Wednesday, February 11, 2009

The Top Six Overlooked Business Assets  
By Fred Leeb
Year-end holidays are traditionally a time for thanksgiving, reflection, appreciation of the people around us and preparation for the new year and upcoming winter.  This year, we also must prepare for a very harsh business climate in which the economic pie is getting smaller.  It is the perfect time to take a fresh look at all of your business assets, maximize their value using new techniques and begin to implement improvements.  This newsletter is designed to give you some tangible ideas on how to begin this process now.
Often CEO's are Too Close to Day-to-day Operations to Fully Appreciate the People and Assets Around Them
The Best CEO's Recognize They Should Bring in Consultants Periodically to Help Them Unlock the Full Potential of Their Assets

We have found that many of our clients have untapped strengths that represent major opportunities to improve cash flow.  Even though business owners have worked hard for years to build up these strengths, they are too close to day-to-day operations to see them.  They need an experienced and unbiased outsider to help unlock this potential.  When times were better, CEO's could be content to rely on themselves and not to take this step but this is a luxury that they can not afford any longer.  The best business owners recognize they must constantly hunt for new ideas and business perspectives, often with the help of objective consultants, to achieve the highest returns on their assets. 
The one thing we know about this economy is that it will get much tougher; the business cycle will never bring us back to 2007.   If we use all of our resources creatively now, however, we will be on track to thrive again rather than just survive over the next few years. 
The Top Six Overlooked Business Assets
During our 20 years of consulting with many small, medium and large businesses we have been able to take advantage of many opportunities to help our clients quickly increase their cash flow.  Some of the most significant ways to increase the return on unrecognized and underutilized assets are as follows:
  • Employee knowledge:  The employees frequently know more about the business, on a collective basis, than the CEO and are a tremendous untapped source of valuable information.  By  bringing in a consultant to interview employees, the CEO is telling the employees that he/she is serious about wanting their input, there are new opportunities for employee advancement and visibility (by providing new ideas) and that the employees can speak confidentially, if desired.  Remarkable value can be generated in many areas including the following:
1) Employees have the most face-to-face/first-hand meetings with customers and vendors.  During these meetings and discussions, they get valuable feedback on product pricing, quality, delivery timing, product features, packaging and potential add-ons. 
2) Employees know which employees and family members are pulling their weight, which have leadership potential, and which are committed to the success of the business and the cause of improving morale.  They also know who can benefit the most from additional training and who are entitled to promotions.
3) Employees have ideas for potential innovations, cost reductions, new efficiencies, decreases in "shrinkage", better usage of inventory and methods of collecting receivables.  
  • Ability and energy:  Even though many managers are highly capable, the CEO often does not allow them to manage.  As a result, many significant risks and opportunities are not addressed.  In fact, the company may be limited more by the lack of management resources than a lack of cash. 
CEO's frequently could give much more responsibility and authority to their management team.  This would take some of the burden off the CEO, enable time for high-return special projects, and cause the business to be managed much more effectively.  The CEO should remember that these managers were hired because it was recognized long ago that it was not in the best interest of the company for the CEO to do everything him/herself.  On the other hand, if the CEO can not trust the managers to do their job, the managers should be replaced.  Otherwise, the CEO is perpetuating low returns on the company's investments in managers' salaries and training dollars. 
The managers can and should be the source of encouragement for the employees, new ideas, energy and future leadership ability.    
  • Professional expertise: The company already has paid for at least five outside advisors (the banker, consultant, accountant, attorney and insurance broker) to go up the learning curve on the intricacies of its business.  If CEO's would use these professionals judiciously, rather than try to keep them at bay, they could significantly improve the returns on these often-overlooked assets.
After working on the company's investments, business plans, financial projections, acquisitions, divestitures, real estate, financial statements, tax returns, audits, employee disputes, benefit plans, collections, etc., these professionals are a tremendous storehouse of knowledge and ideas about potential business improvements.  Paradoxically, CEO's sometimes try not to involve these people in their business in an effort to reduce cost.   This is the equivalent of buying a large, expensive and flexible piece of equipment for one application and then purposely trying to never use it again.   
  • Knowledge of the competition:  Salesmen, engineers and others in the company have a substantial body of knowledge about competitors' product features, pricing and upcoming new developments.  They also  have many contacts outside the company through which they could get highly valuable additional information.  If this intelligence would be sought out and communicated across departmental boundaries, management would be much better informed and investments would generate much greater returns.
  • Customer and vendor relationships:  CEO's frequently miss opportunities to gain assistance from two of their most important stakeholder groups, their customers and vendors.  This is because CEO's jump to the conclusion that customers and vendors will abandon them in a heartbeat at the first hint of trouble.  The reality is that this is not the case--customers and vendors also have developed a strong reliance on you because you are one of their stakeholders. 
Vendors know that many other customers, particularly in this economy, also are having great difficulty and they know that it would be hard for them to improve on their position with you.  They also may have tailored their company to meet your needs and it might take a long time before they can replace you and collect from their new customers. 

Your customers also have come to rely on you and trust your processes and quality. Their personnel may have built strong relationships with your employees and they may not want to change. 

Momentum is on your side with both your customers and vendors.  They probably want to help you.  For example, they can slow their collections of receivables from your company and can speed up payments of payables to your company, etc.  This additional credit may not be available to you anywhere else.  But, you must communicate with your customers and vendors properly and build their confidence and trust.  If they think that you are taking advantage of them they will run away as fast as they can.   
  • Buildings and equipment:  Buildings and equipment often are much larger and more sophisticated than needed because they were sized based on needs before the economic downturn.  They are likely to remain more than needed for years.  This represents sorely needed cash that is trapped in these assets.  Due to the difficulty of finding a buyer during the economic downturn, you should begin the sale process for these assets as soon as possible.  If you ever have the customer demand to need these assets again in the future, they can be repurchased. 
In addition, just putting these assets up for sale is a very important tangible indicator to all of your stakeholders that you are serious about implementing improvements to your business now.  This helps to build your credibility and stakeholders will be more inclined to trust your judgment on many other matters.

Virtually everyone agrees that the economic conditions will get worse before they get better.  There is no time to waste to make your company stronger.  Take action before conditions get worse, cash is diminished and even fewer options are available. 

Competitive Advantages and the
Fred Leeb & Associates Value Proposition

  • Bringing innovative solutions to the table from extensive experience in over a dozen successful multi-billion dollar companies and almost 15 years of helping small and medium-sized businesses in over 50 different industries throughout the US.
  • Teaming with the client's management, key personnel and other professionals to refine the solutions into practical strategies that are feasible for the client. 
  • Lending immediate credibility to the client's business plan; leveraging excellent business relationships and a track record of success as a consultant and interim CEO. 
  • Providing the value proposition--enabling the client's personnel to become the solution themselves as quickly as possible rather than bringing in an army of consultants to stay at the client's location doing everything as long as possible.  Supplying only what the client can not provide so as to maximize our added value, a necessity for small and medium-sized businesses.
  • Consulting experience and techniques from working in AlixPartners and PriceWaterhouseCoopers, two of the most preeminent consulting firms in the world.
  • MBA from Wharton, membership in the Turnaround Management Association, numerous articles and presentations to professional organizations.

Call Fred Leeb & Associates, the value proposition since 1994, to help build your company's strength and cash flow.