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Author: Pavlo Phitidis

business exit

Creating an exit roadmap

Written by Pavlo Phitidis on . Posted in Aurik Business, Exits, Uncategorized.

We spend years building a business to generate economy for ourselves. Mostly, we are undercapitalized and learn to do things ourselves. It becomes a habit. Then, of a day, we decide we want out. Or circumstances change and we want out. This is brand new to us despite the 10-20-30-40 years of investment work in our businesses. All your experience is in generating an income through your business, you have no experience selling it.

Understanding your exit roadmap early will serve you well. Listen to this podcast of Pavlo Phitidis’ discussion about business exit planning with Bruce Whitfield on The Money Show on 702 and CapeTalk:

Elements of an exit roadmap:

  1. Salable vs non-salable business

94.6% of all businesses started, fail to sell. Even the well-established ones. Think of it like a share you would buy on the stock exchange – what would you want from it?
You want to earn dividends each year hope, and when you are ready to sell it, you want to be able to sell it – for a capital gain. Your business is the same, it needs to demonstrate to a potential buyer the following:

  • Income growth
  • Capital growth
  • Tradability

  1. The buyer personas

Think of your potential buyer as a customer: That buyer needs to have a problem solved and different buyers have different problems, different skills and competencies.

  • The private buyer – an individual who wants to buy a business. Typically they work through a business broker to find a business that fits their own abilities and resources.
  • Management buy-out – this is seen often in professional services, where you generate income and value by selling time – medical, legal, architectural firms etc.
  • Family – the first generation sells to the next generation.
  • A business – where a business sees value in acquiring you.
  • A JSE listed business – these form the majority of buyers of private businesses. They look to acquire growth in revenue, innovation, or skill and capability, which often means they want you in it.
  • A foreign owned business – a multinational looking to gain a foothold into Sub-Saharan Africa but these are few and far between until we welcome foreign investment.

Identify who the most likely kind of buyer would be for your business, and think about what they would want, and how you should build your business to suit their wants and needs.

  1. The hurdles

It is very rare to get an outright cash offer for your business. Pavlo shared the story of an American business owner he worked with, who got this right. He did medical assessments for insurers and over a period of time he realized it wasn’t scalable as he had to do each patient visit. So he harnessed technology through Amazon, Instagram, Facebook, Google and used all of that data to create a risk profile for individuals, which he provided to the big insurers. When he was ready to sell he got a once-in-a-lifetime offer of $180million. But that was extremely rare. Most of us will not secure such a simple payment.

So who is buying what?

  • Private money – if you are selling to a private individual, how much can they put down and how much can they borrow from the bank? The need to borrow, especially in our current economic climate, caps these buyers at around R15 million for private money.
  • Business money – Between R12 million to around R30 million, a private business could leverage funds to buy you.
  • Corporate money – given the compliance, risk and legislation around transactions, one that doesn’t give them a business that generates at least R50 million plus, is not going to justify the pain of acquiring you.

This leaves a no-mans land between around R25 million and R50 million where there is no-one who wants to or can buy your business. And it’s important to know that, as you grow your business towards an exit

 

Captain

What is the job of a business owner?

Written by Pavlo Phitidis on . Posted in Aurik Business, Creating time, Leadership, Team.

If the purpose of the entrepreneur is to create an Asset of Value, how do we get from where we are to the Asset of Value? What is it that the entrepreneur actually does? What is the “job” of the business owner?

Let’s break down the business. No matter what sector you are in, every business works utilizing the same basic functions: marketing, sales, supply, operations, human resources, money management and general management.

If you look at any one of these functions, you’ll see that it is made up of many activities that are performed on a daily, weekly and monthly business.

Take marketing. The intention is to generate leads. To that end you do hundreds of different activities, from analyzing customer data, to briefing an ad agency, to updating your company website. The sales function has to convert these leads into sustainable customers. Again, many different activities are performed every day, week and month, in order to do that.

And so it goes, for each of the core business functions mentioned above. That’s one heck of a lot of activities! The job of the entrepreneur is to organize these activities and functions into coherent business systems and then find the right people to run the systems with you managing the results.

Here’s an example of what happens when you don’t organize those activities into a manageable system. I’ve been working with a client, Kevin, who has fantastic technology to sell. It’s really better and smarter and cheaper than anything you’ll see internationally. His business should be growing in leaps and bounds, but it’s not. Why?  Because Kevin can’t let go of the idea that his job is not to sell the technology, but rather to organize all the activities of each function into business systems that point him towards his ultimate destination – building an asset of value. Kevin is absolutely consumed by the daily, weekly, monthly activities. He’s over-involved in the minutia. His staff finds his nit-nitpicking infuriating and so his staff turnover is high. You would think that his obsession with his technology would be an asset in the sales arena, but in reality it’s not. He’s scornful of the customers who don’t understand how brilliant his products are, and he lets them know it. He even manages to alienate his suppliers with his interfering and correcting.

When business owners don’t create systems which allow them to take a step back from the hundreds of activities that every business performs every day, month and year, they eventually hit a ceiling. They can only do so much, no more. They get exhausted. Their entrepreneurial energy is depleted, and with it, their passion, their love for the business and their joy in what they are doing.  They lose sight of the vision. They doubt themselves. They alienate staff and customers.

Only through realizing that your job as a business owner involves organizing the building the activities of your business functions (marketing, sales, HR, supply etc) into organized systems, and then delegating the management of systems to your staff with you managing the results of the systems, will you progress!  This is a vital change needed in any business that is going to grow and non-negotiable if you are building an asset of value. This will allow you to spend less time working in the business, and more time working on the business. Get out of the engine room and up onto the bridge of your ship to sail it in the direction you want it to go.

If you are not consumed by the day-to-day activities of your business, you have a better perspective. You have more time. And what do you do with that time? You lead the creation of value by introducing new products or by finding new customer groups that your system of delivery can deliver products and services to.

Kevin is someone with a great idea, a brilliant product – and a not so brilliant business. Why? Because Kevin has not got his head around the fact that the job of the entrepreneur is to niche the business, build systems of delivery for the product or service, and lead the creation of value. Don’t let that happen to you!

blind spot

Shining a light on the business blind spots

Written by Pavlo Phitidis on . Posted in Exits, Leadership.

Smart and successful businessmen have faith in their vision for their companies, but they need to be aware of their limitations and see themselves and their situations in the proper light.

A failure to do this leads to the business blind spot, a place where we can’t see what is going on around us. It’s also a place where we see things not for what they are, but what we perceive them to be. It grows from a history of how things have always been done in the business and a narrow view of what the business needs going forward. On The Money Show with Bruce Whitfield this week, we discussed business blind spots, how they develop, what they cost your business and how to prevent them.

Recently, I met two business owners in their late 60s. Both started their businesses from the ground up, work hard and earn their success. But what perplexed me was that even with their wealth of experience, both were plagued by glaring blind spots preventing them from putting succession plans in place.

In fact, the global status of successful succession is bleak – 28% of businesses survive it and only 3.4% make it there.

Keeping it in the family

However, blind spots are extreme in the family context. Founders in their late 60s and early 70s don’t admit to their fallibility easily. They can’t tolerate change, but argue that they don’t want the next generation to change the way they’re running the family business because it’s too risky. The successors can’t see that the founders are fearful of risk simply because time is running out and change means risk. This cycle places both in a deep, dark circle of despair – and both generations know it, but feel helpless to change it.

We all suffer from them

Many successful businessmen overestimate their capabilities and have an infallible view of themselves. They surround themselves with a team that seldom disagrees and mostly offers opinions that support the boss’s views. They listen to reply, not to hear and they talk to an outcome but don’t back it up with a plan to act. They seem convinced that what and how they are doing things is the best course of action to grow their businesses even though the numbers don’t agree.

Luckily, there are some blind spot antidotes that we can embrace such as:

  • Have a big vision for the business and one you believe in. The vision then becomes more important than your ego, your being right rather than effective and it will require you to surround yourself with co-creators rather than subservient implementers. The different views on getting things done will shine lights on blind spots for the business.
  • Annually, do the turnaround steps to keep fresh, in the present and relevant.
  • Don’t surround yourself with yes-men. A few contrarian people whose views differ from yours is a good thing. Diversity in a team will bring on contrarian views for certain. Create a safe environment for people to intelligently contribute opinions. That means listen to hear when they are offered and be sure your team knows why the business exists and what its goals are.
  • Increase your self-awareness – understand that the way you project yourself might be viewed by your staff as bullying behaviour in your efforts to retain the status quo. A message will go out that even though you ask for an opinion, you never really engage with it.

As a business builds over time and as growth comes in, the complexity of the operation increases and your ability to change your way of working is crucial. Don’t allow your business to be sabotaged by blind spots. They can lead to a misplaced commitment to a selected course of action that can cloud your vision and stunt the growth of your business. If the destination is clear and there is a clear vision, you can get past the problem and deliver on the promise.

Aurik Business Accelerator will work with you to build, implement and manage a family business succession plan.

marketing

Why (and how) to develop an effective marketing strategy

Written by Pavlo Phitidis on . Posted in Lead generation and conversion, Positioning.

If you can’t and don’t get potential customers to know that you exist, they don’t care and you die. They don’t care because there is very little special about you. Should you not be there, they will get what you were selling from the next business selling it. This is the mindset of a successful marketer.

A Bit of History

In 1870, Ralph Waldo Emmerson said, “build a better mousetrap and the world will beat a path to your door”. In 1870, he was right. There were very few products so simply having one led to success so long as the product held together.

Henry Ford applied this thinking and he made a great success of it in the early 1900’s. His offer was “you can have any colour Model T Ford as long as its black”. Then in the early 1970’s Philip Kotler, referred to as the ‘Father of Marketing’ argued that products aren’t good enough to draw your customers.

Market Segmentation

Kotler proposed that you must divide your customers into groups of customers with similar needs and wants. You must communicate with your segments rather than rely on “spray and pray” marketing. This is where you communicate with anyone and everyone in the hope that you reach someone who becomes your customer. The business world loved it. It held the promise of bringing customers to your door and it beat mousetraps.

Today’s environment is different but not

In 2020, very few business owners that I meet and work with have progressed beyond a hybrid of these two positions. They have identified their segments and impose their products features on them!

What’s missing?

The ability to see and hear messages from a business has become increasingly difficult. There is more advertising, products, options, voices and choices today than ever before. There is greater access to information, more economic pressure and a massive increase in competition. The environment has changed. But the way most business owners understand and see marketing has not. This new environment means that a product-centric and market-segment approach is no longer working. Both these strategies rely on broad messaging as opposed to customised, contextual messaging.

What’s Messaging?

Messaging communicates your offer and value to a prospective client. It includes :

  • Format
  • Message,
  • Design,
  • Distribution
  • and a result.

Think of an email campaign as an example:

Campaign – this is the programme of communication. It includes the various formats and messaging as well as distribution. It has a beginning, an end and should be measured in terms of impact.

Format – this is the mechanism used to communicate. In our example it is an email, it could be a radio advert, an advertorial, an event etc. There are many formats right down to fridge magnets and coasters.

Messaging – In our e-mail this is the copy. The words that communicate what the offer and value of the product is. It should also include a call-to-action.

Design – this is wrapping of the format and messaging. An email might include a picture with the copy. The copy includes colour, fonts, spacing and more. Design should illicit the ideal emotive response to the message. Red means act now, blue means trust, orange means creative and energetic etc.

Distribution – this includes the method of communication. Distribution is managed off a platform. It includes radio, TV, billboards, websites, social media. It’s also that guy, standing on the side of the road pleading with you to open your window and take the flyer.

How do you get your messaging consumed above the noise?

The evidence is there – people don’t buy products. They buy solutions to their problems. Problems are experienced on a personal level, that is, an emotive “lived experience”. Messaging must resonate with your “lived experience” or you blank it out or look past it.

Beyond Segmentation towards Personas

A persona is a personality, character or identity. It changes over time and its change is led by many aspects from the environment to the body and the mind. Excellent writers have the ability to present the physical, emotional and lived experience of their characters. In reading about these characters, you immediately understand them, and think of people in your friends and family circles. You further knew exactly, based on their description, how to delight and annoy them. Personas are just that.

Persona Messaging

Understanding your customers as personas enables your messaging to emotively connect with them. It makes a person feel heard and understood and that builds familiarity and trust. What you have is a potential customer who feels safe with you. They warm towards your communication and hold the promise of high conversion.

Effective marketing builds messaging that is based on a deep and sound understanding of what problems you solve and for who. It is this understanding that lets you build consistent marketing campaigns that can be measured and improved.

 

ship

Building a business is like sailing a ship

Written by Pavlo Phitidis on . Posted in Leadership, Operational systems, Positioning, Team.

Analogies are very useful to simplify thinking and action. As a business owner, building a business in a challenging environment creates noise and chaos. Gaining clarity, certainty and confidence helps manage the noise and emotion to provide right action and timing in your journey of building your business. A good analogy helps you get this right.

Building a business is like sailing a ship. Here’s how and why.

  1. A ship sets sail with a clear destination in mind

Like a business, you start and end. The end takes one of two forms: A sale or closure. For most, its closure. In fact, 94.6% of all businesses started close at great cost to the business owner, their family, their staff, suppliers and customers and the economy in which they operate. To succeed in your journey, you need to set a clear destination. You then need to ‘chart your course’ to arrive there safely and efficiently.

For example, you set sail from Durban to get to Mumbai. It’s a 12-day journey at sea. Being smart, you take 15 days of food, fuel and water in case things go wrong. A business too, should have a resource plan to get from where it is to where its going. This means a clear destination and a plan to get there supported by a budget.

  1. A ship has a crew with specific skills and roles

A ship has a crew made up of people with varying skills and responsibilities. There’s the Captain, first and second mate, navigators, engineers, cooks and deckhands and so on. Each has a specific role to perform and is trained to perform it.

A business is made up of people too. If well organised, the team includes people best suited and skilled in marketing and sales, operations and procurement, human resources and finance. At sea, every crew member knows what to do and when to do it. The safe passage of the ship depends on it. In a business, the same applies. Failure in any one area of activities stalls your business growth and lets all your team members down.

  1. A ship is organised in three distinct areas: a bow, midships and stern

The bow of the ship is like the ‘front-end’ of your business. It breaks new water and directs the ship along its course. The stern is like the “back-end” of your business. It propels the ship forward. The midships is the control centre of the ship located between the bow and the stern. It’s like the “middle” of your business and controls the finance and human resource administration and management activities. Each area must perform its role for the ship to function well and sail successfully to its destination.

The same applies to your business. The front-end of your business: sales and marketing, leads the business direction. The back-end of your business delivers in response to sales made. The midships holds and coordinates everything together with hopefully, good metrics and data to be sure that there are sufficient resources to get to the destination.

  1. A ship has a bridge and engine room

The engine room of a ship is below deck and houses the diesel engines that drive the propeller and move the ship forward. Its mostly a dark and dingy place. The loud noises of the engines smell of diesel, it’s poorly lit and the constant issues that a sea faring ship experiences make it a tough place to be. The bridge of the ship is located above the deck at a high point on the ship. It has windows wrapped around it giving you a 300-degree view. It has a dashboard with instruments and navigation equipment. It controls the direction of the ship, it deals with speed and communications and has a Nespresso machine. It’s a great place to be.

As a business owner, where do you spend most of your time? In the engine room putting out fires or on the bridge guiding the direction and growth of your business?

Most business owners I meet are spending most of their time in the engine room. They are driven by the business and everything that makes up their business. Staff, customers, suppliers, landlords, government and more. They spend little time on the bridge because their businesses are chaotic and poorly built, requiring them to be constantly fixing and rejigging the engine room. Yet, they are the most expensive resources in their own businesses. They should be spending up to 70% of their time on the bridge. There, they can direct the ship, set the course, ensure that they get to the destination to off-load their cargo and get paid. There, they drive the business and are not driven by it.

  1. A ship sails alone in the open sea to get from A to B

The open sea is full of surprises. The waves, wind, currents and storms bash the ship and threaten its safe passage. The business environment is no different. Every day we face political regulation that hurt business, volatile currency, uncertain energy supply, bad behaviour and hectic competition. It’s a rough sea indeed.

  1. A ship is regularly maintained

A ship is an asset that if well maintained, earns income for many, many years. Regular maintenance from scrubbing the hull free of the barnacles that create drag on the ship’s momentum to removing rust and replacing the lifeboats and distress flares all improve the performance and sustainability of the ship.

In any business, the systems you build will have to be partly broken and rebuilt as you grow. The software and computing you have will need to be upgraded. It’s a process of continually ensuring that your business, as it grows, is shaped and tweaked to deliver continual performance.

  1. Build your business like a Captain sails a ship

Using this analogy, be sure that you have a clear, well-defined destination to sail to. In my view, the only port you should be sailing to is an #AssetofValue. That is a business that’s well-positioned, driven by business systems operated by a well-organised team. Importantly, an #AssetofValue can be successfully sold at any point. Importantly, it releases time for you, the Captain of your business, to be on the bridge.

The shape of your business from the front, middle and end should be well designed to ensure that your ship sails successfully and efficiently. That design coordinates the activities in the business for your crew to play their role. That crew should be well-selected and trained, only possible if the destination is clear and ship is well built.

The sea you sail through will have surprises and your being on the bridge of your business lets you look ahead and keep a clear mind to cope with them as they batter and bash your business.

Finally, you, the #businessowner, should be on the bridge. Its only there that you can grow your business beyond yourself, organise your team, coordinate the building and functioning of your business to ensure that, when you reach your destination port, you have an #AssetofValue. It’s at that destination port you can unload your cargo, or in the case of your business, you can exit with a successful, clean sale.

Working with Aurik we have a structured approach to help any established business owner build their business like a ship. We work with you from the bridge to set a clear destination, build the ship of your business to get there and with the right crew. With us you will get to the bridge and remain in it to take control of your destination and secure your eventual, successful exit.

Pavlo Phitidis

Book review: Reset Rebuild Reignite, how to build a business to thrive in a crisis

Written by Pavlo Phitidis on . Posted in Innovation, Leadership, Mindset, Pavlo Phitidis.

There’s nothing like a crisis to expose the cracks in a business, and there are reasons why some rise to the challenge and others can’t or don’t. In his new book, Reset Rebuild Reignite, Pavlo Phitidis shares stories of those businesses that successfully weathered a storm, as well as practical insights and strategies to build your business to do the same.

He was interviewed by Bruce Whitfield for the Business Book review on The Money Show on 702 & CapeTalk. Listen to the podcast from that discussion:

The book is now in stores and you can get your own copy to learn how to build a business to thrive in any crisis. https://aurik.com/pp-books/