The cries of business re-engineering, cut backs and rationalisation are not unusual in the times of crisis. With the global economies hitting the buffers in 2008 the all too familiar stories of the 1990 mini-recession and the early 1980s deep recession are filling our news and media. The familiar cost cutting, getting back to basics, entrenchment and safe play is the norms of today but the reality is businesses should have been taking regular review of their operations, costs and strategies before the economical conditions forced their hand. In theory a well-managed business should have no excess baggage, run a lean operation and be focused on its strengths. Does this mean most businesses are running inefficiently or are badly managed and only a crisis in economy or business focuses the management mind? Business grooming is not just a tool and approach for crisis management but it is a process sensible business leaders should implement in the good times.
What is business grooming?
Business grooming is the process of implementing sound financial and business control systems in an organisation in order to maximise the return on investment and increase shareholder value. A well-run and managed business provides secure employment, supplies best in class product or service, and delivers value for money for both customers and investors.
Why would you need business grooming?
Apart from the sensible approach to business, business grooming forces companies to review their strategy, process, structure, cost base, focus and financial discipline. Any business that needs funding for growth or has hopes of IPO or profitable trade sale would have to demonstrate sound business practice to their potential investors or lenders.
Business grooming enables companies to recognize their strengths, identify opportunities, create business plans that withstand financial scrutiny and enter new ventures or markets in a measured and low risk manner. Smaller companies have become so adept at responding to crisis that management-by-crisis has become the order of the day. Whilst senior managers focus on fire fighting and managing one crisis after another, the management time is not spent on strategic thinking, planning for the future and managing change or adapting to new environment. Business grooming helps companies to anticipate crisis rather than react to it, reduces waste by focusing on sound decision making process, and nurtures innovation so that companies can take advantage of new opportunities presented to them.
Business grooming also addresses the financial practices of the company, helping to present a professional and well thought out business plan to potential investors and lenders therefore increasing the chances of new funding for growth and survival of the enterprise.
Smart business leaders do not wait for a financial crisis or their planned IPO/business sale to implement sound business practices. From day one, you should be thinking like an investor or a potential buyer for your business. Think about the areas you would investigate if you were buying this business. Consider the questions you would be asking if you were signing the cheque to buy the company and then think like your worst kind of nightmare awkward customer. Now you are thinking like your own worst critic.
Most SME sales are unplanned, which means they are a response to an event which is outside of owners control. The top 3 reasons for SME sales are:
2. Financial crisis.
3. Death or Departure of key business partner.
With the exception of a legally questionable prenuptial agreement, there is very little preventative measure business owners can take to insure against forced sale. Therefore you should run your business as though you were going to sell it tomorrow, with auditors arriving at 8am in the morning. Only this type of discipline can ensure surviving any possible crisis and maximizing the value of your business should you ever be forced to sell it before your planned exit. This approach to business management creates a sense of urgency in your business, energizes the organisation and motivates business managers to go-beyond the call of duty to ensure organisational success and management excellence.
Business grooming is not distress management and will prevent management-by-crisis enabling companies to manage change, respond to prevailing market conditions and secure the necessary funds to thrive.