By Maurie Cashman
Today, let’s talk about tactics. According to Wikipedia, tactics are conceptual action(s) implemented as one or more specific tasks. Strategy is a high level plan to achieve one or more goals under conditions of uncertainty. Strategy is important because the resources available to achieve these goals are usually limited. So we must choose tactics necessary to accomplish your strategy and figure out how you will implement your decisions. Tactical Planning must support your Strategic Planning.
We have been discussing how owners use Value Drivers to build the business value necessary to achieve the lifestyle they desire through Ownership Transition Planning. First, they must create written value-building plans that outline what must be done to reach the owner’s goals and designate specific people to accomplish those tasks (Close the Gap Between What You Have and What You Need). The first Value Driver to include in that written plan addresses the business fundamentals necessary to protect the value you will create using your written plan (Putting Business Fundamentals In Order).
What tactics must you employ to accomplish these and other objectives in your ownership transition strategy?
David Smith knew he needed help to build business value but didn’t know where to start. So we started by asking, “What do you not like to do in your business?” David’s list included: “Making collection calls, doing the books, paying bills, hiring and firing employees.” Obviously, these tasks—and others that you and David just don’t like to do—are critical to any company.
To determine what tactics David might employ, we suggested that he stop doing those necessary things that he just didn’t like doing. “Do you remember,” I asked, “when you wanted to own a business for the joy, happiness, a sense of accomplishment?” David did remember and observed that because he dislikes certain tasks, “I either put them off until they are urgent or don’t do them at all well.”
My follow-up questions were: “Which of these tasks could a co-worker do as well as you can? Can you create a process to train and support an employee to do those things you want to avoid?”
Like all owners, David has strengths, aptitudes and interests that he brings to his company. He also has areas of weakness, or lacks interest in certain areas. We suggested that David find people to perform those tasks and create the procedures to ensure that tasks are done well and in a timely manner. His alternative was to do it all himself, thus working harder and longer.
If that second option is as unappealing to you as it was to David, we suggest that you complete a short questionnaire to determine exactly where you should focus your time and attention on growing value. From there, develop specific tactics to increase business value.
We then suggest that you look at several areas (your business may require others) that may need attention:
• Diversify the customer base.
• Expand sales to current customers.
• Define and measure success: set goals and hold people accountable.
• Create a consistent sales and marketing message.
• Tax Planning.
Customer Base. Do you know what percentage of sales or income is attributable to each of your customers? If one of your clients accounts for a disproportionate amount of total sales, you may have difficulty convincing a future buyer of the value of your company’s customer base. Understand that high customer concentration can prevent a third party sale of an otherwise attractive company.
Expand Sales to Current Customers. Are you selling all you can to each customer? What can you do to increase sales to existing customers? Are you building relationships with each customer to allow you to continue and expand sales to them, or to return to them when a product cycle indicates a need for more of what you sell or do?
Define and Measure Success. By what parameters do you measure your company’s success: Consistent achievement of annual sales targets? Ability to penetrate a difficult market? Knowing the answer to this question is important as you grow value because it is the basis for measuring growth for purposes of incentive compensation and to establish interim targets the company must reach in order to grow at the pace needed to meet your ownership transition objectives.
Create a Consistent Marketing and Sales Message. Many owners assume incorrectly that most or all of their employees can accurately describe what the company does. If you have communicated to your employees your company’s purpose, can most or all of your employees accurately describe its unique competitive advantage?
Tax Planning. No discussion of tactical planning would be complete without raising the issue of taxes. As you work to increase your company’s value, it is wise to do everything legally possible and practical to protect the value of your company from unnecessary taxation. What tax legal entity are you utilizing and is it the best one for your long-term objectives? What are the prospects of increasing taxes, income and otherwise, and what will be your strategy for dealing with them? Have you discussed the impacts of Obama-Care with your insurance advisor and are you confident that they understand them?
The five aspects of tactical planning that we’ve outlined here are just a few that you might want to address in your business. You should employ an advisory team that can help you organize and focus your efforts efficiently so your company tactics are aligned with your Ownership Transition Plan
Next week, we’ll talk about Internal Operations.