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Four drivers of CEOs actions

Regardless of the stage of your business or your future strategy, Growth, Profitability, Predictability and Independence are the magic words.

September 16, 2019

Regardless of the stage of your business or details of your future strategy, Growth, Profitability, Predictability and Independence are the magic words.

These are the four drivers which should be at the forefront of your mind if you want to run, buy or sell a successful company.

Growth

Ambitious private business owners and CEOs as much as investors like a dynamic and growing company. Start with asking some of the below questions which might give you pointers or creative ideas to improve your company’s growth and identify potential hurdles. Because only when you are aware of an obstacle, can you work on finding ways to resolve it.

  • Is your business growing faster than inflation?
  • Does your business have a unique selling proposition, brands or IP with a lot of potential?
  • Could you sell more of your current products/services or adjust pricing when dealing with your existing customer base?
  • Are there enough new customers in your existing market who you could approach to support future growth?
  • Is your sales team incentivised, aligned with company’s objectives and motivated?
  • Is your overall market growing?
  • Could you expand/diversify your product/services portfolio to tap into new markets or enter new geographies?
  • Can you identify any major hurdle slowing down the growth potential of your business now or in the future?

Profitability

Growth itself does not save the day. Ensuring that the company’s top line performance is reflected in its profitability helps to streamline your key business decisions.

  • Does your company generate sustainable gross and net margins higher than industry average?
  • Is each of your products/services/customers or market segments profitable?
  • Is your business exposed to significant fluctuations in input prices and can these be minimised or passed on to customers easily?
  • Is your senior-management profit driven and responsible for achieving profitability targets?
  • Can you quantify the proportion of costs that are part of operating activity and what is exceptional?
  • Are all transactions in your business market-rate-transactions, e.g. when dealing with related parties?
  • Can you quantify the proportion of your profit that translates into freely available cash?
  • Are you aware of any items outside of your control restricting your company’s profitability?

Predictability

What makes a valuable company? Your business is growing and is very profitable, but what actually gives you peace of mind and prevents sleepless nights is predictability. Because everyone likes to feel in control and know what comes next.

  • Are you on top of your monthly P&L, balance sheet and cash flow?
  • Can you quantify how much cash/capital you need employed to keep your business running?
  • Do you set your targets in formal budgets and business plans?
  • Does your company’s performance usually track well against the set targets?
  • Do you have visibility about where your company is heading and how far it has gone on this journey?
  • Does your business have repeat customers or visible recurring revenue?
  • Are your customer and supplier relationships secured by contracts?
  • Is there any main factor blurring your view of the future?

Independence

Especially for a private business owner it is difficult to “let go”. However, a good business is an independent business, in the wider sense.

  • Could you go on extended holiday and not worry about something going wrong in your business whilst you are away?
  • Can you rely on your senior-level employees to run the operations of your business?
  • Is knowledge documented and shared within the company?
  • Is your business process-driven?
  • Is a large proportion of revenue at risk due to reliance on one product, service, customer or market?
  • Do you have back-up suppliers for your main input factors?
  • Is your business operating from a site which is secured by ownership or fair lease contracts?
  • Could the business be put under pressure from its creditors or other stakeholders?

In conclusion

Whilst running a business can be complex and CEOs very often get dragged into the minutiae of the day-to-day, it is important not to derail too much and always keep the bigger picture in mind. Introducing standardised weekly or monthly reporting with the focus on tracking key performance indicators can be a very useful tool to evaluate your business on an ongoing basis and compare its performance to your targets. Building a history of robust financial and operational ratios will provide you with valuable insight into the effectiveness of any changes or strategic decisions undertaken over time and take a lot of weight from your shoulders in a potential due diligence exercise should you be seeking an investment.

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  • QuestGates is a complex business and we had very set ideas of what we wanted to achieve. Rockworth were patient and supportive throughout and were always available to support and help, challenging where need be but always looking for solutions not problems. We could not have achieved the investment that we wanted without their advice.
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    CEO, QuestGates
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    Dr Donald Gibb
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  • Thank you for your hard work and trustworthy advice on this deal - your focus and patience have been incredible. I've been hugely impressed at all stages on how you've guided me through this process, and how you've kept cool heads when it must have been very challenging to do so. Extremely happy to recommend Rockworth.
    Andy Crysell
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  • Thank you everyone at Rockworth for your guidance, advice and pragmatism during what has been a very quick turnaround. It has been a pleasure.
    Andy Whittard
    Managing Director, Cherwell Laboratories Limited
  • Rockworth provided the support, experience and the technical knowledge that we needed to secure a successful sale.  Lawrence and his colleagues are all high calibre individuals, and I would certainly recommend them.
    Alice Watson
    Founder, Porge Research
  • During the whole process the team at Rockworth was always available to answer questions, no matter how banal, and held our hand throughout. I can honestly say that without the Rockworth calm hand on the tiller I am not sure we would have got through it in such an easy manner.  
    David Bilton
    Director, CadCam Technologies Limited
  • We chose to work with Rockworth on the basis of their approach, networks and reputation. Lawrence and his team provided excellent support throughout the entire sale process and enabled the company to achieve an outstanding result. Whilst there was a great deal of complexity at times, it was managed with great care and my colleagues and I enjoyed working together with the Rockworth team throughout. I would have no hesitation in using Rockworth for future transactions and would recommend them very highly to others.
    Martin Lucas
    MD, Kittiwake Developments Ltd
  • I would like to thank you and the team for the major contribution you made to the sale of Cromptons Healthcare. It turned out to be a very complicated deal and I have to say I was staggered by the commitment and effort that was required from us all. I was impressed by both the professionalism and the support that Rockworth provided, which proved to be absolutely essential to me. I had not fully appreciated beforehand just how necessary that support would be.
    Martin Calhoun
    Owner, Cromptons Healthcare Ltd
  • Lawrence, many thanks to you and the members of the Rockworth team for achieving such a great result. It is the best possible outcome we could have achieved, both for ourselves as shareholders, and for our staff, ensuring not just the continuation of the company but positioning it for further growth. We were very pleasantly surprised at the range of potential acquirers that you introduced us to - we had no idea initially of the types of acquirer that you would manage to find from outside our direct industry.
    David Black
    Managing Director, Young Black IS Ltd
  • Rockworth was the ideal guide and partner in our search for a buyer for our company. Their process, insight and people skills were the perfect antidote for our inexperience and were a major factor in achieving the smooth path to our desired outcome. From the start their approach suited our needs as a privately owned company with limited resources to run the business and undertake a transaction. They were invaluable in helping us understand what was needed and what we might reasonably expect. I cannot recommend them highly enough.
    Tim Champion
    Managing Director, H.Squared Electronics Limited
  • From initial preparatory work and advice through the deal process and to final completion, we found your work to be invaluable. I was particularly impressed with the careful and thorough management of the due diligence process: the consistency and detail-oriented manner in which this work was carried out was much appreciated and ensured that the deal completed smoothly, even accounting for the different languages and countries involved.
    Fabio Antoniazzi
    Founder, La Credenza Ltd
  • As a family-owned business, it was extremely important to us that we had an advisor who took care and paid attention to the detail of our business. Lawrence and his team demonstrated real commitment to the deal, both in researching appropriate potential acquirers and following this through in a diligent and extremely supportive manner. I know that without Lawrence and his team we wouldn’t have achieved the successful outcome that we did.
    Rachel Bush
    Owner, Bush & Company Rehabilitation Ltd

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