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.
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.
Finding the right investor, who is interested in your company and you, begins long before you actually may need money. Preparations include thinking about businesses that investors want to invest in and then modeling yours accordingly, maintaining up to date financial data, and building a strong consumer base. Once you’ve made the decision to search for capital to grow your business, you create two pitch decks (yes two), and the clock is now ticking. Your goal should be to secure funding within three months from making this decision. And the best way to do so is to have targeted contact list.
First, Some Introspection
Before you can ask anyone for money, you should first ask yourself some important questions. First and foremost, why are you raising money? Be very clear as to why you are doing so, why now is the time, and what the funds will ultimately do for your business. These answers should be weaved into the fabric of your business’s story and included in your decks and any accompanying materials you may present to potential investors.
You should also do a check on your core values. Are they aligned with the company’s vision and mission? Are they still as relevant as when you developed them? Are changes needed? Only when you are confident in what you stand for can you try to find someone who shares …
Who Should be on the List?
Your targeted list may include any combination of some or all of the following: family and friends, angel investors, angel groups, venture capital firms, private equity firms, and corporate investors.
Gather data by performing research on Crunchbase or Pitchbook, and simply networking with others. You should identify vertical industries to see what is happening there. Startup accelerators are also an invaluable resource. Follow groups on social media to see what they’re talking about and what they’re interested in.
Keep in mind that you are not just looking for money. You are looking for someone (or a group) who shares your values, will be excited about what you offer, and who fits with what you do and who you are. Identify who has money and is actively investing.
Factors to Consider in Building Your Contact List
Industry. Who is investing in your industry? Why? Is there some personal connection or is it just about the potential profit? Note that those interested in one particular type of industry often have a background, experience, and connections that can help your business.
Location. Some investors want to be close to the businesses they are investing in. Others give preference to local startups. It’s important to understand if this is a priority for them.
Amount. How much do they typically invest? Some may invest only smaller amounts than what you are looking for, whereas others may invest amounts that are larger that what you need. Ensure there is a good fit.
Longevity. Are they looking for long-term or short-term relationships? Will they be involved for your next round of fundraising or will they want out before then?
Track record. How many successful exits do they have? How many businesses they’ve invested in have failed?
Value. What value do they bring? Investments into a venture are rarely just about money. Do they have operational experience? Industry experience? What are their connections and network? Will they provide advice based on their knowledge and experience? All of this will factor into how quickly you scale.
This process is about targeting the right types of investors, focusing on quality over quantity. You want the best fit to bring the most value. As is with much in business, and life, it is about networking and cultivating relationships.
Once you’ve identified some strong potential investors, gather as much contact information as possible, including email, social media accounts, website, phone number, and address. Understand that they will want to see your pitch deck to determine if it is a good fit with their investment thesis before moving forward. Being prepared sets the right expectations from the start.
Your list should be an ongoing concern. Contacts will fall off and new ones will be added. By keeping it up to date, you can ensure that you will be ready for each round of funding in the future.
Your most limited resource is your time. And the time you spend finding investors is less time you have to focus on operations, marketing, or sales. Protect that time fiercely by targeting the right investors from the start. With increased focus comes increased efficiency and clarity on what and who you really need. You may need to talk to 100 or more contacts to get some interest, but you don’t want it to be thousands. That’s where your targeted list comes into play. So you’re not spending too much time and energy and burning out before the right person comes along.
Ultimately, if you need money for your business, you need people to pitch to and the more targeted your list, the more possible yeses you’ll have, and the greater ROI on your time.
I have the distinct pleasure of participating in the Seattle Angel Conference as an Angel Investor. This virtual event is May 12th, and I am thrilled to be involved. The mission of the Seattle Angel Conference is to create stronger startups and more effective angel investors with a “Learning by Doing” approach. Through this approach, the angel investors provide invaluable benefits to participating entrepreneurs.
Angel Investors vs. Venture Capitalists
With all of the excitement surrounding the Seattle Angel Conference, I thought it was a good time to point out some of the differences between angel investors and venture capitalists. Before a company can determine which type of investment is for them, it’s important to understand the distinction between the two.
An angel investor provides a large cash infusion of their own money (or a group’s money) to an early-stage startup. Working with an angel investor benefits the entrepreneur through the wealth of knowledge and experience the investor possesses and is ready to share. Most have earned a substantial amount of wealth through entrepreneurship, and have experience with the exact same processes, preparation, and questions in the past. They can guide the entrepreneur through all of the bumps in the road, as they build their company and success.
On the other hand, a venture capitalist is a professional group that invests money into high-risk startups or developed companies because the potential for rapid growth offsets the potential risk for failure. While they may still offer support and guidance, the transaction is mainly one of larger sums of money and more control over the venture going forward.
While both angel investors and venture capitalists invest money in start-ups, here are three of the major differences between them:
How they work. Angel investors work alone (or in small groups), while venture capitalists are part of a larger company of professional investors. Angels invest their own money, while venture capitalists invest money from various funding sources.
The amount they invest. As a general rule (and there are always exceptions), angels invest less than venture capitalists. Angels will usually invest somewhere between $25,000 and $100,000 (angel groups could be much higher – up to $750,000 or even more). Venture capitalists generally invest millions of dollars per company.
The timing of their investments. Angels only invest in early-stage companies. Venture capitalists invest in both early-stage and more developed companies, as long as there is a proven track record showing strong indications for rapid growth.
Accreditation for Angel Investors
Many angel investors, but not all, are accredited according to guidelines established by the Securities Exchange Commission (SEC). To be accredited, the angel investor must have:
annual earnings of $200,000 per year for the past two years, with a strong likelihood of similar earnings in the near future (if the angel investor files taxes jointly with their spouse, their required annual earnings increase to $300,000) or
have a total net worth of at least $1 million (regardless of marriage and tax filing status).
Seattle Angel Conference
The Seattle Angel Conference provides education for the companies that participate, completely free of charge. The education experience alone is invaluable, allowing exposure to many professionals with a depth of knowledge to help build a company with the right attributes to move to the next level. As an investor-led event, the conference connects entrepreneurs and a collection of new and experienced angel investors, who truly are everywhere. Each investor contributes $5,500 to create a fund, estimated to be between $100,000 and $200,000.
Applying companies participate in a company review, during which the angel investment committee sorts the documentation, looking for key components of investment. This ongoing review and due diligence strengthen the entire process. In the end, six companies are chosen to present their ten-minute pitch at the final event on May 12th to get a chance for funding and a more thorough review by the investment program.
The participating startups not only receive a detailed review of their company, but also the opportunity for valuable feedback from the investors, who are often seasoned entrepreneurs themselves. While many entrepreneurs want to avoid the “tough questions,” it is only through those difficult questions that the company’s narrative increases in clarity and strength. In addition, these entrepreneurs get introduced to dozens of angel investors through the process. While they may only end up working with one of them, building that network is a huge benefit – you never know whose path you will cross in the future.
For me, personally, I have loved participating as an angel investor, as it inspires me to learn about the innovative ideas of early-stage companies. I enjoy having a pulse on what is happening in various industries and what is next through these inventive entrepreneurs. All angel investors have the opportunity, and are expected, to participate in the process, including review, analysis, and due diligence. The collaboration of investors with diverse backgrounds and experiences helps bring about a better investment decision.
Click here to purchase a ticket to this thought-provoking, inspiring virtual event and learn more about angel investing and the companies that need it. If you would like to discuss angel investing, either as an investor or as a company that requires funding, or if you have other specific areas of concern, please click here to schedule a 30-minute consultation at a rate of $100.
Celebrating International Women’s Day The Past, Present, and Future of Women Leaders and Founders
“We need women at all levels, including the top, to challenge the dynamic, reshape the conversation, to make sure women’s voices are heard and heeded, not overlooked and ignored.” – Sheryl Sandberg
Yesterday, we celebrated International Women’s Day, highlighting the accomplishments of social, economic, and political achievements of women around the world. It’s no coincidence that we celebrate this day as a part of Women’s History Month. How can we celebrate the achievements of today and look forward to the progress of tomorrow, without acknowledging the determination and sacrifices of the past? While there is no shortage of influential women leaders today, they stand on the shoulders of hundreds of others who paved the way.
A Look into the Past
Unfortunately, we cannot list every courageous woman leader from the past (not to mention those we each have within our own families and friends), but here is a celebration of a few, intended to honor all:
Sojourner Truth, after being born into slavery and escaping with her infant, became an abolitionist and women’s rights activist. She later became known for her “Ain’t I a Woman?” speech regarding racial inequalities in the year 1851.
As a young girl, Louisa May Alcott worked in the mid-1800s to support her family financially, something unheard of at the time. She later wrote “Little Women,” one of the most treasured novels in American history.
In the mid-1900s, Marguerite Higgins became the first woman to win a Pulitzer Prize for Foreign Correspondence after working as a war correspondent for the New York Herald Tribune during WWII, The Korean War, and the Vietnam War.
Rosa Parks became one of the most famous, influential women of the civil rights movement when, in 1955, she refused to give up her seat on the bus to a white man. Today, she’s known as the “Mother of the Freedom Movement.”
Sandra Day O’Connor was the first female justice on the Unites States Supreme Court (1981-2006).
The list, of course, goes on in all government and private sectors, industries, and facets of life. These women and thousands more played prominent roles in advancing women to where they are today. And, as we celebrate women this month, we share in our gratitude for them all.
The Here and Now
There is no doubt that progress continues for women leaders and founders. There have been great successes in the government, sports, finance, and corporate worlds. Women are breaking records every day, but there is still a long way to go. In 2019, the proportion of women in senior management roles globally grew to 29%, the highest number ever recorded (same percentage in 2020). On the one hand, we love breaking records. On the other, at only 29%, there is much room for improvement and many more glass ceilings to crack.
The gap doesn’t just exist within the boardroom. It is also very apparent in female founders and funding. We need improvement in women led companies locating and securing the funding they need to scale their companies.
While there was already a significant gap in funding, according to Crunchbase, global venture funding to female-founded companies fell further in 2020. Whether this is the result of COVID-19 is unclear; however, there is data that suggests the pandemic has disproportionately impacted women in the workforce.
Through mid-December, 800 female-founded startups globally had received a total of $4.9 billion in venture funding in 2020, representing a 27% decrease over the same period in 2019.
Optimistically, early 2021 Crunchbase data shows improvement. In fact, 30% of investments in U.S. companies at Series A and B stage between January and mid-February went to teams with female or Black founders. While it is a brief study period, this trend is worth watching over the coming months.
Overall, while female entrepreneurs are still far underrepresented in startup funding tallies, at least there are some signs of, and initiatives to, continue that progress. In fact, there is a new target set by All Raise (an organization that advocates for female investors and founders) of growing seed and early-stage funding amounts from the current 11% to 23% by 2030 for U.S. companies with a female founder.
Tomorrow
So much has been accomplished, yet, it’s clear we still have a long way to go. According to the World Economic Forum, global gender equality is not estimated to be achieved until 2133. So, as we celebrate the great women leaders of yesterday and today, we do so with an understanding that thousands more women will be standing on our shoulders tomorrow. And the forward momentum that is women’s leadership continues on.
Are you a woman founder looking for funding? Are you ready to be a part of that 23% target? Schedule a free 30-minute consultation with this link to my calendar to talk about how we can work toward getting you the investment money you need.
Lately, we’ve been talking a lot about pitching investors. We talked about the importance of your story coming through loud and clear and why you need two pitch decks. And with all this “talk,” it now comes down to your actual words.
You have a limited time to tell your story and make the best impression. Knowing what will resonate with potential investors, and perhaps, more importantly, what will not resonate with them, can make all the difference in whether you receive funding. Even if your pitch deck is perfect, it can easily be derailed by poor word choice. How you choose your words says a lot about you, your views on your business, and how you would fare as a potential partner.
Overall, your pitch will tell your story, including information about the problem (briefly), target market, revenue or business model, early successes and milestones, customer acquisition, team, financials, competition (briefly), funding needs, and exit strategy. As you’re talking about each, there are words and phrases you should avoid, as what the investor hears when you say them will be entirely different than what you intend. Take the following chart as an example of some of those situations.
No one can do it alone. This person will burn out.
No competition
No market or you have not done your research
“No brainer”
Arrogance
Guarantee
Amateur – there are no guarantees in investing.
Any word or phrase you cannot explain well
Unprepared
A Quick Note on Buzzwords
People tend to use them because they think it will make them sound like they know what they’re talking about. But those people aren’t fooling anyone, particularly sophisticated investors. A “buzzword” is defined by Merriam Webster as “an important-sounding usually technical word or phrase often of little meaning used chiefly to impress laymen.” By the definition alone, you should see why you should exclude them completely. You want to impress the investors (who are not laymen) the right way – with legitimate numbers and proven strategy, not by trying to sound impressive.
Powerful Words/Phrases that Strengthen Your Story
Instead of the above words and phrases, focus on the following powerful ones that show you mean business:
Customer Acquisition Cost (CAC) – explain how much your customer acquisition strategy costs and how it can be reduced over time.
Lifetime Value – explain how your customers will eventually cover the cost of operations.
Churn – explain how efficient you are about retaining your existing customers (eventually generate enough value to pay back their acquisition cost and help you generate a profit).
Burn Rate – explain how much cash you have remaining to operate and how efficiently you are operating your business.
Cost of Goods Sold (COGS) – explain the sum of all costs that go into offering your product.
Gross Margin – explain how well your business is performing.
EBITDA – understand what this means and have projections to back it up.
Use of Proceeds – explain how the investor’s money will be spent and make sure it is not to increase the existing C Suite or Founder’s salary.
These are the terms investors want to hear. Not only do they demonstrate that you know your business inside and out, but they also give more credibility to your numbers. A win-win for investors!
Other Pitching Tips
Now that you understand the words and phrases to avoid and those to focus on, other pitch tips include:
Stay professional
Be on time and respectful of your time limit. Show that you value the investors’ time.
Be confident, but not arrogant.
Focus on the solution, not the problem.
Don’t attack the competition. Instead, focus on your strengths.
Think and talk long-term. Investors are not interested in quick wins. They’re looking for companies that are going to make an impact on their industry.
Communicate your “why” passionately and infectiously.
Understand that there is a difference between creating a great pitch deck and creating a great pitch.
Going into any pitch is a nerve-wracking experience. Even with practice, you may struggle to find the right words, which is why focusing on them from the start is so important. There are many available pitching tips out there, but word choice alone can make or break the deal. At the very minimum, they can give some extra positivity, and who doesn’t need that on pitch day?
Barker Associates has extensive experience with assisting companies in preparing their pitches, including the keywords they want to use (and to avoid). Schedule a free 30-minute consultation with this link to my calendar to talk about how we can work toward getting you the investment money you need.
Last month, we talked about the initial considerations of a non-profit merger, as well as the critical due diligence phase. After finding unity of purpose, reflecting on the relevant issues and deciding that a merger aligns with your goals and mission, you engaged in an extensive due diligence process, examining all legal, financial, logistical, and human resource documents and processes. At the conclusion of due diligence, the board of directors of each organization developed and approved a Plan of Merger consistent with applicable state laws. At long last, after months of preparation, meetings, discovery, approvals, and planning, the time arrives for merger implementation. Essentially, it is finally time to close the deal. However, this is only the beginningof the end.
As with the previous phases, planning and organization are crucial for a successful implementation. While it would be nice if we could sign on the dotted line and all issues magically resolve, we know that is not the case (it never is!). This process, like the others, will take time, patience, and an in-depth understanding of the logistical steps that must be achieved to effectuate the merging of two different organizations. The following checklist can be used as a guide through the final steps of the merger.
1. Appoint a Merger Transition Team. This group of three to six individuals will spearhead each logistical step of the merger. They will assign tasks, set timelines, and keep the merger moving forward at a reasonable pace for the new nonprofit.
2. File Appropriate Documents with the State. Each state has its own requirements for filing with regard to non-profit mergers. All documents should be filed with the state of organization/incorporation, following those particular guidelines and requirements. Note that although the merger is legally completed once the state accepts the documents as filed, many more steps must be taken for actual completion.
3. Develop Integration Plan. Due diligence should have previously identified duplicative positions, departments, and resources. This plan will identify what is being removed and what is surviving in the new organization. The plan should also identify any issues in the short-term due to the merger and provide for analysis at one month, three months, six months, and twelve months.
4. New Board of Directors Established. The new board generally consists of previous board members from each of the non-profits prior to merger, but can be entirely new. They should establish their new meeting schedule and implement new by-laws as soon as possible.
5. Schedule Employee and Volunteer Training. How will the new departments, responsibilities, and tasks differ from the previous ones? What do employees and volunteers need to know about the mission, vision, and day-to-day operations to effectively perform their duties?
6. Determine Human Resource Needs. Establish a new payroll system, health benefits, vacation and sick pay, and hiring and termination protocols.
7. Finalize any Facilities Management Issues, Vendor Contracts, and Insurance Coverage. What contracts need to be rewritten in the new organization’s name? How will insurance coverage transfer without lapsing?
8. Develop Communication Plan. This plan should involve internal and external communications and ensure consistent messaging throughout. This may include the launching of new branding, the name and logo, and a marketing campaign. The new website and social media accounts must also be established and maintained.
9. Finalize Financial Transactions. Transfer assets, close and open accounts, as needed, and integrate accounting systems.
10. Implement Technology Solutions. How will technology, phone systems, and databases be integrated? What is still required? What can be eliminated?
While the entire process can take between twelve and eighteen months, depending on the size of the organization, this Closing Checklist enables the Merger Transition Team to keep the merger on track, heading toward a successful completion.
Need more assistance? Barker Associates has extensive experience working with non-profit organizations as they implement and finalize mergers. If you are considering this strategy, use this link to my calendar to choose the best time for a free 30-minute consultation.
Last week, we talked about the strategic planning of an ERP system implementation, with factors to consider in both the planning and implementation phases. This week, we pivot to how to choose the right system for your organization.
The decision has been made. You and your key stakeholders are ready to automate and streamline the workflow and day-to-day tasks. You’re more than ready to increase efficiency and productivity with one resource for data centralization, workflow management, and tracking. You’re moving forward, but quickly become overwhelmed, not with the process of implementation itself, but with the vast variety of ERP system options available.
Taking the time to ensure there is a good fit is crucial for success. In fact, implementation failures often occur where there was never the right fit from the start. However, this should not discourage you from pursuing a transformational strategy that will provide a competitive edge.
The following are the top five tips that will help eliminate the confusion and move the process along to help you choose the best system for your organization.
1. Thorough Process Review and Analysis. Prior to looking at any system, you should determine your current needs, as well as those needs that are likely to arise in the foreseeable future. Start by documenting your current processes, strengths, and weaknesses. Ask yourself the following:
What is working?
What is not working?
Where are the gaps in the current system and processes?
What should the system look like now?
What should it look like going forward?
Do I actually need a new system?
What problem am I trying to solve?
What functions are “must needs,” and which would just be a bonus?
After you answer those questions, create a document that shows the core objectives, needs, and gaps; what essential functions, solutions, and automation capabilities a new system should provide; the budget; timeline; and a list of key stakeholders. This document should present a clear picture of the criteria you require in an ERP system.
2. Determine Budget and Research Costs. You’ve determined your needs, but now you need to know what budget you have and the related costs of the various systems. An ERP system implementation is time-consuming and a large investment, so you want to ensure you are comfortable with your budget, as well as all of the associated costs up front. As you research ERP systems, you should have a good understanding of all the costs involved – not just for implementation, but long term. You may want to consider: What are the licensing fees? Are there costs for training? Are there support, maintenance, and upgrade fees? It is up to you to discover any “hidden costs.”
3. Review of Current Infrastructure. Before proceeding, you want to have a clear understanding of your current information technology infrastructure. An ERP system is software, and you don’t want to start down a road with a possible solution only to find out later that it does not align with your current technology. This is a large enough undertaking of resources. You do not want to have to worry about investing in a new technology system as well. Involve your IT department from the beginning to confirm that the new system will be compatible.
4. Evaluate Systems. Narrow your requirements and criteria to the five or ten that are priorities. What exactly are you looking for? Use a chart or Excel spreadsheet to list out each and to keep all of the details organized. Then research systems via Google, social media, reviews, and recommendations. Verify all claims made through independent research and 3rd party reviews, and consider all options to start. It is not prudent to choose one because you’ve heard the name before or because it is what competitors are using. Instead, ensure it will meet the needs you identified in your process analysis.
As you analyze your potential new partner, you may want to make the
following inquiries:
How many implementations have you performed? Any in our industry?
Who will be responsible for different parts of the implementation? What experience do they have? Will you use a third-party for any phases? What is required from my team?
Is there a guarantee or warranty?
Are training and support offered?
Is it customizable? Mobile friendly?
Is there cloud storage? If so, what are the data limits?
As you gather information about each system, plug it into your criteria chart, so you can easily compare the systems, their functionalities, and their solutions. Additionally, check on the system’s scalability. This is a long-term investment. You don’t want to outgrow it in the foreseeable future.
5. Meet with Stakeholders to Make a Decision. Having everyone’s buy-in on the system that is ultimately chosen is critical to its long-term success. Management teams should be involved – anyone who will be impacted during or after the process. You will need their support during planning and implementation. Choose the one that offers as much of the functionality your organization requires as possible, and don’t be swayed by extra features that you don’t need. Finally, look for longevity and a proven track record with other organizations similar to yours.
Remember no one system will be a 100% perfect match for all of your needs or requirements, but it should be an overwhelmingly good fit for your organization. Barker Associates has extensive experience with ERP system implementation plans, assisting organizations achieve increased productivity and efficiency. Use this link to my calendar to choose the best time for your free 30-minute ERP consultation.
I have noted that, even during these days of the COVID pandemic, there is still a lot of money in the PE and VC world that investors must spend for firms to survive.
PE and VC firms invest in companies with a plan to exit the investment in three to five years. The exit can take the form of another investment round at a higher valuation, an IPO, or the sale of the business altogether. Another dynamic is becoming increasingly apparent: PE-backed companies are having an increasingly difficult time implementing an exit and/or raising the next round of capital.
Why the difficulty, when there is an incredible amount of money for investors to invest?
The primary factor leading to next round challenges is the enhanced due diligence investors are performing now compared to pre-pandemic. The long run of economic gains nourished a confident exuberance in investors where the investor had to believein a company’s financial projects similar to how Dorothy had to believe in Oz … without much evidence. The supply of capital outweighed the supply of companies to the point that investors were willing to lower the bar for the due diligence completed on sales and financial projections, data rooms, and balance sheet liabilities.
The current atmosphere based ona stricter due diligence process represents a correction that goes back to the core fundamentals of investing.When the pandemic dust settles a bit, the correction will result in a more sustainable environment for the PE and VC firms. In the meantime, portfolio companies must place more focus on the following areas to support due diligence efforts:
Data rooms. Companies that cannot produce supporting documentation for their financial and sales assertions are destined to fail due diligence. Deals fall apart when a company cannot produce contracts, proving professed commitmentsordemonstratingcompliancewith the contract terms.Be prepared for due diligence efforts by appointing a trusted, organized document manager to oversee your data room. Read more about data rooms here.
Projections.Think like the investor—play a great game of Sesame Street and make sure that one of these things (your financial projections) looks like the other (your historical trends).Practice the dialogue spoken regarding your company’s future to ensure it rings true to what you can support based on data and research.
Historical financials.Your financial data must be accurate and easyto follow by potential investors.When you produce complicated financials that require confusing explanations or take too long to organize, you put the deal at risk. Just like a burglar will move on from a house with a security system, investors are glad to move on to the next deal that requires less effort to close.
If you are a founder or a C-suite executive of a fast-paced, growing entrepreneurial company, are you prepared for the next round of funding or other exit strategy? Let’s talk about how to begin organizing your data room, simplify your financials, and produce realistic, evidence-based projections that investors will find credible.I would love to speak with you about the challenges you face in preparing your exit strategy. I invite you to set up a 30-minute free consultation with me by clicking on this link to my calendar – let’s talk!
Those of us who work to manage our cholesterol have received conflicting information about eating eggs. I grew up loving eggs, but then, as an adult, I was told not to eat them due to high cholesterol.
Then the nutrition experts decided you can eat egg whites. Now it is back to eat your eggs – yolk and all – the last time I spoke with a nutritionist. Confusing.
Deciding if you are going to outsource a function within an organization is about as confusing. The trends go back and forth on that issue too. Advances in technology and lower costs of offshore professionals have made the idea of outsourcing more attractive in some cases.
I have some advice, gained over my years as CFO in various organizations, for you to consider while you evaluate the idea of outsourcing financial functions:
Don’t try to fix a broken process by outsourcing it. Do not outsource a recurring, detail-oriented process that is currently broken. Get the best consultant you can afford working to fix the process. Make certain the expert who fixes the process creates a training manual on how the process should run and trains an internal staff person on it. You may discover during this process it is easier for you to keep that process going with your own employees or you may decide you want to outsource the detail part of it to an outside, less costly resource. The bottom line is that if you do not understand your own process, you cannot know if a third party is accurately performing it on your behalf.
Get organized. Organize your data in a way that you can provide it to the outside party prior to engaging them. If you cannot make sense of your data, you can end up paying a third party a lot of money to do it for you.
One of the areas I’ve seen this as an issue is with State Sales Tax. Compliance in this area is about as difficult as hanging upside down from a tall tree branch while flossing your teeth. Companies get frustrated with the complicated process of filing state sales taxes, especially when multiple states, or states with complicated calculations and forms are involved. For example, are you capturing sales revenue based on the billing address or the shipping address? You must have accurate data before outsourcing it for someone else to handle.
My recommendation is to invest in upgrading your IT infrastructure. Regardless of whether you are outsourcing compliance with state sales tax or another process, you must be in a position to produce data in an organized manner that a third party can accept and act on.
When you do decide to outsource a portion of your business, make sure you keep the data and regularly backup the data the outsourced agency is using. Make sure you still know where your information is and how to get to it if the outsourced entity suddenly goes out of business. Perform routine oversight of the work being done by the third party. This is even more important today in this every changing business world.
Just-in Time Experts. Expertise that you need infrequently is a great area to consider outsourcing. Many third parties provide outsourced IT, legal, human resource, or financial expertise to augment internal resources and are less costly than hiring the expertise full time. You may only require specialized expertise for specific projects rather than an on-going need.
Outsourcing these functions is not without its drawbacks. For example, let’s say your obsolete, no-one-has-ever-heard-of information system gets hacked and you have no in-house expert who is familiar with your system. Hiring an expert to support obscure software can be costly and time intensive to get your problem solved.
Or perhaps legal expertise is something you only require occasionally. You decide to download a customer contract from the internet instead of hiring legal expertise to prepare your standard contract. If you get in a nonpayment dispute with one of your major customers and then bring in legal to help you, you may discover that the customer contract you downloaded for free from the internet will not allow you to properly recover the revenue you are due. Now the outside lawyer has to clean up the mess you made by not hiring them on the front end to prepare a sound contract.
My point is that it is essential the right expertise performs the company’s core functions in every business. The laws and regulation in these areas change rapidly and you need someone to help you stay compliant and out of trouble.
Barker Associates provides outsourced Chief Financial Officer services on a fractional or full-time basis in the event of a transition. Fractional services work best during times of fast paced growth, a new system implementation, a merger, or an acquisition. Even with a full time CFO on board, they have a day job and these types of changes require a unique focus and background. Our extensive and diverse background helps guide the organization through the change.
During a transition time, Barker Associates uses their expertise to assist the organization with designing a job description and interviewing candidates for the new position. Once your new CFO, Accountant or other financial professional is onboard, Barker Associates exits until you bring us back for the next big project.
If you are considering outsourcing a financial process within your organization and would like to discuss specific areas of concern, I would love to speak with you. Click here to schedule a 30-minute free consultation to discuss your unique situation.
