Talent Management: A Key Factor for Organizational Success and Growth

Discover the vital components of a talent management strategy and why it's crucial for driving innovation, achieving business goals, enhancing employee engagement, and building a resilient workforce, ultimately contributing to your company's long-term success.

As a private business owner, you know that your employees are your most valuable asset. They are the talent who drive your business forward, deliver quality products and services, and satisfy your customers. Having the right people in the right roles can propel results and define a company’s competitive edge, and “is an essential imperative that is critical for business success”, according to Sue Cummings, former head of HR at TD Bank Group. However, finding, developing, and keeping the right talent can be challenging, especially in a competitive and dynamic market. That is why you need a talent management strategy.

Outlined below are the key elements of a talent management strategy, many of which are often overlooked by Management who relegate some of these components as “peripheral”. Sue believes that “this is a mistake because having a plan to step into an increasingly mature approach over time is a key business value driver – and one that is scrutinized by third parties during a liquidity event”.

WHAT IS A TALENT MANAGEMENT STRATEGY?

A talent management strategy is a plan that outlines how you will attract, develop, and retain your workforce. It is aligned with your vision, mission, values, and goals, and drives your competitive advantage.

WHY A TALENT MANAGEMENT STRATEGY IS IMPORTANT

In the dynamic and competitive landscape of today’s business world, effective talent management is an absolute necessity. It is the key to unlocking the full potential of a workforce, driving innovation, and ensuring long-term success. By investing in talent management strategies, private businesses can build resilient, engaged, and high-performing teams that can help them weather challenging times and propel them to new heights. Successful talent management provides numerous benefits, including:

Driving Innovation and Adaptability

Talent management is instrumental in fostering innovation within any business (AIHR). By identifying and nurturing individuals with diverse skill sets, experiences, and perspectives, companies can create a dynamic workforce capable of generating fresh ideas and adapting to changing market trends. Innovation is the lifeblood of any successful company, and a well-managed talent pool is essential for staying ahead of the curve.

Achieving Business Goals and Objectives

For a business to thrive, it is critical that employees at all levels are aligned with its strategic goals and objectives (Rizolve Partners). Talent management ensures that the right people, with the right skills, are in the right positions to drive the company forward. This alignment maximizes efficiency and improves decision-making processes. Talent management also helps you to measure and improve the performance and impact of your employees, and to identify and address any gaps or risks. By doing so, you can optimize your resources, increase your effectiveness, and enhance your profitability and growth.

Enhancing Employee Engagement and Productivity

Engaged employees are more likely to be productive, committed, and aligned with the organization’s goals (HBR). Talent management involves creating an environment where employees feel valued, supported, and encouraged to develop their skills. When employees believe in their potential for growth within the company, they are more likely to invest time and effort in their roles, resulting in increased productivity and overall business success.

Mitigating Risks and Building a Resilient Workforce

Talent management goes beyond hiring skilled individuals; it involves planning for the long term. By identifying and developing potential leaders within the organization, businesses can create a pipeline of talent capable of taking on key roles. This succession planning mitigates the risks associated with sudden departures or unexpected changes in leadership, ensuring continuity and resilience (McKinsey).

Improving Employee Retention

High turnover rates can be detrimental to the success of any business. Recruiting and training new employees incur significant costs, both in terms of time and resources. Employee turnover is a significant issue for many businesses in North America, as it can result in high costs, low productivity, and low morale. The average cost of replacing an employee can range from 0.5 to 2 times the employee’s annual salary and even more for C-level positions (Gallup). Talent management focuses on retaining valuable employees by offering career development opportunities, mentorship programs, and a positive work environment. Satisfied and engaged employees are more likely to stay with the company, reducing turnover and preserving institutional knowledge.

Enhancing Organizational Culture and Your Employer Brand

In today’s interconnected world, a company’s reputation as an employer plays a crucial role in attracting top talent (HBR). Effective talent management not only focuses on internal development but also emphasizes creating a positive employer brand. It helps you to foster a culture of collaboration, innovation, and diversity, and to align your employees with your values and goals. A company known for valuing its employees, nurturing growth, and providing a supportive work environment will naturally attract high-calibre professionals, giving the business a competitive advantage in the talent market.

CORE COMPONENTS OF A TALENT MANAGEMENT STRATEGY

A well-defined talent management strategy is the cornerstone of building a workforce that not only meets your current business needs but also ensures sustained success in the future. Some of the key components of an effective talent management strategy are:

1. Conducting a Thorough Talent Assessment

Before embarking on the development of a talent management strategy, it’s crucial to understand the existing talent within your organization. Conduct a comprehensive talent assessment to identify skills, competencies, and potential gaps. This analysis sets the foundation for targeted recruitment, development, and succession planning.

2. Aligning with Strategic Objectives

Your talent management strategy should seamlessly integrate with the overall strategic objectives of the business. Identify the critical skills, competencies, and behaviours for different roles and levels. And clearly define how the acquisition, development, and retention of talent contribute to achieving long-term goals. Identify key performance indicators that will measure the success of your talent management efforts.

3. Creating a Succession Plan

Develop a robust succession plan that identifies critical roles within the organization. Establish a talent pipeline by grooming internal candidates for key positions. This proactive approach ensures a smooth transition in leadership and minimizes disruptions caused by unexpected departures.

4. Implementing Effective Recruitment and Onboarding

Craft a recruitment strategy that goes beyond traditional methods. Leverage online platforms, social media, and professional networks to attract top-tier talent. Utilize data and technology to optimize the recruitment process and to ensure a positive candidate experience that showcases your company’s culture and brand. Include clear and consistent criteria for selecting and evaluating candidates. Once recruited, streamline the onboarding process to integrate new hires into the company culture, mission, and workflows.

5. Promoting Continuous Learning and Development

Foster a culture of continuous learning within your organization. Offer regular training programs to enhance employee skills and knowledge. Provide opportunities for professional development and career advancement, creating an environment where employees feel invested in their growth.

6. Fostering a Positive Work Environment

Cultivate a positive workplace culture that values diversity, equity, inclusion, and employee well-being. Promote open communication channels, encourage collaboration, recognize and reward achievements, and celebrate successes. A positive work environment contributes significantly to employee satisfaction and retention.

7. Implementing Performance Management and Feedback Mechanisms

Establish clear performance expectations and goals for employees. Empower your employees to make decisions and take ownership of their work, and provide them with autonomy, support, and the resources required to achieve their objectives. Implement regular performance reviews and feedback mechanisms to track progress. Provide constructive feedback and support for employees’ professional growth to ensure a continuous improvement mindset.

8. Creating a Culture of Employee Engagement and Retention

Regularly gauge employee satisfaction through engagement surveys. Address concerns promptly and implement retention strategies, such as career development opportunities, flexible work arrangements, and competitive compensation packages. A satisfied and engaged workforce is more likely to stay committed to the organization.

9. Offering Competitive and Fair Compensation

Provide compensation and benefits that are attractive and meaningful for your employees. Compensation and benefits should be based on market research and benchmarking and should be linked to the performance and potential of the employees, reflecting their contribution and value to the organization.

10. Staying Agile and Adaptable

Recognize that the business landscape is constantly evolving. Periodically review and update your talent management strategy to stay aligned with changing business needs. Being agile and adaptable ensures that your strategy remains relevant and effective over time.

Developing a robust talent management strategy is a critical investment in the future success of your business. By conducting thorough assessments, aligning with strategic objectives, and implementing effective practices, you can build a talented, engaged, and resilient workforce that optimizes your human capital, enhances your organizational performance, and propels your organization toward sustained growth and prosperity.


 

Rizolve Partners understands what needs to be done to achieve sustainable, high-quality growth. To learn more, check out our services here.

Managing Your Business During Recessionary Times

Preparing for and Managing Your Business during Recessionary Times. A blog post to help you Navigate Economic Challenges with Strategic Business Resilience: Key Strategies for Efficiency, Innovation, and Growth.

Recessionary times can be challenging for any business, but they also present opportunities to improve efficiency, innovation, and customer loyalty. There are strategies that business owners can adopt to not only survive but also ultimately thrive. Here are some ideas to help you prepare for and manage your business during challenging times:

Manage your costs and expenses:

With inflation and competition high, you need to be smart about how you spend your money. Streamline processes to reduce waste and improve operational efficiencies. Review and cut non-essential expenses without compromising quality. Renegotiate contracts with suppliers, vendors, and landlords to secure better terms.

Stop doing what isn’t working and clean house of non-core assets:

Stop selling unprofitable lines. Stop doing marketing that is not working. Stop subscriptions that are not being used. File taxes on time and stop the penalties. Sell land and buildings that are not used well in the business. Sell parts of the asset portfolio that are non-core. Dismiss unproductive employees. Identify loss-making client accounts, that require too much sweat equity, or are problematic and a drain on resources that can be put to better use elsewhere.

Analyze and manage your cash flows:

You need to have a clear picture of how much money is coming in and going out of your business, and how that might change in different situations. Expedite customer payments by instituting a process of timely collection of receivables; for new accounts ensure reasonable collection periods of 30-45 days; do credit checks for new accounts and slow payers. You can also increase your cash flow by reducing your inventory levels and clearing your stock as fast as possible. Cash flow forecasting tools can help you create realistic and flexible scenarios, and by identifying the key drivers and risks of your cash flow, you will be in a better position to plan and manage accordingly.

Build cash reserves and review your finance options:

Having enough cash on hand can help you weather the storm and take advantage of new opportunities. It’s prudent to have at least six months of business expenses saved up to ensure your business can cope with a slump. Examine your cash reserves and if you feel you may have difficulties, look for options to extend and defer your debt. Explore funding options and establish lines of credit in advance. Ask for a discount for immediate payment. Find additional creditors with better terms. Consider alternatives like grants and loans. Invoice factoring is another option that can provide you with cash right away by selling your invoices to a company that will recover the money owed.

Prioritize customer satisfaction and retention efforts:

Your customers are the reason you are in business, and you need to retain their trust and loyalty. Encourage customer feedback and use it to make necessary or opportunistic adjustments. Consider offering additional value or services to retain customers during tough times. You can reach out to them through various channels, such as email, social media, or phone, and provide them with valuable information, offers, and support. Make the effort to understand your customers’ changing needs, preferences, and pain points so that you can tailor your products or services as well as your selling propositions more effectively.

Keep your employees in the loop and manage their wellbeing:

Your employees are your most valuable asset, and you need to keep them motivated, engaged, and productive. Focus on retaining key talent. Communicate with them regularly, share your vision and goals, and solicit their feedback and ideas. Consider offering them professional development opportunities, flexible work arrangements, and wellness programs to support their health and well-being. Cross-train employees to broaden or deepen their understanding of the business as well to enhance flexibility and adaptability within your organization.

Ensure your operations are lean, streamlined, and agile:

You need to be able to adapt quickly and efficiently to changing market conditions and customer demands, particularly in tough times. To do that you need to understand and look for ways to improve the performance of all of your business investments. For example – your investment in people: Is your headcount optimized? Are each of the heads performing? Who could you lose if you needed to? Is your investment in advertising and promotion paying off? Are you attracting the right target audience and is the ROI satisfactory? Are there areas of spending that should be stopped or reallocated? What about your capital investments? Are planned capital expenditures necessary? Are they out-of-pocket? Could you subscribe monthly instead, or could you take on asset financing? Finally, is your investment in working capital well managed? It’s always important to look for ways to lower your receivables and inventory and to stretch your credit.

Invest in digital transformation and innovation:

Technology can be a tremendous ally in a recession because it can help you improve your performance, reach new markets, and create new value propositions. Consider implementing automation and technology solutions to enhance productivity and reduce costs. You can use digital tools to enhance your online presence, optimize your marketing campaigns, and analyze your data to inform your strategies and tactics. Digital technologies that can improve the customer experience, as well as your operational efficiency, can be very wise investments that deliver high returns.

Explore opportunities to diversify:

Diversification can help reduce the risk of relying on a single product, service, market, or industry. By spreading their investments across a range of different areas, businesses can protect themselves against market downturns, changes in consumer preferences, or other external factors that could impact their existing operations. Diversification can also enable businesses to take advantage of new opportunities, achieve economies of scale, and increase their profitability. Explore opportunities to diversify your company’s product or service offerings to appeal to a broader market. Also, consider entering new markets or expanding your geographical reach.

Establish strategic partnerships:

Strategic partnerships can be a powerful way to grow your business and survive in challenging times. Seek strategic partnerships, joint ventures or alliances that can provide mutual benefits and help weather economic challenges. For example, by collaborating with partners that offer complementary products or services, you can access new customers and markets, generate more income, and mitigate risks. Partnerships can also help reduce costs, improve efficiency, and drive innovation by pooling together resources and expertise. Partners can help each other overcome challenges and gaps in their capabilities as well as help each other differentiate their brands and create more value for customers. Forming strategic alliances may enable you to gain an edge over your competitors and increase your market share in both good and tough times.


It’s important to remain adaptable and responsive to changing market conditions. By focusing on the areas discussed above, you can enhance the resilience of your business during challenging economic times and position your company for long-term success. If you have surplus cash then consider investing for the future in people, systems, processes, new product development, research, and planning.

Rizolve Partners is a key asset in helping business owners create a plan for growth and liquidity. To learn more, check out our services here.

Driving Sales Revenue that Delivers Business Value

How to Drive Sales Revenue that Delivers Business Value - Part 1: The Essential Components of Balanced Growth | Rizolve Partners blog

Two-thirds of CEOs state that their number one corporate objective is to grow the company. For many, growth is defined by increasing Sales Revenue.

But how many times have you witnessed companies on a tear that experience unintended issues which end up being terminal for the same CEO who mandated the growth?

By stepping on the accelerator and increasing sales, the company may have inadvertently created an even bigger problem than anaemic growth.

Some examples of unintended consequences that impact other value drivers in the company and potentially destroy value include:

Driving Sales Revenue that delivers Business Value - Part 1 of Rizolve Partners' blog series

This is the first of a 3-part series that examines the recipe for success that delivers increased value associated with certain types of Sales Revenue growth – …the golden nugget that you have been looking for – Value acceleration.

In this first part, we’ll examine the essential components of the economic engine necessary for the achievement of a successful revenue growth strategy that delivers value. By successful we mean that the revenue achieved needs to be predictable and sustainable. In the next two parts of the series, we will be discussing the “What” and then the “How” (stay tuned – they are the important bits).

The first question that my Sales Xceleration expert partner always asks when we talk about growing a company is “What is the $ Goal we want to achieve?”. This is the right question. We want to grow – but you need to answer the question: by how much and how quickly? In other words, he is asking the question “What is the Plan?”.

The plan goals should be both Strategic (3-5 years out) and Tactical over the shorter term (typically one year). Strategic goals are necessary because building out a sales team with tools, systems and processes that are scalable are long-term activities that require investment capital. Tactical goals targeting a certain level of sales once the infrastructure is in place with the appropriate skills, require a further level of detail to prove that the revenue levels contemplated provide a satisfactory return on investment.

Importance of a Business Plan

A written business plan is a statement of intent and clarification of purpose for everyone involved. It is a clarification of priorities. At its simplest, it is a communication tool and the golden key to fostering buy-in and alignment. For the team involved in implementing the plan, it is also a motivational tool as they can begin to envisage their role in executing the plan.

A planning process allows for kinks in the thinking to be ironed out minimizing the bumps in the road and therefore allowing for acceleration to occur. It provides a methodology for ideas and assumptions to be proved. It is a GPS that gives you a road map to reduce the odds of getting lost along the way. In other words, it is a risk-reducing exercise.

Fundamentally, it allows targets and goals to be set that can be benchmarked for reasonableness, and ceiling tested against company capacity and achievability. Crucially, it provides analytical support to aid critical decision-making and reduce guesswork.

Put in the context of the question: “What is the sales goal you want me to plan for?” it provides a process to answer the question: “At a particular level of sales and velocity, does the organization’s operations have the capacity, process, and competency to deliver on the promises made by the sales department”.

What Disciplines are a Prerequisite to Reliably Deliver Sales Revenue Growth?

Growth that is valuable needs to be sustainable, predictable, and transferable into the hands of a third party. It also follows that as value increases so does the ability to deliver higher levels of profitability and cashflows. The disciplines that are required as a foundation to deliver such results are:

Are you ready to drive Sales Revenue that delivers Business Value? Expert article by Rizolve Partners.

Senior Management provides leadership and planning to decide on goals; clarify priorities and make decisions on the allocation of resources. Management provides the conditions under which alignment and motivation can be fostered toward the achievement of goals.

Human Resources create and develop the skills and knowledge base needed for the company to execute its goals.

Recurring revenues allow the company to sustain its operations, providing the predictability for the company to pay its bills as they fall due and to invest for future growth. Recurring revenues have a higher value than one-off gains for these reasons.

Margin is the ability of the company to make an economic return on its activities. The higher the margin relative to the industry average the more valuable the company is compared to its competitors.

Financial and operational reports allow the company to monitor its progress and benchmark itself against its competitors.  Timely reporting provides the key metrics that can facilitate corrective action and capture opportunities as they arise.

Sales plan and process are critical elements to organizing resources around an action plan, scaling resources around a process that is replicable with the ability to delegate, monitor, incentivize and organize.

Operations is the body of resources, tools and processes that are required to deliver on the promises made by the Sales team in a timely manner.

Customer satisfaction is the mindset of the customer after receipt of the product or service which was promised by the company. A high level of customer satisfaction is correlated with increased company value.

In short, a valuable company creates a plan to capture the economic returns from market participation and delivers returns from its activities that are higher than its competition while providing products or services that are in demand at service levels that deliver above customer expectations.

Sales Revenue Growth

Valuable sales revenue growth therefore has a business underpinning that spans each of the above disciplines. Management is responsible for deciding on the sales targets that they want to be achieved to earn a targeted rate of return, and they are responsible for putting in place the resources that are capable of delivering on each of the above business needs. Specific examples of these are:

  • Sales plan that has adequate work resources to achieve execution;
  • Financial Plans that prove the company is properly financed through the growth period;
  • Human resources that are skilled, trained and in place to execute using the tools at their disposal;
  • Pricing mechanisms that cover costs with an adequate return to cover the investment and make a reasonable economic return for the investor;
  • Customer service data that measures the satisfaction of the service levels being provided; and
  • A sales process that measures sales activity and minimizes lead management timelines.

Earning the Right to Grow

It is important in business to understand that there are various rights of passage. Sustainability and predictability are two of those rights. Sales Revenue growth fuels the prospects of a company to be valuable, but only if the prerequisites detailed above are in place and organized such that predictable profits and cash flows, at levels at least commensurate with the competition, are being earned while satisfying the customer base. In the absence of a balanced economic engine, unintended consequences occur that are costly and time-consuming to resolve.

The right of passage that allows a company to achieve valuable growth can be witnessed most clearly by growth that perpetuates when the value drivers that we have identified are balanced, working in harmony and appropriate for the size of the company in question.

This balance is what makes the difference between a successful entrepreneur and an underperforming or failing one.  It is the X-factor… Different stakeholders know it when they see it; they want to be part of it when it is working and stay away from it (or leave) when it is not.

Finally, right of passage requires sustainability and predictability.  In its absence, investors turn away from companies that cannot deliver on what they have promised or, at least, charge significantly higher premiums for the uncertainty. “Under promise and over deliver” is a way to successfully manage the “right of passage” that the business community demands.

Summary

In order to deliver valuable growth from Sales Revenue acceleration, it is essential to organize resources in a manner that enables the fulfillment of commitments made by the sales department. Not having the resources properly organized will lead to unintended consequences which will increase the cost of investment and extend the timeline to success, or worse cause the company to stall or fail.

Having your valuable resources in place will give the organization’s economic engine the horsepower to gear up and respond smoothly when the growth accelerator is pressed by the leadership group. We have outlined for you, above, the essential requirements of balanced growth.

In Parts 2 and 3 of this series, we will outline for you the build-out of the 4 key sales competencies that will enable you to accelerate your sales revenue growth, assuming that your economic engine is in place.  We will then detail how those competencies operate in practice for “best in class” companies to deliver on your growth imperative and to sustainably achieve your right of passage to the “next level” of business value.


Rizolve Partners understands what needs to be done to achieve sustainable, high-quality growth.
To learn more, check out our process expertise tips sheets here.

What is Transferable Value and How Do I Build It?

Transferable value refers to the value that a business holds for someone else, without the original owner’s involvement. It is important to understand that transferable value is not the same as profit. Although a business may generate substantial profits, it may not necessarily have transferable value. The transferable value of a business is determined by its ability to function effectively in the absence of its owner, rather than how efficiently the owner manages it.

Peter Christman, the co-founder of the Exit Planning Institute, in his book, “The Master Plan”, identifies the three legs to the stool of a successful exit strategy:

  1. Maximizing Transferable business value;
  2. Ensuring that the Owner is financially prepared; and
  3. Ensuring there is a plan for “What next?”

Each of these key elements of a successful exit strategy need to be understood as they are critical. In this blog we will focus on Transferable Value.

The acquirer of a business whether it be a family member, employees, or third parties, are really looking to take possession of a business that produces cash into the future on a sustained basis with predictable results.

To build transferable value in your business, it’s essential to assess your value drivers. By implementing and improving value drivers, you can develop a business that can be transferred to someone else without any significant disruption to its cash flow.

So what are prime examples of transferable value and issues surrounding it that an incoming owner would prize highly and pay fully for?

Leadership and Human Resources

A strong team of human resource assets that work towards a common vision and set of goals within a defined culture that establish the boundaries for strong working relationships. Within that team would be competent management that can help ensure the smooth running of your business, maximize profits, and make informed decisions that drive growth towards the Company Vision.

Supporting management should be a balanced team with multidisciplinary skills that facilitate the execution of the Plans to individually and collectively defined goals and who motivate each other. The key quality is a team that can execute a plan consistently to increasingly valuable ends.

Examples of issues found in due diligence that would raise value in the mind of the buyer:

  • Strong, skilled, balanced and competent management teams;
  • Retention agreements with key staff to ensure that they stay with the company to facilitate transition;
  • A succession plan for leadership positions as the Owner transitions out of the business, and no gaps in skills in the human resource matrix.

Maintenance of Good Financial Records

Maintaining good financial records is another crucial step in building transferable value in your business. This includes having a clear record of your revenue, expenses, and cash flow. By keeping accurate and up-to-date financial records, you can track your business’s financial performance, identify areas for improvement, and demonstrate to potential buyers or investors that your business is financially stable and well-managed.

Here are some reasons why maintaining good financial records is important:

  • Financial transparency – creates trust and confidence;
  • Better decision-making – to make informed decisions on cost cutting or new initiatives;
  • Tax compliance – to stay compliant with regulations and make appropriate deductions;
  • Improved cash flow management – to track cash flow and manage finances; and
  • Valuation – to show a clear picture of prospects to help the evaluation of future value.

Being able to deliver future projections and estimate the net cash flow that the business will generate, informs decision making and enables nimble management as economic conditions change. Evidence of the repeating cycle of success: Strategic plan; Budgeting process; Performance review; and Rolling forecasting, demonstrates that the business possesses up-to-date information on goal attainment as the central focus of its tactical decision-making process. It also highlights the business’s capacity to adapt and modify plans to embrace emerging opportunities and address potential risks on a timely basis.

During due diligence, a buyer will be assessing:

  • What the quality of the reported numbers are – audited financial information is presumed to be the highest quality;
  • The value of future plans with projections that are predictable and sustainable. This will help the buyer assess future returns so an offer can be made based on both reported and anticipated cash flows;
  • The current status of compliance reporting; and
  • The appropriateness of accounting policies with GAAP and consistency with their presentations.

Issues that could create transferability issues are: Loss making businesses; qualified audit opinions; or contingent liabilities such as the outcome of current lawsuits.

Legal Protection

A company contract is a legally binding agreement between two or more parties that outlines the terms and conditions of their business relationship. Contracts play an important role in protecting business interests, reducing risk, and increasing transferable value.

Having clear legal contracts in place that document agreements with Customers, Suppliers, Employees, Partners, Shareholders and other key stakeholders to the business is important for a third party, particularly when the buyer is purchasing shares of the company.

It is commonly the case that Companies have short-cut creating legal documentation as they grow and have avoided incurring legal fees by “copying” other company document formats. While this serves a purpose at the time (keeping costs down), it is important for a lawyer to review the existing documents to confirm that they are appropriate for the current business conditions especially in contemplation of a change of control.

Given the focus of the buyer on the future and sustainability and growth of current business, the existence of patents to protect intellectual property into the future is of heightened importance – even if the patent protection is in place but “pending”.

Finally, having no disputes outstanding and a clean record is valuable. Conversely, the existence of lawsuits is often a blocker to transferability. It is therefore highly recommended that legal disputes are settled well in advance of any transaction.

Recurring Revenue and Efficient Sales Processes & Systems

The process and systems that exist in a company to identify, prospect, engage, excite, sell to and convert prospects and customers in the Sales process is a key leverageable asset. A buyer will want to ensure these are in place to facilitate their plans to operate and grow the business into the future. The absence of good quality, repeatable systems is likely a significant issue for a buyer that can negatively impact transferability and business value.

In particular, the existence of a sales pipeline and a sales back log will be the subject of detailed due diligence, and the probability of conversion of the pipeline into future cash will determine how transferable the business is.

During due diligence, the quality of the processes and systems will be assessed.The existing pipeline, as often captured in a CRM, will be scrutinized and is often key to the value placed on a business.

Transferability will be impacted where:

  • Systems and processes are undocumented, impacting scaleability; and
  • Sales pipeline and evidence over the probability of converting a lead is poor, leading to low visibility behind sale projections.

The repeatability of sales to customers should be emphasized during due diligence both historically and in showcasing the ability to convert prospects.

Marketing and Customer Service to Support a Strong Brand

Developing a strong brand is a critical step in building transferable value in your business. A strong brand creates a lasting impression on your customers, making your business more memorable and recognizable. It can differentiate your business from competitors, increase brand recognition, build customer loyalty, support premium pricing, and provide a competitive advantage. By doing so, you can create a more attractive business for potential buyers or investors.

The transferable value is often documented in:

  • The development of a marketing brand book – that documents characteristics of brand identity;
  • Documentation outlining the company’s Unique Selling Proposition;
  • A history of strong and improving customer satisfaction scores using widely accepted scoring benchmarks such as Net Promotor Score; and
  • Marketing conversion metrics giving a clear track record of understanding the ideal customer and their needs and wants.

Operational Capacity and Ability to Fulfil the Sales Promises

Operational capacity is the business’s ability to fulfil orders in a timely manner such that the customer is satisfied that the brand promise has been fulfilled time and again.

The buyer of a business is interested in whether the Operations of the systems of fulfilment and Customer service are repeatable and set up such that the promises made by Sales are satisfied no matter what time of year and in spite of different influences on the business.

They also focused on whether such practices are scaleable and therefore sustainable. In this regard they would want to know if Standard Operating Procedures (“SoP’s”) are in evidence and are teachable to facilitate higher volumes.

Transferable value is contained in:

  • Documented SoP’s;
  • Documented training in Systems and Procedures;
  • Products that are standardized as opposed to being customized; and
  • Human resources that are onboarded and trained in procedures with defined job descriptions so that they can become a productive member of the team in the minimum time possible.

 

In summary, this presents several key value drivers and indications for you on what represents transferable value. This is by no means an exhaustive list, and you should seek professional help in identifying transferable value in your business. Your company’s transferable value needs to be showcased and emphasized during due diligence with prospective acquirers.

As a final thought, the “three legs to a stool” is a powerful symbol in this context when you consider what happens to the three-legged stool that is short one leg. Note that 75-80% of businesses fail to sell when they are brought to market *. Beware ignoring the components of a successful exit strategy and in particular the drivers of transferable value.

By focusing on the key value drivers, you can build transferable value in your business and make it more attractive to potential buyers or investors. It is important to remember that building transferable value takes time and effort, but the long-term benefits can be significant.

 


 

* Tom West, Business Reference Guide

 

Rizolve Partners understands what needs to be done to achieve sustainable, high-quality growth.
To learn more, check out our process expertise tips sheets here.

What is Pricing Power and How Can It Drive Company Value?

What is Pricing Power and How It Can Drive Company Value - Blog post

Pricing power refers to a company’s ability to set and maintain prices at levels that are higher than its competitors. It also involves being able to do so without losing significant market share.

It is a measure of a company’s pricing flexibility and its ability to capture value resulting in improved profits. This, in turn, also improves shareholder value. Developing pricing power is crucial for companies to drive value and achieve long-term business success.

Pricing power is influenced by various factors including:

  • market demand,
  • competitive landscape,
  • customer perception,
  • brand strength,
  • product differentiation, and
  • overall market dynamics.

When a company has pricing power, it has the ability to set prices strategically, adapt to changing market conditions, and command premium prices. This allows the company to generate higher revenue, improve margins, and ultimately capture a greater share of the value they create.

Here are some strategies your company can use to develop pricing power…

 

1) Build a Strong Brand and Reputation

A strong brand and reputation can significantly impact pricing power. A well-known and respected brand can create customer loyalty, trust, and perceived value. Customers are often willing to pay a premium for products or services associated with a reputable brand.

Building a strong brand involves consistent delivery of high-quality products or services, excellent customer experiences, and maintaining a positive reputation. Invest in building your brand identity, brand image, and brand equity through effective marketing and communication strategies.

This includes:

  • creating a compelling brand story,
  • establishing brand recognition,
  • cultivating loyalty, and
  • maintaining a positive reputation through customer testimonials, reviews, and feedback.

A strong brand can justify higher prices, differentiate your offerings from competitors, and enhance your pricing power.

 

2) Focus on Customer Value

It’s important to effectively communicate the value proposition of your products or services to your customers. Highlight the unique features, benefits, and value that your offerings provide. Use marketing and communication strategies to clearly convey the value of your products or services, and how they address customers’ needs.

Show how your offerings are superior or differentiated from competitors, and why they are worth the premium price.

This can help justify higher prices in the minds of customers and build perceived value, which can enhance your pricing power.

 

3) Differentiate Your Offerings

One of the most effective ways to develop pricing power is by differentiating your products or services from your competitors. When customers perceive your offerings as unique, superior, and valuable, they may be willing to pay a premium for them.

Differentiation can be achieved through various means, such as superior product quality, innovative features, exceptional customer service, exclusive branding, or customization. Conduct market research to understand customer needs, preferences, and pain points. Then develop offerings that address those needs in a unique and compelling way.

By offering different products or services, you can create a competitive advantage that allows you to command higher prices and develop pricing power.

 

4) Develop Expertise

Build expertise in your industry or niche and establish yourself as a thought leader.

Customers perceive expertise as a mark of excellence and trustworthiness. When you are recognized as an expert, customers are more likely to trust you and be willing to pay a premium.

This can result in higher prices and improved profits, as customers are willing to pay for the added value and trust.

 

5) Improve Quality

Continuously improving the quality of your offerings can justify higher prices and create customer loyalty. High-quality products or services are associated with superior performance, reliability, and durability.

When you consistently deliver products or services that meet or exceed customer expectations, it enhances customer perceptions of your brand. Customers are willing to pay a premium for quality as they perceive it as an indicator of value and reliability.

By improving quality, you can position your offerings as premium products or services, commanding higher prices and developing pricing power.

 

6) Optimize Pricing Strategies

It’s important to constantly review and optimize your pricing strategy to develop pricing power. Conduct pricing analysis to evaluate the effectiveness of your pricing strategy. Evaluate factors such as price elasticity, customer segmentation, competitive benchmarking, and profit analysis.

Test different pricing strategies such as value-based pricing, cost-plus pricing, or dynamic pricing. Do this to determine which approach works best for your business and market. Consider using pricing software or tools to help you analyze data, make informed pricing decisions, and optimize your pricing strategy.

Regularly review and adjust your prices based on market conditions, customer feedback, and competitive landscape. This will ensure that your prices remain relevant and competitive while also reflecting the value of your offerings. By optimizing your pricing strategy, you can maximize your pricing power and drive value for your business.

 

By developing pricing power, your company can drive value in several ways. It can increase revenue and profitability by capturing higher prices and improving margins. It can also enhance customer perception of your brand, build customer loyalty, and foster customer advocacy. These efforts can lead to repeat business and positive word-of-mouth marketing.

Pricing power can create a barrier to entry for competitors as customers are willing to pay a premium for your offerings. This can help your company establish a sustainable competitive advantage and position itself as a leader in the market.

Overall, developing pricing power requires a deep understanding of your customers, market, and competitive landscape. By focusing on building a strong brand, providing value to customers, and continually improving your offerings, you can create pricing power that drives value for your business!

 


 

Rizolve Partners understands what needs to be done to achieve sustainable, high-quality growth.
To learn more, check out our process expertise tips sheets here.

What is Business Growth and how does it work?

What is business growth, and how does it work?

Growth in a business in and of itself may or may not be a good thing…

Generally, a business’s ability to grow is regarded as a good thing.

It’s usually indicative of:

  • having attracted and satisfied more and/or larger orders,
  • purchased and built inventory,
  • hired and trained staff,
  • and developed processes and systems to fulfill more orders.

Capacity has been developed to meet the demands of an increasingly demanding customer. Not to mention, the holy grail of achieving customer satisfaction has been demonstrably achieved.

However, a rapid growth rate can sometimes be a bad thing.

Growth requires funding with additional working capital. This could be bad if facility increases are not planned to keep up with the financing needs of the business. Customer satisfaction could take a dive if delivery time or service quality suffers.

Human resource motivation could be significantly impaired if systems and processes are weak or broken. This can cause substantial effort on the part of employees to coordinate fulfilment orders and completion of delivery.

So when professional investors or stakeholders see a growing company, they are initially impressed. However, their predisposition is to look under the covers and to ask questions to establish the quality of that growth. They do this to better understand the business valuation of a company. This valuation can vary greatly depending on the type of sales and the capacity for growth that the company has established.

Let’s first consider the nature of the sales… If the new sales orders are one-off in nature, an investor will give the business credit. This will increase its appraisal of value.

However, the growth will only be appraised at a stepped-up multiple if the new business is contractual.

Furthermore, it must be recurring into the future.

In other words not all growth is evaluated equally. Business Owners beware as this will be established during due diligence. Demonstrating the dollar value of growth is only one component if you are looking to maximize the value of your business.

Let’s consider how the company has been built. Is it seen by an Investor to have capacity suitable for the size of its business base? Are its competencies operating in a balanced way? Imbalances and lack of capacity cause unintended consequences.

For most companies, a stable platform of growth is achieved when it can demonstrate that it has:

  • Delegated responsibilities to a competent leadership team that is managing its affairs;
  • Margins that are set at levels equal to or better than the competition and can fund future growth through reinvestment;
  • Financial and operating systems that can support the information requirements of growth;
  • Human resources that can attract and fulfil the growth;
  • Sales processes and systems that can be replicated and controlled to deliver planned growth;
  • Operations with planned capacity that is sufficient to fulfil the promises made by sales in a timely manner without sacrificing quality;
  • Customer satisfaction that brings them back and is sufficient for them to recommend the product or service to friends or colleagues.
  • Contracts that provide legal formality over relationships and transactions.

This is crucial the bigger a company gets. Players can stretch what was intended in a handshake. Money in greater amounts can expose integrity; so better to get everything agreed to in writing to avoid misunderstanding. Good businesspeople have no problem with that.

Many companies fail to set a firm foundation for growth. As a result, they fail in numerous, unintended ways to achieve growth and breakthrough to the next level.

Instead of growing, these companies plateau.

Absence of any of the above competencies, or balance in these disciplines are definable reasons for their lack of success. There are exceptions, but this is true in the vast majority of cases.

Fundamentally, value can be demonstrated if a company is growing in a sustainable and predictable manner. Such growth should result in the company becoming a net generator of cash. Sustainability is illustrated by growing the contractual base of business with customers who order consecutively giving the business recurring income. Such recurring income should be demonstrated via strong processes through the sales funnel that creates predictability for plans and forecasts.

Rapidly growing companies often exhibit weaknesses in operations, and this area is a constant challenge for management. The trick here is to create business plans and forecasts that are achievable.

This enables the company to marshal adequate resources in a timely fashion to fulfill its commitments. All cogs in the business engine must then run smoothly together in a controlled fashion. However this is where the greatest dynamism occurs for most businesses.

In summary, businesses that achieve good quality growth have each of the cogs of the engine working in harmony together. They have set the conditions necessary to grow in a manner that will likely achieve customer satisfaction, repurchase and onward recommendation.

 


 

Rizolve Partners understands what needs to be done to achieve sustainable, high-quality growth.
To learn more, check out our process expertise tips sheets here.

Will your business be more valuable this time next year?

For many, January is a time of rebirth and resolutions. It’s a time to reflect on last year’s achievements and to set goals for the year ahead.

Some people will set personal goals like losing weight or quitting a habit, and most company owners will set business goals that focus on hitting certain revenue or profit milestones. But if your goal is to own a more valuable business next year, you may want to make one or more of the following New Year’s resolutions.

Tips to build a more valuable business:

  • Take a two-week vacation without checking in with the office. When you return, you’ll see how well your company performed and where you need to make a key hire or create a new system.
  • Write down at least one process per month. You know you need to document your systems, but you may be overwhelmed by the task of taking what’s inside your head and putting it down in writing for others to follow. Resolve to document one system a month and by the end of the year you’ll own a more sellable company.
  • Offload at least one customer relationship. If you’re like most business owners, you’re still your company’s best salesperson, but this can be a liability in the eyes of an acquirer, which is why you should wean your customers off relying on you as their point person. By the time you sell, none of your key customers should think of you as their relationship manager.
  • Cultivate a new relationship with a new supplier. Having a “go to” group of suppliers is great, but an over-reliance on one or two suppliers can create a liability for your business. By spreading some of your business to other suppliers, you keep your best suppliers hungry and you can make a case to an acquirer that you have other sources of supply for your critical inputs.
  • Create a recurring revenue stream. Valuable companies can look into the future and see where their revenue is going to come from. Recurring revenue models can vary from charging customers a small amount for a special level of service to offering a warranty or service contract.
  • Find your lease (and any other key contracts). When it comes time to sell your company, a buyer will want to see your lease and understand your obligations to your landlord. Having your lease handy can save time and avoid any nasty surprises at the eleventh hour in the process of selling your company.
  • Check your contracts and make sure they would survive the change of ownership of your company. If not, talk to your lawyer about adding a line to your agreements that states the obligations of the contract “surviving” in the event of a change of ownership of your company.
  • Start tracking your Net Promoter Score (NPS). The NPS methodology is the best predictor that your customers will re-purchase from you and/or refer you, which are two key indicators of a healthy and successful company. It’s also why many strategic acquirers and private equity companies use NPS as a way to measure the health of their acquisition targets during due diligence.
  • Get your current Value Score. All goals start with a benchmark of where your Company value is today. By understanding it and what it is composed of, you can pinpoint how you’re doing now and which areas of your business make-up are dragging down it’s value.

A lot of company owners will set New Year’s resolutions around their revenue or profits for the year ahead, but those goals are blunt instruments. Instead of just building a bigger company, also consider making this the year you build a more valuable one.

Rizolve Partners is a trusted strategic advisory firm dedicated to helping business owners achieve peak value. If you’d like to learn more, let’s have a conversation. Are you curious about how transferrable your company is and what you would need to adjust to transition it successfully when you’re ready? Then perhaps it’s time to for us to connect so we can discuss your company’s current value and how to make your business (and your life) more attractive! You can reach us in any number of ways here.

The Smartest Business Owners Never Leave Money on the Table

Have you heard about the “age wave” that could affect the value you realize for your business when you decide to monetize the wealth you’ve created? Two thirds of private business owners are baby boomers, and their average age is 65, representing over 700,000 Canadian businesses. According to BDC, 49% expect to exit their business within 5 years. That could be good news if you’re looking to buy a business, but the market is about to get much more challenging for owners looking to exit.

Unlocking the wealth in a business is no trivial affair given that 80%-90% of most owners’ financial assets are tied up in their business. Owners are banking on their ability to monetize this wealth to ensure their financial security and lifestyle once they exit.

However, historical transition rates suggest looming issues for the unprepared: statistics show that only 20%-30% of private business transitions are successful. Poor transaction success, high levels of owner dissatisfaction, and low levels of survival for family-owned transfers all threaten retirement plans.

Despite that backdrop, nearly 80% of owners have no written transition plan, and nearly half have done no planning at all. Not having a considered exit plan will close doors to value maximizing opportunities and available tax saving strategies.

Here are five thoughts business owners should keep in mind when trying to optimize value on what they have created.

Know your exit strategy

A successful exit strategy ensures a business owner is financially prepared, maximizes transferable business value and provides a plan to answer the question, “What next?”

There are several factors that come into play.

First, an owner must understand their business and their personal objectives.

Your personal objectives and needs are key inputs to correctly setting your personal expectations and financial plans. Understanding your wealth plan and what must be achieved out of the business sale to enjoy it, represents your bottom line for negotiations.

Understanding that there are different phases in the getting-to-cash process is important, too. The planning phase to maximize value can take up to three years, while preparing and executing the final transaction can take up to a further year. Even after the transaction is completed there may be contract terms that need to be fulfilled.

Having a written plan covering these stages, as well as identifying goals for pre-sale value acceleration, will help chart a course for the owner and give other stakeholders something they can buy-in to.

Focus on value

To optimize value in the sale of a business, an owner needs to look at his or her company through a value lens. This is likely to involve “reframing” their approach from a perspective of purely maximizing profit to one of maximizing value.

To do this an owner needs to understand the value of the business today and what drives that value. The quicker one gets comfortable with the fact that this is not just about sales and growth in profit, the greater the likelihood of having a successful sale.

The more time one allows for “value acceleration” work to be executed, the better the prospect for maximization and creating a return on investment.

What gets measured, gets done

It is important to understand that more than 80 percent of the value of a company lies in intangible assets and goodwill (often off-balance sheet). An advisor team can help an owner identify and measure the components of such assets.

In order to track progress in accelerating value pre-sale, it is important to institute a measurement framework where the unit of measure is enterprise value. Having the value scores for the components of these assets allows an owner to create a targeted plan of improvement around the key drivers of value.

There are various measurement tools, ranging in sophistication, that enable owners to identify winning strategies and transform them into genuine results (e.g. Value Builder and Value Opportunity Profile). Measuring the positive results from improvement actions will help deliver desired outcomes.

Remember the maxim: “What gets measured, gets done!”

Know the end game

There is a defined sales process that occurs when selling a business.

The sales agent (broker or investment banker) invites a group of prospective buyers from a wide variety of sources to engage in the sales process. The agent stages the interaction to funnel down to the buyers who have demonstrable interest and qualifies their ability to execute the transaction. The goal is to orchestrate competition and create “deal tension” to optimize bids with attractive terms.

Some key sales documents, which the market expects to be available when engaging, will be employed in the process. An owner will need to have significant input in their preparation and justification. Having these documents available, with supporting information, is critical for deal momentum and navigating due diligence.

A lawyer skilled in M&A will also draft and provide negotiation support for various legal documents critical in arriving at negotiated price and terms.

Appoint an aligned advisor team

There are a number of key roles that form the backbone of an aligned exit-planning team.

First, there’s a quarterback (the “Exit Planner”) who can help an owner build, orchestrate and implement a plan. Critically, this position will take the business through a process of value acceleration and ensure that the business is transferable and ready for sale.

A personal financial advisor helps compute the minimum number that an owner needs to achieve from the sale of a business in order to fulfill his or her lifestyle wants. This provides a bottom line.

A business tax and legal advisor helps structure business assets so that what is sold is separated from assets not being sold and will organize to minimize tax on net proceeds.

Finally, a transaction advisor will help the owner organize and orchestrate the sale process, which requires independence and skill.

For a business owner, early planning, informed navigation, and careful execution of the exit process can mean the difference between maximizing the value of the business or settling for something less than they have dreamed about for their retirement.