In his book, The Danger Zone, Lost in the Growth Transition, Jerry Mills describes how owners (called Finders) create successful businesses by creating products and services to sell, building relationships with customers, and creating relationships with vendors. Finders perform activities that bring sales and cash into the company. This initial success causes the Finder to expand these activities. Eventually, this sales growth cannot be supported by the company’s infrastructure or the line of credit from the bank may be insufficient. Customer service may suffer and sales flatten. The cash needs of the business start to exceed the cash being generated. This is the beginning of The Danger Zone.

The Finder starts performing more and more administrative duties called Minding Activities. These might include:

• Preparing financial projections
• Meetings with bankers and lenders
• Additional meetings with attorneys and accountants
• Spending significant time deciding which bills need to be paid
• Spending time on HR matters

These are tasks that many Finders may not be good at, but more importantly, do not like doing. Think of a homebuilder that has a reputation for building quality homes with fine craftsmanship. They probably did not get that reputation because they knew how to balance a bank statement.

There may be other distractions that may even cause the owner to lose enthusiasm for the business or worse, lose customers. As these disruptions increase, the business continues to decline and suffer unless the owner takes steps to turn the situation around.

If you need help keeping all of your plates spinning, call Ed Baloga, at 914.474.9547 or via email at ebaloga@b2bcfo.com.

My first audit, fresh out of Notre Dame, was Steak n Shake.  At that time Steak n Shake was a 120 store restaurant chain in the Midwest.  This was 33 years ago, just for context.  I was selected by the senior auditor on the job to assist her with the audit.  She chose me and one other (he is now CFO of a very profitable publicly held software communications company) to go with her from Indianapolis to the corporate accounting offices in Bloomington, Illinois. 

Why me?  My father was a CPA and had me keeping books for a couple of his clients at age 11.  Back then, that meant manual sales journals, manual cash disbursements journals, and manual ledgers.  No excel worksheets.  No computers.  Mostly an adding machine.  I could, and still can, run a 10 key adding machine better than anyone, with either left or right hand.  And that’s why she chose me to work on the audit. 

Let me set the scene for a moment, and I will get to my point.  Steak n Shake had 120 stores.  All of the accounting was manual, as it was for all companies back then.  IBM had not yet invented the PC, and Bill Gates was still in grade school.  The Steak n Shake corporate accounting office consisted of 30 ladies, yes, all ladies, and one controller.  The controller had his own office.  The bookkeepers all worked in one large room, upstairs, above the warehouse and supply kitchen for the Illinois restaurants.  No cubicles.  Rows and rows of desks. Just a metal desk, an adding machine, and one lady for every 4 stores.  30 bookkeepers all seated in rows, 2 desks wide, 15 rows deep.  For each store, she kept a sales journal, a cash receipts and disbursements journal, a fixed asset register and a general ledger.  And there was lots of accounting paper, the stuff with the columns and the little squares where you hand wrote the numbers.  You have seen old pictures of company offices, just like this. Rows of clerks and bookkeepers, with an adding machine (or a comptometer), hand writing letters or hand posting the books, thick black ledgers and journals. Usually a lamp on the desk, sometimes a black rotary dial phone.

My job was to use my 10 key adding machine skills to add and re-add all of the worksheets that the ladies prepared every month, that they gave to the controller, who prepared a consolidating workpaper for the balance sheet and the income statement.  120 columns wide, one column per store.  It was a 6 foot wide set of worksheets.  I am not kidding: six feet wide, every month, 120 stores.  Prepared in pencil so mistakes could be corrected.  No delete keys back then.  My job was to re-add the numbers, by hand, to make sure they were accurate.  You should have seen my fingers fly on that adding machine.

What’s the point, other than nostalgia?  The point is that the accounting task for the 30 ladies and controller was to prepare accurate numbers for every store, and combined totals for the senior management.  Basic, double entry bookkeeping, every month for management, every quarter and year end for the public shareholders.  That is still the task today.  Accurate numbers that have to be checked, and rechecked, so they are useful to management and owners.

The only difference today is that with computers, the numbers can be compiled more quickly (although not more accurately in many cases).  I tell my clients that all we seem to have accomplished is that we can make the same basic accounting errors really, really fast.  Inaccurate account coding, basic bookkeeping mistakes, incorrect account reconciliations, and sheer tardiness are still problems for most companies today, especially smaller and mid size companies.  At the end of the day, the basic numbers still have to be accurate, they still have to add up, and they still must be checked.  Only then are they useable for the managers, the owners, and the bankers to make sound business and cash flow decisions.

I find much of the time that the first task I have with a new client is not to evaluate the cash flow, nor try to find ways to improve it, nor begin working on margins, capital structures, forecasts, etc.  The first task much of the time is to get the numbers right.  In the case of Steak n Shake, they were already getting the numbers right.  My job as the auditor was to confirm it.  For my clients now, the first task is sometimes still to help them get the numbers right.

By the way, the Steakburgers were really good in Bloomington, Illinois at the headquarters 33 years ago.  They are still really good now.  I ate at a Steak n Shake in Indianapolis last week.  Thanks for the memories.

Does your business have working capital problems? Let's take a look at what working capital involves. Basically working capital falls into four main areas. These are:

1. Cash
2. Accounts Receivable
3. Inventories
4. Accounts Payable

There are many reasons why a business will have working capital problems. As a business owner, it is critical for you to determine why the situation exists, and correct the problem immediately. So how do you determine why you would have working capital problems? Here is a short list of some of the usual causes of this issue.

1. Not enough sales, therefore not enough cash
2. Past due receivables are increasing
3. Customers are paying short, due to quality issues
4. Staff has been added to process orders and/or invoices
5. Detailed information on inventory is not available
6. Slow turnover in Inventory lead to larger investments and risk of obsolescence
7. Interest incurred or late payment penalties from vendors
8. Over purchasing

To avoid problems in working capital, the business owner should spend time carefully looking at what is going on in the business at this level. At the end of every month, a "financial dashboard" should be prepared for the business owner that gives you the vital statistics in the areas needed to monitor working capital. For instance, each month you need  information on aged receivables, receivable days, inventory levels by category, inventory turnover, and days in payables. These statistics should be compared month by month to determine if the problem is getting better or worse. Action should be taken immediately when the numbers show a trend that will be bad for the company.

Monitoring working capital is not a difficult thing to do. A simple report put together every month will focus management in the right areas, and help to move the business into better times. B2BCFO can help business owners monitor their working capital by putting together simple, easy to understand reports that get to the heart of the matter. Tackle this problem early, and working capital will not be a problem.

The Need for Driver-Based Continuous Planning

Do you know the effects on your company if sales increase by 10%, 20%, etc.?  Do you have the cash to fund the growth?  What happens if a new competitor forces you to cut prices or a key supplier pushes through a significant cost increase?  Especially with the ongoing economic crises all of us have been challenged to develop planning systems that react more quickly than ever before.  Do you have the right tools to respond?  This month I will challenge you to consider tossing out the traditional annual budget and instead move to a dynamic driver-based rolling forecast.

Successful companies of all sizes are facing pressures to make planning systems more immediate and responsive. The old way thinking was to sit down with the team in Q4 and come up with next year’s budget.  Once finalized it was set in stone and loaded into the accounting system.  That works fine if your business model is static and predicable. However, old ways of doing business are continuously

challenged by competitors, customers and the ongoing economic crisis.

The once a year Uber-process that  produces a one size fits all scenarios budget is on the way out in favor of new approaches such as driver- based continuous planning, a discipline for developing plans and decision making promoted by such organizations as the Beyond Budgeting Round Table and planning gurus like Rob Kugel at Ventana Research.

Pulling from the literature, the table below presents the differences between budgeting,

the historical discipline, and driver-based continuous planning, another way of thinking promoted

in this article.

In contrast to traditional budgeting, driver-based continuous planning or rolling forecasts is all about

scenarios, lots of them. If you can’t predict the future, the next best thing is to set up

scenarios that let you explore how you might behave (or decide) if things are better

or worse or just different. Unlike budgeting where you care about who changed what

number, scenario analysis is about understanding what’s behind the numbers—the

most critical assumptions, volume and rate impacts, and especially what’s driving material

changes to the P&L and cash flow.

The deliverable of scenario analysis is actionable knowledge. By analyzing a specific

scenario and comparing it to a baseline case or other scenarios, the management team is

better able to evaluate best courses of action.  Where there is an immediacy to the

issues—e.g. to proceed with a capital project or change pricing—the deliverable is decision

making. Because it’s decision and action focused, robust scenario analysis is the

most critical underpinning of continuous planning.

The functionality you need for effective scenario analysis goes beyond simple budget

versioning. Here are criteria to consider:

Real time feedback.  when you change a value, all elements of the financial model—the

P&L, balance sheet, cash flow, financial ratios, performance metrics—should update immediately.  For example, with driver-based continuous planning if a volume increase is being contemplated, you will know immediately the effects on revenue, materials, payroll, margins, etc.

Maintenance across scenarios.  Rolling forecasts should support adding, modifying and deleting line

items across selected scenarios in a single operation. Calculation and update of financials after structure changes should take only a minute or two, at most.

Robust comparison at the line item level.  Budgeting focuses on amounts in accounts. Driver –based continuous planning is about in depth comparison of scenarios and differences in values at any level of detail, especially at the line item level where the most significant inputs and modeling occur. Where the underlying data or links are available, scenario comparisons should reveal variances in

underlying unit activity drivers and rates.

Summary

Driver-based continuous planning provides companies with a strategic advantage by providing business owners real time actionable information that extends far beyond the capabilities of the traditional budget.             My partners and I are experts at creating driver-based rolling forecasts.  Call me and let’s discuss scrapping your budget and moving to a more strategic and action based system of planning for the future.

.          

Contributions by Rand Heer and Ben Lamorte, Alight LLC.

Whether you are planning a personal strategy, a business plan or a production process, I have found that strategic planning follows the same steps.   The first step in this process is to decide what is important.  What is your mission, your vision, your values?  What are the guiding principles you will use to filter every decision you make?  At B2BCFO® our values are honesty, integrity and objectivity.  Once this is understood it is then easy as a firm, as well as for an individual partner, to align any decision against this value statement and make the right decision.

The second step in the process is to have well thought out goals.  If you are going to be constructing a building, you start with a clear idea and visual of what the building looks like. You have the engineering drawings, blueprints, elevations, site plan, all of which are necessary to build the building that was envisioned by the customer.  This same concept applies to a personal plan. Do you want to retire? When would that be?  How much in assets would you like to have to maintain what lifestyle?  All of these questions and many more, help develop your plan. 

The third factor in the plan is to align the various systems necessary to achieve the goal.  By systems we mean such things are your HR policies, how you hire, train, motivate and compensate your employees.  Do you have the tools, processes, technology in place to facilitate the goal attainment?  Do your overall company policies align with the values you wish to follow and help you achieve your goals?  I was recently in a retail office supply store attempting to return a defective product, a charger for a laptop computer, which broke within two weeks of buying it.  When we spoke to the service people they told us that unless we had the originally packaging for this $99 item they could not refund or replace the item.  The reason for this was that they could not in turn get compensated from the supplier.  Therefore if they could not get their $99 back then I could not get mine.  I am not sure what their mission, vision, values and goals are as an organization, but I do know that customer service is not one of them and for $99 they lost a customer for life.  On the flip side, one of my clients is a manufacturing operation.  One of their value propositions is that no defect will knowingly leave their shop and should there be a problem in the field their value statement is to fix the problem within 24 hours.  They operate in all 50 states, but hey take pride in telling story after story about how they solve these problems. But not just that; they learn from the story telling so that the same situation will not be repeated.  Their systems are correctly aligned to their value statements.

I believe the next step is the most critical and the one where many organizations fail.  This step is the execution of the plan.  You may have the best plan, systems and policies, but if those responsible for executing the plan are ill-prepared and do not take the initiative, are inefficient or do not follow up, then the plan can go awry.  In a normal business process there are millstones that need to be met for the process to flow on time.  Going back to my building example, there is site work to be performed, followed by the foundation, then structure, interior building systems, then on to finish work.  Each and every one of these separate tasks needs to be mapped out, contracts need to be negotiated, and timelines need to be established and process to be managed.  If any one falls behind, the entire project is at risk.  The same is true for the overall business plan or a personal development plan.  Each step needs to be understood, laid out and executed, all being mapped against the timeline of the goal.  If this does not happen then the entire plan is at risk.

The fifth and final step in the process is to step back and take a realistic look at the business, the project or the personal plan.  This should occur on a reasonable and ongoing basis.  I recommend to each of my clients to look at their business process and evaluate at the end of any project how they did.  Did the work come in on time and on budget?  What take-a-ways can we learn from what just happened?  This is true for the business or personal plan as well.  Great organizations continually review and apply these learning’s to the process.  To borrow from Jim Collins; make sure you have the right people on the bus and make sure they are in the right seats.  When looking at the business overall it is important to not just look at internal processes but what is happening in the industry or the economy overall and what effects will it have on your business.  Then rework the plan and start the cycle all over again.  Based upon the work of Gary Harpst this is how excellence is created and maintained.