We are all fully aware of how the pandemic affected the labor market last year. In March and April of 2020 alone, more than 20 million workers lost their jobs, with many of them remaining out of work for months or longer. The economy was clearly crashing, and then, very tentatively, started to ascend earlier this year.
While we may have thought that was the end of it, we’re seeing it was only the beginning of the pandemic’s effects on our economy. Somehow, within a year’s time, the leverage shifted drastically from employers to employees. In fact, I recently read a Washington Post article reporting that a record number 4.3 million people quit their jobs in the month of August alone.
The Whys of the Resignation Letter
One of the things that struck me most is that over the past twenty years, when we’ve experienced higher numbers of employees resigning, there was also higher confidence in a very strong economy, providing the cushion most people need to risk the security of their regular paycheck. It typically does not happen in a volatile and unpredictable economy or during challenging times fraught with unknowns.
It made me wonder how we went from millions of people out of work, scrambling to find any job to now 2.9% of the workforce leaving those jobs in under a year. It seems that when the pandemic shook our mindsets in countless ways, it completely revamped how we view our jobs, or lack thereof. And questions abound – Is it that there are other opportunities out there, with better pay? Is pay no longer as prioritized because people are searching for something more fulfilling? Are people more restless now?
There are indications that it is some combination thereof. This is coupled with the fundamental shift in employees’ thresholds for what they will, and will not, deal with as it relates to work. Most have become accustomed to working remotely, and as such, are not as willing to partake in stressful commutes or long hours. Others are taking a more scrutinizing look at what they are being paid compared to what they feel they are worth. Still others continue to have direct pandemic related issues, such as concerns over safety, healthcare, and childcare for their children. Whatever the reason for the shift, the data demonstrates an abundance of confidence among employees and stronger bargaining positions overall.
Additionally, the employees that continued to be employed last year, who often worked with a skeleton team (or no team at all) are completely and utterly burnt out. For a year, they carried not only their own weight, but the weight of their absent team members, trying desperately to help sustain their company in any way they could. They’re exhausted. And they want (and quite frankly, deserve) to be appreciated. Unfortunately, some employers haven’t handled those situations post-pandemic as well as they should have, causing those loyal employees to search for greener pastures where they will be appreciated.
Is It a Matter of Supply and Demand?
Regardless of the reason though, there were a reported 10.4 million job openings at the end of August. And plainly, that’s a lot of leverage for employees looking for “something else.” Maybe it all comes down to Economics 101 – Supply and Demand. The supply of well-paying jobs is outnumbering the unemployed, and employees are, whether consciously or unconsciously, reevaluating their options.
One thing is for sure – we haven’t seen the full effects of the pandemic on the workforce yet. It remains to be seen when the leverage will balance out, causing more stability. In the meantime, many employers are reacting with increased pay to try to find and retain qualified candidates. They are also (or should be) investing in retraining and skill analysis for their employees, who need new skills to work in the hybrid model for which so many employers are opting.
Barker Associates has extensive experience in helping corporations shift and maintain alignment with the changing needs and requirements of the economy. If you need assistance, or have any other questions, please click here to schedule a 30-minute consultation at a rate of $100.
Corporate Governance Trends and Their Effects on Investor Behavior Where We’ve Been; Where We’re Going
A Harvard Law School Forum on Corporate Governance study conducted earlier this year identified the global corporate governance trends that would impact businesses in 2021. The study was based on interviews with investors, pension fund managers, advisors, and other corporate governance professionals from around the world. As the new year approaches (I know, I can hardly believe it myself!), we thought it was an ideal time to check back in on these trends, as we navigate what investors may be looking for going forward.
For the United States, the trends have been focused, in part, on the following topics:
Diversity, Equity, & Inclusion (DE&I)
Environmental, Social, and Governance (ESG) Oversight & Disclosure
Corporate Culture & Human Capital Management
Technology & Cybersecurity
Virtual Shareholder Meetings
Social and racial issues gained unprecedented attention in the United States last year, and companies are responding. They are now incorporating far more aggressive initiatives to address DE&I concerns to increase racial and ethnic diversity, especially on the board and at the C-suite level. But if they plan on bringing on investors, they should maintain or even increase these efforts.
Investors are holding more companies accountable, demanding increased disclosure of key data on diversity, equity, and inclusion. They expect improvements in these areas and full disclosure of the company’s data. Some states and institutions are taking it a step further. The study notes that “California law now requires that by the end of 2021 public companies headquartered in the state have at least one director who is from an underrepresented community. NASDAQ has proposed a similar listing requirement, which is subject to approval by the Securities and Exchange Commission (SEC).”
ESG Oversight & Disclosure
There has been a rise in ESG reporting standards over the past year. Investors are increasing their support of ESG oversight and disclosure, and are holding directors responsible if those standards are not met.
Now, private equity firms and other private companies are also increasing their focus on ESG. All boards should expect to start being held more accountable for ESG disclosures by their stakeholders. Key considerations should include (1) if they have ESG data ready for review, (2) if they have considered shareholder interests when creating ESG initiatives, and (3) whether ESG has been integrated into their business strategies and financial planning.
Human Capital Management
The consequences of the pandemic and social justice movements for businesses have led to an increased demand for Human Capital Management (HCM) data, such as gender pay gap, safety incidents, and employee turnover.
The SEC has adopted new HCM disclosure rules on the premise that employees are key to an organization’s value. Those rules require a description of the company’s human capital resources, including applicant attraction and employee retention and development measures. Investors also have increased expectations and are demanding increased board oversight of HCM and corporate culture issues.
While executive compensation has always been a consideration for investors, it is under increased scrutiny now. With the unique considerations brought about by the pandemic – company acceptance of federal aid, mass layoffs, and overall employee treatment during the pandemic, investors are looking more closely at compensation paid to the C-suite. Companies should be carefully scrutinizing the compensation paid to upper management compared to how the pandemic affected their frontline workers and be ready to address disparities.
Technology and Cybersecurity
As a necessary result of conducting business from afar, technology use has exploded over the past year. Unfortunately, with all of the benefits it provides, increased technology use also increases security risks. This year, and going forward, investors want to see that cybersecurity needs to minimize those risks are a part of both the company’s financial planning and overall strategic business decisions. Companies should be prepared with additional board oversight and disclosure on these matters.
Virtual Shareholder Meetings
As shareholders and directors adapted to virtual life last year, many began the process of permanently leveraging the methods used, and their associated efficiencies, post-pandemic. Most of what is emerging is some form of a hybrid model, where at least one annual meeting remains virtual, along with other smaller meetings, while other meetings transition back to face-to-face.
Barker Associates has extensive experience in corporate governance issues, especially as they pertain to financial considerations and investor scrutiny. If you need assistance, or have any other questions, please click here to schedule a 30-minute consultation at a rate of $100.
A Review of Month-End and Quarter-End Best Practices Streamlining Processes Before the End of the Year
As we approach the end of the third quarter, it’s time for more than all things pumpkin spice, falling leaves, and cooler temperatures. For CFOs, it’s also time for quarterly financial reviews and audits. The third quarter is particularly relevant because as we near year-end (for calendar taxpayers), we want to ensure that our financials are in order for any strategic planning and budget planning needs for the new year.
Quarter-End is Also Month-End
Just because it’s time for a quarterly review though does not mean it’s time to put aside our normal month-end review. As a reminder, best practices for month-end financial and accounting tasks include:
Reviewing the general ledger.
Reviewing the balance sheet and profit and loss statement.
Reconciling balance sheet accounts.
Running budget comparisons
Running prior year comparisons.
Reviewing monthly bank reconciliations (particularly for any checks that have not been cleared or any suspicious activity).
Ensuring all bills are current by reviewing Accounts Payable.
Reviewing Accounts Receivable aging.
Reviewing any investment activity.
With regard to specific quarter-end reviews, actual wages paid should be reconciled with any Form 941s that are issued. We always advise our clients to be especially cognizant of any adjustments that need to be made prior to the filing of the annual Form W-2, Wage and Tax Statement. Board and committee minutes required for annual audits should also be approved and filed at this time, and any scheduled quarterly audits conducted. Given our “new normal,” many companies are also taking a closer look at their financial technology at the end of each quarter. With more businesses operating virtually, ensuring your company has the most up-to-date technology and accessible systems is crucial to conducting business efficiently.
Streamlining Closing Processes
While there is no doubt that much needs to be done during a month- and quarter-close, there is always room for improved efficiency in the processes. These closing procedures should not be days upon endless days (or weeks) of analysis of every small detail, particularly when those details have no impact on the company’s big picture or leadership’s decision making. Making this process longer than it has to be costs not only time, but also money.
Leadership needs timely information to effectively run the business. Efficient month-end and quarter-end close processes not only increase timeliness, but also improve controls, and reduce risks. Streamlining these processes gets information to leadership faster for smarter decision-making. Streamlining can include:
Set a goal for a 3-5 day close (yes, it can be done).
Gather a team for the closing process with clear directions and goals. Make sure everyone is in alignment and clearly understands what is expected of them pre-close.
Prepare a detailed close schedule. This should be reviewed at the pre-close meeting.
Conduct a post-close meeting to review what could have been done differently to improve the process.
Continuously implement those improved procedures in future month and quarter closes.
After all, time is money, and no one knows that better than the CFO. Barker Associates has extensive experience in helping companies streamline their month- and quarter-end closes. If you need assistance, or have any other questions, please click here to schedule a 30-minute consultation at a rate of $100.
The Pandemic’s Larger Impacts on Financial Reporting It’s About Much More than a Loss of Revenue
Many people incorrectly assumed that the pandemic’s only true effect on a business’s financials was a loss (albeit often significant) of revenue. And while that assumption is not even necessarily true of every business (many did very well), Covid-19 impacted much more—not just financial performance, but also position, cashflow, and balance sheet accounts. There have been impairments to goodwill and other intangibles, effects on inventory, a change in how and when audits are conducted, and impacts to overall company strategy and goals. And these impacts are especially challenging for a company in the growth phase.
If your company is in the growth phase, it’s crucial to think about your options, understand your needs and, more significantly, how they have changed since the pandemic, what numbers are required, and to develop a new strategy. Companies in the growth phase are experiencing positive cash flow. With this increase in cash, they have the ability to repay debt, and are in a better position to seek additional capital from investors to expand their market reach. However, if the CFO hasn’t been carefully monitoring the pandemic’s impact on all aspects of the company’s financials, they likely don’t have their reporting in order to even approach potential investors.
Changing Financial Needs Means Increased Financial Monitoring
We learned fairly quickly in the beginning of the pandemic that liquidity is key to keeping a business from closing its doors in a crisis. The question that plagued many was how to increase liquidity with revenue decreasing? But those CFOs were often only considering pre-pandemic needs and observations, not the changing needs of the company in the midst of the pandemic. Auditors have noted that many accounts, including sales, inventory, and bad debt have been affected, as well as production and distribution.
First, these changing needs require a change in financial monitoring. Cash flow projections and other assumptions used to measure financial instruments pre-pandemic should be adjusted to reflect your company’s new reality. Remember that a majority of businesses have been affected in one way or another, but if that results in their lack of ability to pay you, you’re going to incur additional credit and liquidity risks, increased bad debt, and write-offs.
Cash Flow A careful analysis of your company’s cash flow can help. Some questions to consider about revenue include:
Are accounts receivable being paid?
Are past due accounts being followed up on?
Are late payment fees and interest being charged to customers (your money should not be free)?
Do you need to offer pre-payment discounts?
Should you look at retainers/deposits?
Do you have the capability of setting up auto-payments?
Of course, we can’t consider cash flow without considering expenses. And while there will be a decrease in some, there will be an increase in others. At a minimum, consider the following questions:
How have your office needs changed?
Do you have the ability to downsize?
How much are you saving due to decreased meal and travel expenses?
Where are these savings being utilized?
How much more are you spending on technology expenditures to maintain communications with staff and customers/clients?
Balance Sheet Accounts
Additionally, other balance sheet accounts have also been affected. One issue that warrants attention if you plan to seek outside funding is inventory needs and accessibility. With productivity and supply chains being disrupted, it may be difficult to allocate costs to inventory. There is also the issue of inventory that cannot be delivered because of travel restrictions. This also plays a significant role in the larger economic impact of decreased supply and increased demand, resulting in higher prices going forward.
Goodwill, post-retirement plans, and internal controls are other accounts/issues that require an in depth look at your financials and a pivot in business strategy, as we slowly climb out of this pandemic.
If you’re still waiting for things to get back to “normal,” and analyzing your financials based on pre-pandemic assumptions, you are not doing your business justice. You may think you have enough cash on hand or that expenses are timely being paid, but without meticulous monitoring and a true long-term plan based on our new reality, you cannot forecast or grow to the next level.
This can be overwhelming. But pivoting in your financial planning and forecasting is necessary. Barker Associates has extensive experience in financial statement analysis, plans, and forecasts. If you need assistance, or have any other questions, please click here to schedule a 30-minute consultation at a rate of $100.
Embracing Negotiations in Leadership How to Break Through Hesitation and Negotiate Your Best Solution
Negotiations are a crucial part of corporate strategy, but not (as some may think) merely for high-stake deals, such as mergers and acquisitions. In fact, leadership frequently requires negotiation on nearly a daily basis. And good leaders understand that negotiating is a skill that needs to be developed, just as with any other leadership attribute. Yet, many avoid it unnecessarily … and often, detrimentally. They tend to be more concerned about the objections and perceived conflict they believe negotiations brings about than with the feasible solutions they uncover. Some feel they lack the confidence to ask for what they want or need.
Underlying all of these concerns is age-old fear, and in particular, fear of failure or rejection. This is the fear that likes to stop us in our tracks, causing us to hesitate in the belief that we are safer that way. And, as we all know, the only way to grow and truly get what we want is to push that fear aside and get comfortable with being uncomfortable.
In addition to the uncertainty and fear that can arise in preparing for negotiations, the pandemic has also actually affected how we negotiate. Non-verbal communication and body language are important elements in connecting with others, especially during negotiations. However, with the increase in virtual negotiations, our view of the other person is restricted to computer screens or smartphones. Without the ability to fully see a person’s body and, more specifically, his or her subtle movements, it becomes more challenging to anticipate their acceptance or objections and proactively work toward solutions. But while their individual preferences and comfort levels may be more difficult to ascertain, they are not impossible if we remain mindful of them throughout the process.
Finding Opportunities to Negotiate
If you find yourself shying away from negotiations, it’s time to start thinking about why, and recognizing the numerous opportunities that surround you each day to do so. Like any skill, it takes practice and development. Utilizing average encounters will increase your confidence as you move into negotiations with higher stakes. Even asking for a discount on an item you are purchasing and asking your cell phone service provider for a better rate are, in fact, negotiations.
One could argue it’s not worth the effort or the time to engage in these activities, but that’s the fear talking again. Even if you don’t care about saving a few dollars at a store, the investment in building your negotiation skills and confidence is invaluable. Avoiding negotiations in these “not worth it” circumstances leads to avoiding them in other “very worth it” ones.
Going into any negotiation, you can also hone in on your skills by considering the following questions:
Is the situation fair?
Do I deserve a better outcome than the one I have been offered?
Am I feeling hesitant or confident?
How can I connect with the other person to come to a better resolution?
Tip 1: For in-person negotiations, pay close attention to the other person’s body language and try to anticipate and address objections before they ask them.
Tip 2: For virtual negotiations, take the pulse of the other person often. Repeat what they’ve said to ensure you are understanding correctly. Ask them if they have any questions throughout, and pay attention not only to their words, but to their tone.
How can I cultivate the relationship?
How can I close the deal?
Negotiating is really about making the conscious decision to do so, rather than avoiding it all together. Be mindful about recognizing and evaluating the potential for negotiations and that it may look a bit different today than it has in the past. But underlying it all is always relationships, confidence, and the mindset to put yourself in a position to strategically approach the deal. Ask for you what you want, be fair, work through the objections, and get better outcomes.
As with any skill, the more you practice – even with “low-stake” negotiations, the stronger your skills will become. If you need guidance, Barker Associates has experience working with CEOs on negotiation strategies and skills, particularly with finances, lending, and mergers and acquisitions. If you need assistance, or have any other questions, please click here to schedule a 30-minute consultation at a rate of $100.
The Real Costs of Deal Fatigue How Not Being Prepared for the Deal can Cost You the Deal
Deal fatigue is a common occurrence in the world of mergers and acquisitions. The parties involved get frustrated with the process and feel helpless that they can do anything to speed it up. Frankly, they’re fed up, and as negotiations or other processes necessary to close the deal seem to have no end in sight, one of both parties loses hope and wants to give up. For example, oftentimes, the timeframe between a Letter of Intent and the close of the deal takes too long and can result in one or more of the parties deciding they want out of the deal.
The High Costs of Deal Fatigue
The costs of deal fatigue are high and the complexities many. Not only has the company lost the proposed deal and any related funding, but there are many other associated costs of the deal falling apart, including:
Attorneys’ Fees. The funds used to pay attorneys and consultants have added up over the months (or even years) and can no longer be paid from the closing proceeds.
Impact on Operations. With the pending deal, the C-Suite has been distracted by answering due diligence questions and negotiations. And, as a result, they have not focused on the core day-to-day responsibilities of the company’s operations. This could impact many success metrics, such as ensuring customer satisfaction, building the proper pipeline of sales, managing personnel, and regularly reviewing financial data.
Personnel Problems. There is also the potential loss of personnel if they had learned of the pending transaction and decided to pursue another career opportunity. The costs of recruiting and onboarding are always high, but this has never been truer than in today’s environment, where the costs of losing personnel have skyrocketed.
Lack of Preparedness and Its Effect on Deal Fatigue
The root cause of deal fatigue is a lack of preparedness. This can begin years prior to the idea of entering any transaction whatsoever. Decisions that are made, and processes put in place, that are not healthy for the day-to-day organization can impact the company’s ability to complete a transaction. The following are a few far too common examples:
Lack of organization of legal documents and contracts. Unfortunately, this is a huge issue that has gotten worse in the digital age. Years ago, businesses would have filing cabinets full of documents, along with administrative personnel who managed those documents. There was a clear-to-follow process to make sure all contracts were executed and fully completed prior to being added to the filing cabinets.
In contrast, contracts now reside in emails and other cloud-based storage systems. They may have signatures, or they may not. In fact, most of the due diligence processes I have gone through over the past eight years are held up because the “completed and executed” contracts are not readily available or the parties involved thought the documents were executed and find that they never were.
Financial statements are not up to date and do not reconcile to the billing and sales data. The ease of use of some modern cloud-based accounting systems combined with the fact that most personnel are not taking the necessary time to reconcile as often as they should lead up to outdated, unbalanced financial statements. Imagine going into a deal only to find that their representations are based on unfounded financial principles? This could not only cost you the deal, but your reputation, credibility, and integrity. There is simply no negotiating around outdated financials.
The best way to avoid deal fatigue is to be prepared in every aspect of your business and the deal itself. This will help each step move along faster and more efficiently, reducing the overall time of the transaction. If deal fatigue starts to creep in, remind everyone involved about the mutual advantages and the reasons the deal was struck in the first place. Keeping a clear vision of the big picture helps to avoid getting stuck on the smaller details.
Are you about to go into negotiations or already experiencing deal fatigue? Barker Associates can help keep the parties and the deal on track. If you need assistance, or have any other questions, please click here to schedule a 30-minute consultation at a rate of $100.
We have collectively experienced unprecedented times. As CEOs and CFOs, we seem to be writing the playbook as we go. Over the past eighteen months, survival mode has become the norm rather than the exception, as we navigate the turbulent waters of each day. Yet, we all realize we can’t survive in survival mode for extended periods of time. In doing so, we are only looking at our immediate requirements and needs to get by, not our long-term goals and needs to thrive.
When we operate only in the day-to-day, as survival mode requires, we tend to overlook the basics when it comes to our businesses, and specifically, our financials. But truly getting back to basics is the only way to support the long-term strategic growth of the business. And when it comes to basics, you can’t get much more fundamental than a business plan and an annual budget.
Basics #1: The Business Plan
You may be thinking this is Business 101 and you’re beyond it, but you’d probably be surprised (or maybe you wouldn’t be) at the number of businesses that do not have any business plan whatsoever. A business plan is much more than something that has to be checked off your never-ending to-do list. It not only helps you create an effective strategy for growth, but also helps you determine your future financial needs, including the need for investors and/or lenders.
According to the SBA, the importance is clear. “A good business plan guides you through each stage of starting and managing your business. You’ll use your business plan as a roadmap for how to structure, run, and grow your business. It’s a way to think through the key elements of your business.”
Additionally, if you plan on seeking funding, business plans play a crucial role. “Business plans can help you get funding or bring on new business partners. Investors want to feel confident they’ll see a return on their investment. Your business plan is the tool you’ll use to convince people that working with you — or investing in your company — is a smart choice.”
In thinking about the execution of a business plan, too many owners or leaders get stalled on the format itself. However, it’s important to remember there is no right or wrong way to develop a business plan. Regardless of how many pages or the font used, the most important takeaways are that it clearly lays out your product or service, identifies your target market, and details your strategy for reaching that market, including the financial needs and requirements on both a short- and long-term basis. While this past year has shown us that we cannot fathom every possible scenario that could impact our business, developing a robust plan is one way to prepare for as many contingencies as possible and help ensure the company’s success.
Basics #2: Annual Budget
While twelve months from now may feel like it may as well be twelve years from now, it is imperative to have a strong annual budget. The annual budget should also be able to be broken down into months for easier monitoring. At a minimum, your annual budget should include the following:
Balance Sheet, and
Cash Flow Statement.
Most businesses are familiar enough with income statements – they can clearly see the revenue coming in and the expenses going out. This is undoubtedly important, but it does not prepare you for your working capital needs. Essentially, you need to know how much you actually require to run your business. In order to truly understand those requirements, an accurate balance sheet and cash flow statement are needed. For example, if you have inventory on your balance sheet, you will need to project the use of cash to purchase that inventory. An income statement will not help you with that.
Nearly every decision you make today can impact your cash flow tomorrow. For example, I once worked with an organization that had double-digit growth each year and was very profitable. The company was getting ready to launch a second product and had offered extended payment terms to customers on their entire order if they added the new product to their order. This may have been an impactful customer service move; however, it was quite the opposite for generating the cash flow needed to pay the vendor. No one had projected the impact this decision would have to their balance sheet and cash flow, so they were unaware that the plan they had in place was going to essentially stop incoming cash. We had to react quickly and manage cash just to meet payroll and other immediate obligations. Simply, this stressful time could have been avoided entirely if the company planned appropriately with a balance sheet and cash flow statement.
While the responsibilities and priorities of a CEO or CFO may vary depending on the company, the need to get out of survival mode and back to business basics is the same for everyone. The common denominator of these basics is that they require you to look ahead and make forecasts on the future of your business – the very opposite of survival mode. Barker Associates has extensive experience in developing business plans and annual budgets that are appropriate for the specific business involved. If you need assistance, or have any other questions, please click here to schedule a 30-minute consultation at a rate of $100.
Cybersecurity – It’s Not Just a “Big Business” Problem
Cybersecurity is a word we’ve all become entirely too familiar with. It seems that we can’t turn on the news without hearing about another story of a company being hacked, its information stolen, and, in certain instances, its data being held for ransom. And despite what some continue to think, this is not just a “big company problem.” It affects small and mid-sized businesses just as much, if not more. In fact, according to the Verizon 2019 Data Breach Investigations Report, 43% of cyberattacks target small businesses.
There’s a reason for this targeting. Small businesses tend to have more exposure, without the protections in place to help minimize the risks of a cyberattack. Not only are they more prone to attacks, for small business with limited resources, an attack can prove to be fatal. Sadly, 60% of small businesses that experience a cybersecurity attack are out of business within six months. The reason? Too often, they don’t have a viable backup system or plan, so when they lose their data, it’s gone for good.
According to a U.S. Small Business Administration survey, 88% of small business owners believe their business is vulnerable to a cyberattack. With the increase in remote workers without infrastructure for cybersecurity or employee training on increased risks due to the pandemic, this high percentage is not surprising.
Other Costly Statistics in the World of Cybersecurity
The most common way attackers infiltrate your system in through email. We’ve all seen them. They look like legitimate emails at first glance, but then there is something that catches your eye – the email address may be off, it may be asking you to click on a link, or it has an attachment that doesn’t seem right.
Whether it’s through an email or through ads or pop-ups on the web, when you click on that document, link, or ad, the virus that was embedded launches a program on your computer that will start locking files. If you’re connected to a network (which many of us are), the virus then travels to the server and infects files there and on other connected computers. Once it starts, it cannot be reversed, and you may not even be aware it is happening. Often times, the attacker will wait, lurking in the background, to collect as much valuable information as possible.
What You Can Do to Protect Yourself
Despite the news stories and all the warnings, many small businesses are not prepared for a cyberattack. While we can never eliminate the threat completely, there are actions we can take as part of an overall strategy to minimize the risk:
Ensure your computers and servers have a strong firewall
Keep all hardware and software up to date
Install all updates and patches
Use stronger passwords and change them frequently
Use Multi-Factor Authentication (MFA)
Do not allow users to download unsupported or free software
Back up all critical data and systems regularly
Have a backup plan in place
Invest in Cybersecurity insurance
Educate your employees
Raising awareness among employees is one of the most important steps you can take. Continuously inform them about what the latest threats are, remind them about updates, and remind them not to open emails if they don’t know who the email is from. Use real-life scenarios and samples of phishing emails to help them understand the threats.
With these tools and systems in place, you not only minimize your risks, but if you are attacked, you will be able to get your company back up and running much faster than if you didn’t.
As they say, the world is changing, and, as always, we need to change right along with it. The key, as with much in business, is being prepared, understanding your own particular vulnerabilities, and taking proactive steps to help ensure your safety and the safety of your business.
Barker Associates has extensive experience in helping companies navigate through all the complexities of running a successful business, including utilizing resources to help keep it safe. If you need assistance, or have any other questions, please click here to schedule a 30-minute consultation at a rate of $100.
Acquisition Integration – After the Ink Dries The “3 Ps” of Integration
Last week, we talked about defining your corporate strategy, and that oftentimes, those strategies include acquisitions of other entities for your company to grow to the next level. Whether it’s to streamline operations, introduce new products or services, or both, many companies define their corporate development strategy within the parameters of an acquisition.
There has been a shift in our global economy. And in that shift, acquisitions have become the norm, not the exception. Yet, according to Harvard Business Review, historically, 80% of companies that have been involved in an acquisition fall victim of the plethora of moving parts essential to the process and ultimately fail. Combining not only two companies, but two sets of stakeholders is fraught with potential landmines.
This week, we take the acquisition strategy a step further. The inevitable questions surface after the ink dries on the legal documents … How do we increase the chances of success? What exactly happens now that we’ve acquired another business? The due diligence is complete, the documents are signed, the lawyers have left – so, what’s next?
Acquisition integration is the process of combining the systems, process, operations, and personnel of the acquired company into your own by maximizing synergies and efficiencies. Logistically, the integration itself should be focused on what I like to call the “3 Ps” of Integration – Personnel, Plan, Practices.
Acquisition Integration – Personnel Issues
Appoint an Integration Manager and Team. The integration manager should have seniority and experience with your company, and be able to hold the team members accountable. The integration will be his or her full-time responsibility for as long as the process takes. The team should be made up of those with expertise in the various areas of integration, including information technology, operations, finance, and marketing.
Communicate the Good … and the Bad. Meet with those you plan on bringing onto the new team from the acquired company as soon as possible. Without some reassurances that they are staying, they will soon look elsewhere for career opportunities and may consider offers from competitors. For those who will not be moving forward, let them know quickly. This is for your own benefit, as much as their own. Indecision will lead to rumors, which inevitably paves the path to a lack of morale – no way to start a new venture.
Focus on Cultural Integration. Decide how much of the acquired company’s culture you are bringing into your own. Will they mesh? Are their conflicting values? What are the priorities on each side? Culture will have a huge impact on the new relationships going forward.
Acquisition Integration – Plan Issues
Develop and Follow a Conversion Plan. The conversion plan should incorporate all of the changes that need to be effectuated, as discovered during due diligence pre-acquisition. Additionally, understand who is responsible for each task and goal, along with applicable due dates. The manager and team must be held accountable to the conversion plan.
Modify the Plan as Needed. Through the integration process, additional opportunities may be discovered. Modify the plan accordingly to adjust for these opportunities, including the required resources, and communicate any changes to the team.
Use Metrics Consistently to Measure the Plan’s Success. Measure everything you are doing as it relates to the integration. Compare actual results to those anticipated, including timelines.
Acquisition Integration – Practices Issues
Identify Best Practices. Determine if the acquired company had practices that worked well and could enhance your own operational practices. If they bring value, develop ways to incorporate them into your own. Then, as always, communicate these Best Practices to the rest of the team.
Evaluate Practice Similarities and Differences. What services, products, and operations are the same? Which ones are different? Are there overlapping vendor practices or relationships? Which parts of the accounting and marketing are complementary? Which are contradictory?
Provide and Receive Feedback. Ask yourself the following: What went well with the integration? What didn’t? What are the expectations moving forward? Provide this feedback to the team. Additionally, accept any feedback provided to you and use it for improvements going forward.
Focusing on the “3 Ps” in acquisition integration is crucial for the long-term success of your business post-acquisition. Barker Associates has extensive experience helping companies with acquisition integrations. If you need assistance with yours, or have any other questions, we can help. Please click here to schedule a 30-minute consultation at a rate of $100.
Defining Your Corporate Development Strategy How to Navigate from Where You Are to Where You Want to Go
Typically, when you get into your car, you have a destination. You’re going somewhere and you know how to get there (or you have your smartphone or navigation to help you along the way). You don’t get into the car and sit there wondering absentmindedly about what you should do next (put the key in the ignition, put the car into gear) or where you should go (a quick trip to the store, a commute to work, or a longer road trip to a vacation destination). Rather, you know what your next steps are to take you where you want to go.
We’ve used this analogy before in our financial literacy series, but it holds true here just as much. Running a company is very similar to driving a car. You need to know the steps you need to take to get started, where you are going, and of course, how you will get there. Without them, much like as a driver, you will soon find yourself lost. And, with a company, you not only have to worry about yourself getting lost, but all of those others (staff, clients, vendors, partners) following close behind. It’s important to navigate and lead them along the right path, or, as I like to call it, your corporate development strategy.
What is a Corporate Development Strategy?
A corporate development strategy is best described as an actionable plan for your company. There are different strategies (or routes) you can take—Stability Strategy, Expansion Strategy, or Growth Strategy, to name just a few. And while they all will take you in different directions depending on the goals you have for your company, they all have the exact same foundation—understanding your financials, both current and future projections. Without a clear understanding of your revenue, expenses, and other financial data, it would be difficult to define your strategy based on where you want to drive the company in the future.
As you begin to define your own corporate development strategy, it’s important to put aside some common debates and confusion. Corporate strategy is not corporate finance (although it will always incorporate finance). Corporate strategy is also not business strategy. Like the distinction with finance, they are close, but distinctions abound. Business strategy deals specifically with how you are going to achieve your goals. Corporate strategy is more all-encompassing—it includes not merely your annual goals, but a clear overall strategy on where the company is going with well-researched answers to questions, such as:
Where do you want your business to be in terms of revenue in ten years (not three or five, as most business project)?
Note: This should be realistic, but not conservative.
What will it take each year to get there?
Who is in the competitive landscape?
How will you compete?
What are barriers to where you want to go?
Should you introduce new products/services? Should you remove any products/services?
If so, when?
If so, should you acquire another company with experience in that space?
Are their potential partners or suppliers in which you can outsource some of your operations?
How do you optimize productivity and profitability?
Do you need new technology?
Should you acquire a company with expertise in that technology?
Dig Deeper than a SWOT Analysis
This list in not all-inclusive, but should give you an idea of the scope of the due diligence required. Small companies often will think about some or all of these questions during an annual review (if they have one – let’s hope they do) where they dust off their white board and do a typical SWOT analysis. But a true corporate development strategy will dive much deeper than a four-section chart detailing the somewhat generic strengths, weaknesses, opportunities, and threats of a small business. To grow beyond a small business, there needs to be much more than the contents of four cubes on a whiteboard.
A successful corporate development strategy may include diversification, where a company acquires or establishes a business other than that of its current product. It could also include horizontal integration, where there is a merger or acquisition of a new business, or a vertical integration, which includes the integrating of successive stages of various processes under single management.
Many, but not all, corporate development strategies focused on growth will include a merger or acquisition at some point. It’s often the best way to truly grow your business to the next level. But it always begins with a decision made as you define the right corporate development strategy for your business.
Putting the appropriate strategy together is crucial for the long-term success of your business. If you need assistance defining your business’s future, or corporate development strategy, or have any other questions, Barker Associates can help. Please click here to schedule a 30-minute consultation at a rate of $100.