ReportWire

Tag: Operations & Logistics

  • Find Success With This Unconventional Business Model

    Find Success With This Unconventional Business Model

    [ad_1]

    Opinions expressed by Entrepreneur contributors are their own.

    People coming into the workforce today want to do things differently, and it’s critical that, as employers of multiple generations, we figure out how to support each one quickly. The newer generations want more autonomy, and the reality is that entrepreneurial people exist at every level of every sized company. Still, traditional bureaucracies hold them back until they rise to a position of influence.

    When structuring an organization — either incorporating another company or entering into a startup and setting out to structure from square one — you have more options than the traditional top-down structure. In our experience, there are better ways of organization that bring out each individual’s full potential and drive company growth. But fair warning: This model is more than just shuffling seats — it’s a total redesign of the bus.

    Related: How an Adhocracy Stimulates Entrepreneurial Growth

    Adhocracy as we see it

    As opposed to a traditional, bureaucratic business model, adhocracy is a flexible and adaptable organizational structure where groups form when necessary for a particular purpose. The ad hoc, problem-solving work groups of adhocracy, create a business environment more conducive to innovation.

    In our “adhocracy,” non-hierarchical business units run independently with their portfolio of clients, but at the end of the day, they are still part of our organization. Within each business unit, there are specific leadership roles: Our “executive squads” — an operational person, a finance person, a technical person and a business development person. No different than a C-suite, each one brings their expertise to be part of a collaborative leadership team to support a business unit. And we mean support — this is not an old-school top-down structure.

    Our business units, named after constellations, are all supported by a platform: “Hubble” — the ecosystem’s brain. If I wanted to bring a technical squad to a business unit’s team, we could use Hubble to identify the right people, their location, time zone and rates. We can also use it to seek out particular expertise for a new project or to move someone to a team that needs it.

    Related: 5 Tips to Consider When Designing (or Redesigning) Your Organizational Structure

    Encourage agency and entrepreneurship

    The adhocracy model emphasizes leadership — encouraging it from more people at different levels throughout the company. The ability to break things down and reassemble provides organizational fluidity. Teams can identify problems to solve and take action quickly, accomplishing more and bigger efficiency.

    Each business unit has the autonomy to design what they’re leading and how they want to run it. They control their growth to fit the project needs, which benefits the greater company growth. They see how their efforts can positively impact the company, which creates a greater sense of ownership, camaraderie and ultimately, less turnover. It also drives healthy competition: Who will grow bigger or better in pursuing our goals? When more people feel empowered to try and make a difference, more will rise to the occasion and try.

    Related: Establishing The Structure For Organizational Growth

    Take our advice

    This model allows everyone to step up, be leaders and drive their unit and company growth. People can broaden their experience within one company, making them more likely to stay than look for other opportunities elsewhere. The products we build for our clients make them better and make us better. We hold no one back.

    But this is not a model for an organization looking to stand still; you must have the following recipe to make it work.

    1) Have an appetite for radical change

    To foster the company-wide shift in mindset required to drive this model to success, it takes a strong group of believers at the C-suite level to go all in on a radical shift from a typical organizational structure. It can’t be achieved by teams alone. At our company, we shifted from an organization passing down directives to allowing individual business units to operate in service to their clients. We even encourage our clients to make this shift when restructuring because we see how it could benefit them, but they realize it requires radical change.

    2) Find the right people and rethink their roles.

    From within the organization, find back office people capable of this mindset shift and position them to enable these teams. Our executive squads make things happen at our company, so the rest of us support what they need. My role in HR shifted to being more proactive and engaging with these leadership teams as strategic growth partners. Be on the lookout for people with the natural ability to think like a leader, solve complex problems and seek out opportunities to learn.

    3) Stay flexible.

    Changes often happen: merging, joining, shifting, expanding portfolios and exploring new industries. Teams can grow to scale to the size they need to take on any project. We’ve had business units split. We have had business units join. We have had business units give birth to baby business units. We embrace the fluidity — if it makes sense for the executive squad, we’re all in favor.

    4) Beware the threat of silos

    These business units can grow large at a certain point, making it harder to prevent silos. A siloed company cuts off fluid cross-communication needed to support a healthy adhocracy model, so we must be careful about not letting them form. If you follow the Dunbar Theory, then 300 is a critical number. If you go bigger, getting more siloed becomes inevitable. Consider these numbers to set a cap on the size for individual groups but leave them the flexibility to form alliances and grow.

    At my company, we devour new books on great business theory, absorb it and run with what seems most likely to work for us. It keeps us evolving all the time. If a better, more proven way of structuring exists, we would look at it critically and see if it might be worthwhile. In most cases, change will happen regardless, so we may as well anticipate it. For now, this model puts us in the best position to do just that.

    Related: To Break Down Silos, Build in Cross-Communication

    [ad_2]

    Victoria Maitland

    Source link

  • 6 Critical Questions to Answer When Drafting Your Buy-Sell Agreement

    6 Critical Questions to Answer When Drafting Your Buy-Sell Agreement

    [ad_1]

    Opinions expressed by Entrepreneur contributors are their own.

    So, you’ve done it. Your lifelong dream of being a business owner is now a reality. You’re running a successful company. But have you considered what happens when you’re ready to retire? Or even worse, what happens if there is a premature death or disability of an owner? While it may seem like a far-off reality, legacy planning for the business you’ve worked hard to build is an essential ingredient in running a successful business for the long haul. And that’s where a buy-sell agreement comes in.

    A buy-sell agreement is, in its barest definition, a contract between business owners to provide for ownership succession. It is a foundational tool that helps ensure the business can keep thriving as the organization and its owners grow and change.

    Below are some of the key questions to consider when creating your buy-sell agreement.

    Related: What Is a Buy-Sell Agreement and Why Is It Vital for a Successful Partnership?

    1. How will you fund owner exits?

    Often, we see that the exiting of an owner can cause the organization to produce a large amount of capital for the owner’s buyout, which has the potential to create financial stress on the company. This can often be mitigated through stipulations in the buy-sell agreement.

    There are several ways to fund owner exits, including lump-sum payments, installment payments and gradual stock transfers. Transfer of this risk to an insurance company can also mitigate the capital needed from the business or other owners. Working with a wealth advisor and an attorney can be useful to figure out a good financing option for your organization.

    2. How should you structure any insurance policies held to fund a buy-sell agreement?

    While this may seem unlikely, protecting your business in the event of an owner’s death or disability is important. The two most common forms of funded buy-sell agreements are cross-purchase and entity purchase arrangements.

    Usually implemented in businesses with fewer owners, in a cross-purchase arrangement, each owner purchases an insurance policy on the other. This allows the surviving owner to fund a buyout using the insurance proceeds and increases the tax basis of the survivor. This can also help reduce any subsequent taxes due on a future sale of the business. In an entity purchase arrangement, the business owns the insurance policies on all owners and uses the proceeds to repurchase the shares, which are then retired.

    Related: Estate Planning for an Owner-Dependent Business

    3. How do you replace owners that have exited?

    Typically, when owners start exiting, the business is still going. Therefore, it’s important that the buy-sell agreement lays out the terms of owner transition.

    For example, who is replacing this owner? What guardrails are in place for the person replacing this exiting owner? How will knowledge transfer work? All of these items should be outlined in your buy-sell agreement to help ensure the business is not negatively impacted by an owner’s exit.

    4. How do you prepare for the unthinkable?

    Despite the efforts many business owners put into planning for the inevitable, you can’t predict the future. The unprecedented Covid-19 pandemic resulted in significant business slowdowns and caused many business owners to revisit their buy-sell agreements. Some took advantage of the temporarily decreased value of their businesses and moved them into trusts at a significantly lower valuation. Others temporarily adjusted valuation calculations and owner stipulations to keep the business safe while it “weathered the storm.”

    Let’s say an employee wanted to buy into their business during the pandemic. Based on the existing valuation formula, the transaction would have occurred at a significantly undervalued price for the owner. A review of the business owner’s buy-sell provision in the operating agreement resulted in adding a section to allow for the normalization of earnings in times of temporary stress. We are seeing more and more agreements include these types of “failsafe” clauses to protect a business during unforeseen, usually temporary events.

    5. How will you valuate your business?

    Your buy-sell agreement should outline how you value the business. There are a few ways one can value their business for legacy ownership or sale. Earnings Before Interest, Taxes, Depreciation and Amortization (EBIDTA) multiples are one way but are not the only way.

    From book value to enterprise value, it’s vital to use the right formula for your industry and organization. It is also fairly common to include a failsafe provision that allows an independent valuation expert to appraise the business. And even more importantly, as the company grows, it’s essential to reassess your valuation formula. Of course, it’s not wise to constantly change your valuation formula. However, if your company grows from 20 employees to 200, it may be time to revisit your valuation method.

    Related: Exit Planning for Modern Leaders: How to Determine Your Company’s Worth

    6. How will you create a business prepared for your exit?

    Once you’re ready to retire and fully enjoy the fruits of your labor, it’s important that the transition set you — and the organization you’ve worked hard to build up for success. Will you remain on the board? Will you be passing the organization to family or key employees? Will you be selling the business? These are key questions to consider as you build the legacy terms in your buy-sell agreement.

    Whether you’re a business owner who hopes to sell soon or one who wants to build the company for many more years, an effective succession begins before the exit happens. Developing a high-quality buy-sell agreement is an important part of legacy planning. Answering these questions can help protect the integrity of the business you’ve worked hard to establish.

    [ad_2]

    Matt Barber

    Source link

  • How To Find Success During Search Fund Launches

    How To Find Success During Search Fund Launches

    [ad_1]

    Opinions expressed by Entrepreneur contributors are their own.

    Search funds have started flipping the script on generalists winning in a largely specialized business environment. The efforts of a specialized thesis have recently proved more fruitful than the opportunistic approach, as Stanford’s 2020 Search Fund Study found, “Searchers who focus their search, as well as developing and adhering to a systematic approach of creating deal flow and analyzing deal opportunities, have a higher likelihood of identifying and closing an acquisition.”

    Although the inspiration for a thesis and industry vertical might be apparent based on the searcher’s passions and past experience, often finding an enterprise that fits the search mold could prove challenging.

    Related: Search Funds: What You Need To Know About This Investment Model

    The good news, however, is that value chains in almost every industry are riddled with opportunities that fit the model. They are the hidden gems. What this means, for example, is if the goal is to serve as an operator in the healthcare supplement industry (from knowledge gained over the years as a professional athlete), an operation that makes or procures a certain ingredient that goes into the final product, as opposed to the final product sold to consumers, would make for an ideal opportunity.

    This “value-chain-based searching” approach also opens up flexibility on the geographic front. Running a geographically agnostic search while widening the pool of potential targets might not be viable for most searchers. Offsetting this with more businesses within an industry’s value chain helps keep the net wide while respecting the searcher’s mandate.

    While necessary from the outset, alignment with the entire cap table on a thesis (and geography) and continuing commentary through the process unlocks resources that come from having a large experienced team and seeing multiple searchers and transactions from an investor’s lens — the successful, the break-evens and those who didn’t make it. The most valuable resource of which is a playbook, be it in the form of time committed to mentorship or proprietary documentation conducive to a successful search.

    Related: Search Funds: A Financing Option for Business Buyers

    Whoever first said, “it takes a village,” was probably a searcher. Building out a team who are unequivocally sold on the vision and believes in the mission is crucial to the searcher’s experience as a leader pre-CEO, as well as their chances of landing on a hidden gem of a business. Most searchers achieve this through interns, both in undergrad and business school, looking for an appetizer to private equity.

    While more heads the better by way of sourcing and in the data room looking over opportunities, a key factor lies in the fund’s governance. Karl Scheer, now CIO at the University of Cincinnati, was clear in his governance remarks, “you can’t have investment success with a bad governance structure.”

    Although at a vastly different scale, the same principles apply in aligning incentives and what a potential intern or search fund fellow can get for their time and effort. Additionally, a decision to build out a remote vs. in-person team in 2022 remains a personal preference. This could change with a clearer answer as work dynamics continue to get tested and studied over the next few years.

    Another important set of people to have in a searcher’s arsenal is a set of mentors who celebrate your success by way of unbiased advice — advisors, for lack of a better term. With a large population of the search community embarking on the search journey out of business school, a valuable pool of resources could come from a supportive group of professors and classmates in touch with the focus industry. The Stanford Search model dubs these people as “river guides” and even suggests an incentive structure with which searchers have found success over the years.

    With the people in place, the tools to set the search up for success help close the loop on the most effective use of everyone’s time. A tech stack helps automate low-effort tasks like initial outreach, and net-net gets the searcher in front of more potential targets. A project management suite opens up a layer of transparency on what everyone’s working on and helps move the needle from zero to one.

    Finally, like many things, we are tuned to think the next opportunity around the corner could be a better bet, and regardless of how good the current deal looks, it’s hard to think past the “what-ifs.” With most searches limited to a two-year time horizon to complete an acquisition and competition from other searchers as well as some private equity funds intensifying, having a “take the train” approach should be top of mind. If a deal fits the thesis, can model out successful growth over the next five to seven years, has a viable exit strategy, and is an experience a searcher deems enjoyable above all else — go for it!

    Related: A New Breed of Private Equity Investors Present More Exit Options Than Ever for Entrepreneurs

    [ad_2]

    Karl Eshwer

    Source link

  • 3 Simple Reasons to Add Technology to Your Non-Tech Business

    3 Simple Reasons to Add Technology to Your Non-Tech Business

    [ad_1]

    Opinions expressed by Entrepreneur contributors are their own.

    You are a business owner but aren’t in the tech industry, so why would you need to focus heavily on adapting technology in your daily workflow? Some people may say you don’t need to. However, I’m here to put a bug in your head and prove how technology is critical to any business across any vertical. And that includes you!

    We know technology can be intimidating. It also can be complex, and there are seemingly endless options. So, is it worth the cost, integration headaches and question if you are picking the right ones? Yes! Here are my top three reasons to focus on technology, and I’ll explain how to integrate it into your business:

    1. Not applying technology means you could face a technology deficit

    Let’s face it, not having a line item in your books for technology and software subscriptions means your company will hit a point where you can’t grow any further. Whether your marketing team will be missing major data points for essential customer acquisition or your efficiencies will eventually put you behind, your competition could pass you by (we’ll get to this one more in the next point). No matter the roadblock you will hit, the point is your growth will have to slow down or halt. You don’t want to wait until that point to use technology once the train has left the station without you!

    Related: 5 Types of Technology All Entrepreneurs Need Access to in the Digital Age

    2. Results are everything

    No matter your business or vertical, your most valuable resource is your team. How can you empower your team to work smarter, not harder, and ultimately produce the best results? The answer is with the right technology! Even if your staff has been set in their ways and doesn’t want to learn a new program, you must pick the right operational systems and offer proper training. A minor setback in the learning curve will mean a huge uptick in productivity.

    I once ran into a mid-sized company that was technologically behind due to not prioritizing this aspect of its business. This inadequacy caused marketing and sales to lag compared to its competitors. I likened their technological powers and abilities to taking a knife to a gunfight.

    If a company can increase its operational automation in the marketing space, that would allow it to understand its target customer and truly understand how to sell to its market in an efficient and results-driven way.

    A data warehouse and congruent CRM would allow this business to properly segment and hit goals for its best marketing demographic more accurately. Identifying, understanding and addressing low-hanging fruit, such as abandoned shopping cart funnels, is crucial.

    When you are focused on results, technology almost always needs to be integrated to increase efficiencies and drive sales in the long run. And it’s always easier and cheaper to integrate the right technology early to ensure your team is trained and using it along the way!

    Related: How Technology Is Shortening the Road to Fame

    3. You’re increasing your footprint of liabilities without the right technology

    I’ve seen every range of technology integration, from the tech-savvy millennial CEO who relies on data and analytics for every business decision to the companies that don’t integrate it at all and still use a pen and paper within every significant department. However, if you are closer to the latter, you are potentially putting your team at a huge safety risk. If you have only minimal or wrong technology, you could be putting your customers, reputation and finances at risk too!

    I’ve even seen clients using only a single source for major bookkeeping and documentation, like Excel. One wrong move or fat-fingered mistake can change your calculations completely. Or worse, delete everything! If that isn’t risky, I don’t know what is.

    Technology can feel overwhelming, which is often why we hear people stay away from adding it to their daily workflow. However, there are simple ways to make that change. Start with finding a company to give you a technical audit — which is often cheaper than you might expect. Take their advice and then apply it in chunks.

    You may not need to go from 0 to 100 in the first week. You can slowly add, integrate and manage critical technology into various departments as you feel comfortable. And as I mentioned earlier, a key to tech success is training! Empower your team to take the tech leap with you and work on this together. Everyone can learn a new trick, and it could even be fun! Finally, ensure that you have a base infrastructure to make the ideal environment for success. This includes having the basic technology hardware and compatible systems in place.

    Take this article as your sign to take the first step and better your business with tech!

    [ad_2]

    Craig Ceccanti

    Source link

  • How to Hire a Tech Team When You Don’t Know Much About Tech

    How to Hire a Tech Team When You Don’t Know Much About Tech

    [ad_1]

    Opinions expressed by Entrepreneur contributors are their own.

    For many leaders at many organizations, it’s tough to hire a tech team. After all, while you have a deep understanding of your own business, if you’re not a software engineer or IT specialist, it can be difficult to tell if the person you’re talking with can actually do all that wonderful stuff he or she is promising. (That’s why you need help in the first place!)

    A lot of business owners and executives without technical expertise often select their engineering hires or partners based on the things they are more confident assessing – how well a person presents and the cost of hiring that person or team. And while those metrics are certainly helpful, they are often not the best metrics to figure out if the person or the firm you’re interviewing can actually do the job well.

    Related: 5 Ways Businesses Benefit From Having a Tech-Savvy CEO

    That leaves many executives hoping for the best and crossing their fingers. Given that IT budgets are often some of the biggest costs for an organization, given how critical these systems are, and given the increase in cyber attacks, choosing incorrectly can have dire consequences.

    I’ve led three different technology companies over the last 15 years and have seen a lot go wrong. Today, as Chairman of a software development company called Plan A Technologies, one of the most common requests I hear comes from leaders who have chosen incorrectly…and need us to help bail them out of a bad situation.

    So what are some of the pointers we share with our clients about how to avoid such situations in the future? Here’s a quick list of what you should be listening for and what you should be saying.

    Cover the basics

    Make sure the person or the firm you’re talking to is friendly, easy to communicate with, follows up quickly, and behaves professionally in all your interactions. Make sure to ask for (and check!) references, and make sure those references are from legitimate companies and not friends and family.

    Are they asking multiple relevant questions?

    The external firm you hire or the individual you hire should have a lot of questions for you about your vision, the problems you may be facing, and your current tech stack. They should be asking about how everything has been designed, where everything is hosted, the front-end and back-end technologies that were used to create or integrate your applications, and more. In addition to technical questions, external firms should ask at least a few big-picture business questions as well: about your timelines, budget, how you’d like to differentiate yourself from your competitors, etc.

    Related: Pros and Cons of Hiring a Consultant for Business

    But are they only asking questions?

    Yes, questions are good. But at a certain point, they should also be making suggestions off the cuff. There’s an old saying in writing: show, don’t tell. The same is true for a good engineer or software engineering firm. During your conversation, they should be showing you how much they know about the issues by speaking about potential solutions, potential pitfalls, and more.

    Are they condescending?

    Mediocre engineers often throw around a lot of technical words and try to intimidate a non-technical audience by showing how much more terminology they know. But great engineers are usually also great teachers and have no problem explaining complex concepts to a non-technical audience.

    Do they seem to know your industry?

    Ahead of time, check their history to see if they’ve worked in your field before. And when talking, ask yourself: Do I believe they’re capable of handling my business? This is something you can question them about with confidence—after all, you know your business. Ask specific questions about how they’ll handle your specific needs. If you’re unsatisfied with a response, ask follow-ups.

    Related: Don’t Know Much About Tech? Don’t Panic.

    Can they talk details?

    Let’s say they show you a case study about building a mobile app for a hospital. Even if you’re not experienced in health care, you can still dig in: Walk me through how you built it. What was your biggest concern going in? How did you handle privacy information? Did you find a way to show ER wait times? Etc.

    Can they spot the trick?

    Do some research ahead of time about a technology that’s pretty new (say, 4 or 5 years old). Then ask: “Do you have at least ten years of experience with X?”

    If they proudly say they do, it’s time for the next candidate.

    [ad_2]

    Aron Ezra

    Source link