Increase Your Business Value

Prepare TODAY to EXPAND or SELL TOMORROW | 5 STEPS TO INCREASE YOUR VALUE

As a business owner it is difficult to find the time to think of the future. Leading and managing a business is so intense and demanding, that in our experience, when business owners are ready to sell, they are ready to move forward.

Surely you heard of needing extra time to get your business ready, but statistics show that a large number ignore that thought. When they make the decision to sell, they are faced with multiples that feel unreasonable and possibly insulting. Worst case scenario, AN ESTIMATED 60% OF BUSINESSES WILL NOT BE ABLE TO SELL AT ALL. It is also no secret that a lot of baby boomers are going to want to sell their business in the next few years and if you want to be part of the 40% group, you want to take some measures now to differentiate.

Knowing what a buyer is looking for and where they see the value is often different in how CEOs run their organizations. However you slice it, time is an important factor. Allow adequate timing and you will be in a far better position to negotiate and differentiate. Leaving money on the table is not a smart option as this may impede your retirement plans.
Over the years, we at NSS have developed a 5-step process that you can begin to work on, long before anyone in your business needs to know. Our process is also adaptable to your unique situation and is flexible in how intensely you want to focus on an exit or expansion. We provide an on-demand process where we work with you on a monthly basis to optimize your business value.

When the time is right or the opportunity presents itself, you will have all your ducks lined up, eliminating altogether time consuming hurdles or deal breakers. Should you not plan to sell, you have just increased the value of your business and are in a much stronger position to make an acquisition or form a strategic partnership. Similarly if you want to expand the business organically, you would want to consider an optimal capital structure and our 5-step process helps you get there with the right documentation. Our methodology allows you to take it forward at your own speed one step at a time.

The 5 Step Process

1) Create a good Growth Story
2) Showcase strong Operational and Financial Controls
3) Prepare for complete Financial Disclosure
4) Develop a Cash Flow Management Process
5) Evaluate and plan on your Management Strengths

Our RudiTuesday video goes into more details on each of the five steps and is complimentary. Included in our process is a comprehensive check list that looks at your business holistically. Our Go|No Go methodology also takes a look at non-financial constraints that may need to be mediated or settled, another important time factor.

Our work with you has a different purpose than that of an M&A Advisor or external advisor. We help you get your ‘house’ in order as your TRUSTED INTERNAL ADVISOR and once you are ready, the M&A Advisor helps you position and sell the business, a very important function for a successful exit. We work with you with highest confidentiality, discretion and at your own pace.

Remember, CEO distraction is real whether you are in the process of expanding or selling. Getting off course is easy and can be extremely costly. We are at your back, help you stay focused, understand the buyer’s mind and the demands of your M&A advisor. If so desired, we can support you beyond the preparation phase and represent your needs throughout negotiations.

Give me a call today! I would love to share with you more details on our 5-step process and answer any questions you may have. It’s easy, a phone call or a cup of coffee…..

617-449-7728

NSS Announces Workshops

NSS Announces CEO Event Series & Workshops

Next Stage Solutions (NSS), your partner in profitable growth, is hosting several informational and educational events and this year and we are collaborating with some great folks to give you an even a better experience.

For the past five years we have gained confidence of CEOs and Business Owners in providing quality business insight through high-impact workshop discussions. Their continued feedback and repeat attendance at these events have confirmed the value of our efforts. THANK YOU!

We continue to focus on the midmarket business challenges and opportunities.  We partner with our clients and client prospects in identifying optimum solutions to guide them to their next stage. This experience allows us to tailor our interactive discussions in a more meaningful way for your benefit.

All events are highly relevant to CEOs and Business Owners of midmarket companies (25+ employees and $5M in annual revenue).

Not a CEO or Business Owner, please contact our office directly.  We offer you a seat for certain, if you bring a CEO or Business Owner who fits our target market.  We thank you in advance for your understanding. 

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Tuesday Feb 24th | 5pm – 8pm | Waltham

What Keeps You Up at Night? Interworkings of Working Capital

Our discussion will focus on understanding the need and mastering the management of the Working Capital for your company.  We will discuss the methods and best practices of budgeting and monitoring company’s capital resources.

To register contact Rudi at 617-449-7728 or info@nextstagesolutions.com

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Thursday March 5 | 10:30am – 12:30pm | Waltham | 3-part Series on Nonlinear Growth

Achieving Nonlinear Growth in Academia: Lessons for your Company

In this series we will learn from masters of nonlinear growth.  Join us and Dr. Chris Hopey, President of Merrimack College in an interactive workshop for CEOs and Business Owners interested in alternative and different ways to grow. We promise a nonlinear experience!

Limited Seating | For more information and Registration, click HERE

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Thursday March 19 | 8:000am – 4:30pm | Waltham | Special Rate Available

2015 XPX Summit: The Progression of Succession

Good leadership and a robust culture will start the Summit with great Keynote speakers. Growing business value towards an eventual exit will be the focus of our CEO panelists and moderators. We will talk about the ability to scale and operate efficiently to planning a succession.  Gather insights from seasoned CEOs and Advisors.

NSS offers a special rate to CEOS and Business Owners. Call Rudi at  617-449-7728

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Register Today!   All the workshops are free or with a nominal fee to cover our costs.

NSS MOVED to NEW HEADQUARTERS!

67 South Bedford Street, Suite 400 West, Burlington, MA 01803 | Come and Visit us!!

KPI’s Point in the Right Direction!

Why You Need to Think about the ‘Elastic Bands’ inside your Business. How KPI’s can Point your Team in the Right Direction!

By Paul Latham, CEO of In-Cube-8 LLC | www.in-cube-8.com

I have previously highlighted (see my blog dated April 29th, 2014) how the concept of ‘elephant sandwiches’ can be used to help educate the team and drive the implementation of long-term strategic change.

However, teams will not thrive and survive on ‘elephant sandwiches’ alone! They need to be pointed in the right direction – they need the right ‘elastic bands’ in place!

‘Elastic bands’ refer to those processes established inside a business that drive consistent team behavior. The key component of those ‘elastic bands’ are known as KPI’s – the measurements used by a business to ensure that a particular process has been followed / is working properly.

Ultimately those measurements should lead us towards evaluating our business (or individual) performance. What are our definitions of success?

Let’s look more carefully at ‘elastic bands’

Most businesses measure things (often for long forgotten historical reasons). What is not (often) understood is that whatever you measure will influence team behavior (both for good or bad). This is the flip side of ‘what you measure you can manage’.

In the example illustrated (above) we are measuring ‘X’ and ‘Y’. Everybody knows they are measured (by the boss) – so they must be ‘important’. ‘X’ and ‘Y’ strongly influence team behavior. They create a ‘line of tension’ (just like an elastic band).

Now say the boss also wants to concentrate on ‘Z’ (in the illustration). ‘Z’ is not measured – it’s something considered to be ‘difficult to measure’ (e.g. ‘establish customer needs first’).

What typically happens is that while the boss is watching that team member – they will do ‘Z’. They stretch the line of tension (see red dotted line in illustration) to ‘Z’.

However, sooner or later the boss looks away (attention is diverted). Unless ‘Z’ is measured (as a KPI) what will normally happen is that team behavior will revert to the norm (the ‘X’ – ‘Y’ line of tension) and ‘Z’ will not happen (consistently or properly).

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To overcome this, business owners must decide what matters inside their business (definitions of success), and think about what team members should be doing – and then measure them (establish KPI’s).

In this way they create new ‘elastic bands’. Perhaps ‘X’ and ‘Y” are no longer relevant to the way we do business today? Perhaps we should be measuring something completely different, for example, ‘A’ – ‘G’ in the illustration above.

In which case ‘A’ through ‘G’ are what we should be measuring. They are our KPI’s. and they point our team in the right direction. They point the team towards their definitions of success (in the illustration):

  • Follow the process
  • Generate revenues
  • Delight the customer

You need to really think about the existing ‘elastic bands’ inside your business. Think about your definitions of success and use the right KPI’s to point your team in the right direction.

By Paul Latham, CEO of In-Cube-8 LLC | www.in-cube-8.com

Successful M&A Integrations

Corporations continuously Underestimate Post-Merger Integration (PMI) Costs, yet when an effort is made to balance time, budget and team with the appropriate planning, PMIs can be a success!

Based on our experience, the three most overlooked areas and those which executives say they would approach differently in the next M&A event, are:

1. Under budgeting the Integration Process

2. Lack of Communications

3. Lack of back office focus

Listen to our short video for this month’s RudiTuesday for steps to take and how to properly plan your next acquisition.

The case below shows that by identifying the predictable risks at the beginning stage of a deal, you can realize the maximum VALUE of the merger.

Case Study: Addison Wesley Longman – HarperCollins – 1996

submitted by Derek Smith, Managing Director of Next Stage Solutions, Inc

In early 1996, Addison Wesley Longman, a subsidiary of Pearson Plc and $650 million publisher of text books and related materials for the K-12 and college markets purchased HarperCollins’ business which had annual revenues of approximately $300 million. In announcing the acquisition Pearson Plc advised the financial markets that it would complete the integration of the two companies by January 1, 1997. Having disappointed its shareholders and analysts with a previous foray into electronic publishing, Pearson and Addison Wesley Longman were therefore under extreme pressure to complete the integration successfully and on time. Below are the steps they took to complete the task on time despite a three week cessation while the parties re-negotiated a post-closing adjustment.

1. Formation of Task Forces Prior to Closing of the Transaction and Identification of Integration Leader

Addison Wesley Longman and HarperCollins created 4 task forces prior to closing of the transaction to discuss (1) publishing properties that would survive the acquisition; (2) salary and benefit plans after the acquisition; (3) location of distribution facilities; and (4) the back office systems to support the combined entities. Each group understood that they could discuss their goals but could not reach any decisions until after closing of the transaction. Each group created a project plan to serve as the road map during the process. The CEO of Addison Wesley Longman was named Integration Leader and each task force had an AWL leader too.

2. Publication of an Integration Newsletter

The two companies published an Integration newsletter beginning the day after the closing of the transaction and throughout the integration period. It kept employees informed of the process and the decisions being made by the task forces. In all cases, the publication of decisions was made after advising those impacted of them (employee terminations, employees and their benefit plans, cancellation of author contracts, closing of facilities, etc.).

3. Regular Internal Updates on Completion of Tasks

Each of the four task forces met at least bi-weekly to review the status of their project plans. The back office systems group met weekly and AWL engaged an integration specialist from Deloitte & Touche to monitor the process and provide assistance when items slipped. Peer pressure played a significant role in completing the workplans as no one wanted to be identified as the culprit for failure.

4. Regular External Updates on Completion of Tasks

In addition to the regular internal updates, the AWL executives met with Pearson Plc executives to update them on the status of the integration and to identify any looming challenges that would impact completion of the projects by January 1, 1997.

5. Open Dialogue

During the fall of 1996 AWL identified that a significant post-closing adjustment was required. Before approaching HarperCollins, the AWL and Pearson executives discussed the implication of introducing a challenge to the valuation on the integration schedule. Ultimately the executives agreed that the materiality of the adjustment exceeded the value of completing the integration on time. Two executives at Pearson Plc and AWL had a longstanding relationship with a senior executive at News Corp, the corporate parent of HarperCollins, and they were charged with quickly resolving the dispute. They met with their colleague, identified the issue, and together determined a fair solution for both parties. During this three week period, there were no integration conversations between the two companies.

Outcome

On January 2, 1997 the integration was completed.

Next Stage Solution’s managing directors have been involved in acquisition integration projects. Let us help you with your integration plan and make it a SUCCESS!  Call us today at 617-449-7728

Identify Your Risk and Value Drivers and Enhance the Value of your Business


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Identify Your Risk and Value Drivers and Enhance the Value of your Business


By Guest Author Chris M. Mellen, ASA, MCBA, CVA, CM&AA, President, Delphi Valuation Advisors, Inc. | cm@delphivaluation.com


Many people see valuation as primarily a financial calculation, but that is just a fraction of the process. A company’s financial statements portray the results of its financial performance in the past, not the causes and the company’s expected future performance. A company’s success is generally dependent on its ability to produce products or services efficiently, in appropriate quantity and quality, on time at a reasonable cost, and market, sell, and distribute them effectively at a sufficiently attractive price. This success is impacted by the company’s strengths, weaknesses, opportunities, and threats (SWOT) that must be assessed as part of the valuation process. Therefore, a solid qualitative assessment of the company is at least as important as a quantitative assessment when determining value. It is the qualitative assessment where management can begin to identify risk drivers that cause uncertainty for the company, and look for value drivers and opportunities to create value.


An important part of the qualitative assessment is the identification of risk at the economic, industry, and company-specific level. A proper analysis will reflect the company’s external environment (i.e., its opportunities and threats) and then look at its internal factors (i.e., its strengths and weaknesses) including its historical performance, paying particular attention to the competitive factors—the causes—that created the results portrayed on the company’s financial statements. With this history in perspective, the analysis then looks at anticipated future economic and industry conditions, how those conditions differ from the past, and the company’s ability to compete in this expected environment.


The external analysis examines those factors outside the company that will influence its performance and competitive position, including economic and industry conditions. The internal analysis considers the company’s capabilities, including breadth of products and services, production capacity and efficiency, marketing, sales and distribution effectiveness, purchasing power, customer concentration, status and ability to protect intellectual property, technological capability, access to capital, and the depth, quality, and availability of management and employees.


The SWOT analysis identifies and assesses how the company operates, how it interacts with and relies on its suppliers and customers, and how it performs relative to its competitors. From this, a determination of how risky the company is relative to its competitors can be made, considering the industry and economic conditions in which it operates. As the competitive analysis progresses, we identify the causes behind the results reflected on the company’s financial statements. That is, we identify why the company performed the way it did given its competitive environment. And because investment is always forward looking, the competitive analysis ultimately is used to assess the company’s anticipated performance. While history provides a track record, value is primarily a function of the future.


The factors that are identified in the SWOT analysis are frequently referred to as value drivers and risk drivers. Risk drivers cause uncertainty for the company. Value drivers reflect the company’s strengths that enable it to both minimize risk and maximize net cash flow returns. Cumulatively, identifying the risk and value drivers establishes the company’s strategic advantages and disadvantages. They are ultimately quantified in the discount rate that reflects the company’s overall level of risk and in the forecast of expected net cash flows.


This article was sourced from Valuation for M&A: Building Value in Private Companies, chapter 3, authored by Chris Mellen and Frank Evans, Wiley 2010.

Mitigate Enterprise Risk & Identify Opportunities

Mitigate Enterprise Risk & Identify Opportunities

by Rudi Scheiber-Kurtz, CEO of Next Stage Solutions, Inc.

Lots of literature is available out there discussing the management of Enterprise Risk, the process and the quality of Enterprise Risk Management (ERM) programs. We also know that there is a direct correlation between mitigating risks in a systematic way and increasing the value of your business as your market value is based on replacement cost.

Our RudiTuesday topic this month is Enterprise Risk and the two kinds of risks:

External Risks and Internal Risks.

An important caveat is to view risk as a comprehensive, cross-functional exercise. Typically your CFO is your risk manager in a midmarket business and can lead the integration of an ERM program and tie it to your strategic activities. The risk information is provided through financial metrics and through a process which manages, measures, monitors and reports risks in a holistic view across the organization. Software for the management of risk is available; however it should be considered a tool and not a solution.

Start with a structured Risk Assessment and demand transparency across the organization. Business decisions tied to business strategies reduce surprises and the upside to Enterprise Risk will be that the process will inevitably identify opportunities. Determine your appetite and tolerance for risk which varies from business to business. Your CFO should operate as Risk Advisor rather than as the Risk Compliance Police to focus on changing the mindset from mitigating risk to identifying opportunities. A proactive risk management will reduce your financial losses. The important lesson is to find a balance between taking too much risk and not enough risk. Not taking enough risk means losing opportunities and your competitive edge. For example, what is an acceptable Employee Turnover Rate? Establish this rate and act on it when you divert from the acceptable level. Risks are typically measured in terms of Impact.

The metrics typically used are Leading Indicators, Key Performance Indicators (KPIs) and Key Risk Indicators (KRIs). In all three metrics, identify both external and internal risks and incorporate them onto your dashboard. Quantify all identified activities by tracking the risk losses and avoided losses. This will enable you to better and more accurately estimate future risks. Understanding leading indicators gives you the ability to anticipate risk before it happens. Always ask: How big is the risk? How often will it apply? Quantifiable measures are more accurate than an intuitive guess.

Consider mapping out your event categories in terms of risks. External Risks to your business are economic, natural disasters and political whereas Internal Risks are infrastructure, personnel, process and technology. Take these event categories and map them by level of risks:

unlikely, likely or certain.

Then add the level of impact of each event:

minimal, moderate and critical.

This creates a portfolio view of risks for current and future decision-making. Look for a concentration of risks and put in place adequate responses and actionable steps to mitigate or eliminate these risks. This important diligence work will also inform you the effect each single event can have on your business. Do you have the right controls in place? Do you have adequate transparency of the opportunities and pitfalls?

Anticipate all new risks with strong leadership around the risk assessment process. The business world is always changing and uncertainties are here to stay. At minimum, concentrate on what you have the power to change internally and then have a Risk Assessment Program to manage the external risks.

The cross functional approach and transparency are two key factors in creating a meaningful Risk Assessment Program. Business objectives need to be tied to key value drivers to ensure relevance. Work it like a SWOT analysis. Be aware of the hidden internal risks.

Check out the RudiTuesday Video that focuses on key hidden internal risks and how to avoid them. They pose a real threat
to the overall health and competitiveness of your business if not identified regularly. Ask yourself: What are the risks of NOT having an ERM process?