tag:blogger.com,1999:blog-20732863839725487732024-03-21T11:00:57.491-04:00Harbour Bridge VenturesProviding the Know What, Know How, and Know Who to Launch, Manage, and Grow Successful Companies™Bruce Carpenterhttp://www.blogger.com/profile/00509920552835244724noreply@blogger.comBlogger19125tag:blogger.com,1999:blog-2073286383972548773.post-54805155333664370522011-09-02T16:54:00.000-04:002011-09-02T16:54:07.820-04:00Be the Steve Jobs of Your Company <!--[if gte mso 9]><xml> <o:DocumentProperties> <o:Revision>0</o:Revision> <o:TotalTime>0</o:TotalTime> <o:Pages>1</o:Pages> <o:Words>893</o:Words> <o:Characters>5095</o:Characters> <o:Company>Harbour Bridge Ventures, Inc.</o:Company> <o:Lines>42</o:Lines> <o:Paragraphs>11</o:Paragraphs> <o:CharactersWithSpaces>5977</o:CharactersWithSpaces> <o:Version>14.0</o:Version> </o:DocumentProperties> <o:OfficeDocumentSettings> <o:AllowPNG/> </o:OfficeDocumentSettings> </xml><![endif]--> <!--[if gte mso 9]><xml> <w:WordDocument> <w:View>Normal</w:View> <w:Zoom>0</w:Zoom> <w:TrackMoves/> <w:TrackFormatting/> <w:PunctuationKerning/> <w:ValidateAgainstSchemas/> <w:SaveIfXMLInvalid>false</w:SaveIfXMLInvalid> <w:IgnoreMixedContent>false</w:IgnoreMixedContent> <w:AlwaysShowPlaceholderText>false</w:AlwaysShowPlaceholderText> <w:DoNotPromoteQF/> <w:LidThemeOther>EN-US</w:LidThemeOther> <w:LidThemeAsian>JA</w:LidThemeAsian> <w:LidThemeComplexScript>X-NONE</w:LidThemeComplexScript> <w:Compatibility> <w:BreakWrappedTables/> <w:SnapToGridInCell/> <w:WrapTextWithPunct/> <w:UseAsianBreakRules/> <w:DontGrowAutofit/> <w:SplitPgBreakAndParaMark/> <w:EnableOpenTypeKerning/> <w:DontFlipMirrorIndents/> <w:OverrideTableStyleHps/> <w:UseFELayout/> </w:Compatibility> <m:mathPr> <m:mathFont m:val="Cambria Math"/> <m:brkBin m:val="before"/> <m:brkBinSub m:val="--"/> <m:smallFrac m:val="off"/> <m:dispDef/> <m:lMargin m:val="0"/> <m:rMargin m:val="0"/> <m:defJc m:val="centerGroup"/> <m:wrapIndent m:val="1440"/> <m:intLim m:val="subSup"/> <m:naryLim m:val="undOvr"/> </m:mathPr></w:WordDocument> </xml><![endif]--><!--[if gte mso 9]><xml> <w:LatentStyles DefLockedState="false" DefUnhideWhenUsed="true"
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<div class="MsoNormal" style="text-align: justify;"><span class="Apple-style-span" style="font-size: 16px;">Steve Jobs recently retired as CEO of Apple for health reasons.<span style="mso-spacerun: yes;"> </span>While he will continue in his role as Chairman and likely also as a keeper of the Apple vision, this caps his run as what may well be remembered as the most remarkable and effective CEO of not only our age but all time.</span></div><div class="MsoNormal" style="text-align: justify;"><span class="Apple-style-span" style="font-size: 16px;"><br />
</span></div><div class="MsoNormal" style="margin-bottom: 12.0pt; mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none; text-justify: inter-ideograph;"><span style="font-size: 12.0pt; mso-bidi-font-family: Arial;">What is it about Jobs that made Apple such a success and what can we learn from him that would help us become the Steve Jobs of our own companies?<o:p></o:p></span></div><div class="MsoNormal" style="margin-bottom: 12.0pt; mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none; text-justify: inter-ideograph;"><span style="font-size: 12.0pt; mso-bidi-font-family: Arial;">Apple is a standout company because Steve Jobs refused to accept mediocrity. <span style="mso-spacerun: yes;"> </span>Your company's success could well depend on whether you follow in his footsteps.<span style="mso-spacerun: yes;"> </span>Do you embrace his passion to be different, to be a leader, a visionary, to change the world as we know it?<span style="mso-spacerun: yes;"> </span>Do you accept nothing short of excellence and perfection, or do you tolerate mediocrity?</span><span style="font-family: Times; font-size: 12.0pt; mso-bidi-font-family: Times;"><o:p></o:p></span></div><div class="MsoNormal" style="margin-bottom: 12.0pt; mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none; text-justify: inter-ideograph;"><span style="font-size: 12.0pt; mso-bidi-font-family: Arial;">Apple will be fine without Steve Jobs. <span style="mso-spacerun: yes;"> </span>Because Steve Jobs isn't just a CEO, he's an idea, and an idea that all companies should embrace. <span style="mso-spacerun: yes;"> </span>We know this because in working with our clients and our own companies, this belief system and passion for excellence is something we strive to achieve every day. It is an integral part of our culture and our belief system.</span><span style="font-family: Times; font-size: 12.0pt; mso-bidi-font-family: Times;"><o:p></o:p></span></div><div class="MsoNormal" style="margin-bottom: 12.0pt; mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none; text-justify: inter-ideograph;"><span style="font-size: 12.0pt; mso-bidi-font-family: Arial;">Steve Jobs represents an ethos that is core to Apple's culture. <span style="mso-spacerun: yes;"> </span>He, as an idea, is a simple one. <span style="mso-spacerun: yes;"> </span>It's all about building amazing, intuitive, life- changing products that people love. <span style="mso-spacerun: yes;"> </span>To embody this principle, Apple doesn't need Jobs. <span style="mso-spacerun: yes;"> </span>It can live on through the shared vision of Apple's talented people who deeply care and are dedicated to creating greatness. <span style="mso-spacerun: yes;"> </span>As long as that culture continues to thrive in Cupertino, Apple will be fine.</span><span style="font-family: Times; font-size: 12.0pt; mso-bidi-font-family: Times;"><o:p></o:p></span></div><div class="MsoNormal" style="margin-bottom: 12.0pt; mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none; text-justify: inter-ideograph;"><span style="font-size: 12.0pt; mso-bidi-font-family: Arial;">That said, it's also a culture other companies would be well served to emulate. What Apple has achieved isn't impossible. <span style="mso-spacerun: yes;"> </span>The question for us all is -<span style="mso-spacerun: yes;"> </span>why don't more companies do it?</span><span style="font-family: Times; font-size: 12.0pt; mso-bidi-font-family: Times;"><o:p></o:p></span></div><div class="MsoNormal" style="margin-bottom: 12.0pt; mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none; text-justify: inter-ideograph;"><span style="font-size: 12.0pt; mso-bidi-font-family: Arial;">Perhaps the answer is because it's really, really hard. <span style="mso-spacerun: yes;"> </span>At Harbour Bridge Ventures and our portfolio companies, we work constantly to delight our customers and not only meet, but also exceed their expectations. <span style="mso-spacerun: yes;"> </span>That's what our clients are asking from us when they hire us or use our products and services.</span><span style="font-family: Times; font-size: 12.0pt; mso-bidi-font-family: Times;"><o:p></o:p></span></div><div class="MsoNormal" style="margin-bottom: 12.0pt; mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none; text-justify: inter-ideograph;"><span style="font-size: 12.0pt; mso-bidi-font-family: Arial;">That's no easy task. <span style="mso-spacerun: yes;"> </span>If our companies are to meet this high standard of excellence we must first understand what it is we believe in and are committed to and be certain that it is well aligned with the beliefs and desires of our customers.<span style="mso-spacerun: yes;"> </span>We have to be certain that every employee in our companies understands our mission and is passionately committed to it.<span style="mso-spacerun: yes;"> </span>We need to make sure that we are always pushing ourselves to be better.<span style="mso-spacerun: yes;"> </span>We are not just striving to be better than our competition, but for constant improvement in our own deliverables.<span style="mso-spacerun: yes;"> </span>Steve Jobs created a culture at Apple that was not only willing to obsolete it’s own products, but actively sought to do so.<span style="mso-spacerun: yes;"> </span></span><span style="font-size: 12.0pt; mso-bidi-font-family: Arial;">Apple seeks constantly to improve.</span></div><div class="MsoNormal" style="margin-bottom: 12.0pt; mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none; text-justify: inter-ideograph;"><span style="font-size: 12.0pt; mso-bidi-font-family: Arial;">Does your company wait for your competitors to drive you to innovate and improve, or do you believe you are your own competition? <span style="mso-spacerun: yes;"> </span>It means constantly challenging yourself to see if your customers’ experiences can be better, more beautiful, simpler, more elegant, more in tune with what people will embrace. <span style="mso-spacerun: yes;"> </span>It's a painstaking undertaking that means sweating all the details, because your heart and soul is in it, and because it's become your baby, and you want it to be absolutely perfect.<o:p></o:p></span></div><div class="MsoNormal" style="margin-bottom: 12.0pt; mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none; text-justify: inter-ideograph;"></div><div class="MsoNormal" style="margin-bottom: 12.0pt; mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none; text-justify: inter-ideograph;"></div><div class="MsoNormal" style="margin-bottom: 12.0pt; mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none; text-justify: inter-ideograph;"></div><div class="MsoNormal" style="margin-bottom: 12.0pt; mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none; text-justify: inter-ideograph;"></div><div class="MsoNormal" style="margin-bottom: 12.0pt; mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none; text-justify: inter-ideograph;"><span style="font-size: 12.0pt; mso-bidi-font-family: Arial;">Then once it is delivered, do you sit back and wait?<span style="mso-spacerun: yes;"> </span>Or, do you press forward to improve it yet further.<span style="mso-spacerun: yes;"> </span>Do you seek to make the customer experience even better?</span><span style="font-family: Times; font-size: 12.0pt; mso-bidi-font-family: Times;"><o:p></o:p></span></div><div class="MsoNormal" style="margin-bottom: 12.0pt; mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none; text-justify: inter-ideograph;"><span style="font-size: 12.0pt; mso-bidi-font-family: Arial;">Most people and companies don't bother to do this. <span style="mso-spacerun: yes;"> </span>Most find it easier to rest on yesterday’s successes.<span style="mso-spacerun: yes;"> </span>That's why Apple is such a standout. <span style="mso-spacerun: yes;"> </span>For many the passion, the heartache and the pressure that's required is just too much. <span style="mso-spacerun: yes;"> </span>They fall back to what is easy - mediocrity. <span style="mso-spacerun: yes;"> </span>They punch the clock, go home at five satisfied to have put another day’s work in the rear view mirror, and don't really push themselves or their team toward greatness.</span><span style="font-family: Times; font-size: 12.0pt; mso-bidi-font-family: Times;"><o:p></o:p></span></div><div class="MsoNormal" style="margin-bottom: 12.0pt; mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none; text-justify: inter-ideograph;"><span style="font-size: 12.0pt; mso-bidi-font-family: Arial;">HP's TouchPad is a case in point. <span style="mso-spacerun: yes;"> </span>Think for a moment about that product and the team behind it. <span style="mso-spacerun: yes;"> </span>Were they really trying to reinvent the world? <span style="mso-spacerun: yes;"> </span>Were they trying to create the best new tablet possible?<span style="mso-spacerun: yes;"> </span>Were they trying to define or deliver a brand new user experience to their customers?<span style="mso-spacerun: yes;"> </span>No. If they were, they certainly weren't trying hard enough. <span style="mso-spacerun: yes;"> </span>Because all they created was an iPad clone.<span style="mso-spacerun: yes;"> </span>They didn’t break the mold or create something truly new and innovative. <span style="mso-spacerun: yes;"> </span>Why would anyone buy a bad imitation of the original for the same price? <span style="mso-spacerun: yes;"> </span>They wouldn't and didn't, and consequently HP failed.</span><span style="font-family: Times; font-size: 12.0pt; mso-bidi-font-family: Times;"><o:p></o:p></span></div><div class="MsoNormal" style="margin-bottom: 12.0pt; mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none; text-justify: inter-ideograph;"><span style="font-size: 12.0pt; mso-bidi-font-family: Arial;">If HP had a Steve Jobs culture, they would have made something completely different. <span style="mso-spacerun: yes;"> </span>They would have pushed themselves to make something better. <span style="mso-spacerun: yes;"> </span>Better could have been cheaper; better could have been something dramatically different that makes people rethink whether an iPad is the tablet for them; better could have had consumers wondering how they ever lived without it. <span style="mso-spacerun: yes;"> </span>But HP took the easy way out and simply made a copy of someone else’s idea.<span style="mso-spacerun: yes;"> </span>They didn’t strive to be better or different.<span style="mso-spacerun: yes;"> </span>They settled for mediocrity.</span><span style="font-family: Times; font-size: 12.0pt; mso-bidi-font-family: Times;"><o:p></o:p></span></div><div class="MsoNormal" style="margin-bottom: 12.0pt; mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none; text-justify: inter-ideograph;"><span style="font-size: 12.0pt; mso-bidi-font-family: Arial;">For many companies, taking the easy way out is relatively acceptable. <span style="mso-spacerun: yes;"> </span>You can sometimes even get away with it for a bit, and be just one more of the many competitors in a market.<span style="mso-spacerun: yes;"> </span>But, if you take the easy path you won't stand out, you will never be Apple, and you will never be the Steve Jobs of your company.</span><span style="font-family: Times; font-size: 12.0pt; mso-bidi-font-family: Times;"><o:p></o:p></span></div><div class="MsoNormal" style="margin-bottom: 12.0pt; mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none; text-justify: inter-ideograph;"><span style="font-size: 12.0pt; mso-bidi-font-family: Arial;">So the opportunity for you, as an entrepreneur, manager, executive, technologist, or whatever your job is, is to follow in Steve Jobs' footprints.<span style="mso-spacerun: yes;"> </span>Be the Steve Jobs of your company. <span style="mso-spacerun: yes;"> </span>Just like him, you can push yourself and your team to create exceptional products, service, and customer experiences that are so special that in forty years you'll look back and be proud that you were part of it. <span style="mso-spacerun: yes;"> </span>It's the key to your business success, your company's ability to compete in today's kill or be killed economy, and it's the key to a rewarding, fulfilling career and personal happiness.<o:p></o:p></span></div><div class="MsoNormal" style="margin-bottom: 12.0pt; mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none; text-justify: inter-ideograph;"><span style="font-size: 12.0pt; mso-bidi-font-family: Arial;">Do something you really, really love, do it better than anyone else, and do it first.<o:p></o:p></span></div><div class="MsoNormal" style="margin-bottom: 12.0pt; mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none; text-justify: inter-ideograph;"><br />
</div><!--EndFragment-->Bruce Carpenterhttp://www.blogger.com/profile/00509920552835244724noreply@blogger.com0tag:blogger.com,1999:blog-2073286383972548773.post-20412798933498980872011-08-29T09:45:00.000-04:002011-08-29T09:45:55.687-04:00How Great Leaders Inspire Action - The Golden CircleRecently while researching an idea, I came across an inspiring talk on TED. I want to share this particular talk with followers of our HBV Blog as I feel this is a very powerful concept that can help us understand why some business are more successful than others, why some people are more inspiring leaders than others, and why some communications are more effective. First, for those not familiar with TED, a short introduction.<br />
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For those who are unfamiliar with TED - TED is a nonprofit devoted to Ideas Worth Spreading. It started out (in 1984) as a conference bringing together people from three worlds: Technology, Entertainment, Design. Since then its scope has become ever broader. Today the TED website, <a href="http://www.TED.com/">www.TED.com</a>, offers the best talks and performances from TED and partners available to the world, for free. More than 900 TEDTalks are now available, with more added each week. <br />
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TED believes passionately in the power of ideas to change attitudes, lives and ultimately, the world. TED is a clearinghouse that offers free knowledge and inspiration from the world's most inspired thinkers, and also a community of curious souls to engage with ideas and each other.<br />
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If you have never visited the TED website, I encourage you to spend a few minutes browsing the site and becoming familiar with it. You may find an inspiring idea or thought, or even have one of your own you wish to share with others. I often consult TED when I am looking for thoughts to help explain or clarify ideas I am working on.<br />
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Now for the TED talk I wish to share. <br />
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Why is Apple so successful? Why was Martin Luther King such an inspirational leader? Why did the Wright brothers succeed in achieving the first powered flight? It turns out the answer is both simple and powerful. It is all embraced within the idea of the "Golden Circle" of what, how, and why.<br />
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Please take a few minutes and watch the video at this web link: <a href="http://www.ted.com/talks/simon_sinek_how_great_leaders_inspire_action.html">http://www.ted.com/talks/simon_sinek_how_great_leaders_inspire_action.html</a>.<br />
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I think you will find Simon Sinek has distilled a very powerful idea into an easily understood and well communicated 18 minute TED Talk. I encourage you to be inspired by this as well. Think about how it may apply to your own endeavors. Most of all, I believe it will help you understand a path to more effective communication. Enjoy Simon Sinek's TED talk and think about how you can apply to your life and efforts.<br />
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I will let Simon speak for his own idea as he does an outstanding job in communicating his insight.<br />
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Bruce Carpenterhttp://www.blogger.com/profile/00509920552835244724noreply@blogger.com0tag:blogger.com,1999:blog-2073286383972548773.post-36732299074087130802010-08-26T06:19:00.001-04:002010-08-26T06:22:49.125-04:00A Series of Discussions on Conducting Better Meetings<div align="center" class="MsoNormal" style="text-align: center;"><b style="mso-bidi-font-weight: normal;"><span style="font-size: 14pt;">Process for Reaching Meeting Objectives<o:p></o:p></span></b></div><div class="MsoNormal"><br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt; text-align: justify;">Once the meeting objectives have been defined it is next important that the agenda clearly describes how the objectives will be achieved. This includes the specific steps to be followed during the meeting to achieve the objectives.</div><div class="MsoNormal" style="margin-bottom: 6.0pt; text-align: justify;">In reviews of our clients' meeting processes we often find that too much time is devoted in their meetings to communicate information to the participants to achieve a common level of understanding. Meaningful discussions are difficult to conduct if meeting participants are not informed on the relevant issues and background information. If a significant portion of the meeting agenda is devoted to getting the group to a common level of understanding, it is both a waste of important meeting time and often leaves insufficient time for actual decision-making. We are all for requisite briefings in meetings to make sure an appropriate level set is accomplished and participants understand the context of the meeting objectives and related decisions. However, it is the decision making process that is the true value of assembling the group for the meeting and this should comprise the bulk of the meeting agenda.</div><div class="MsoNormal" style="margin-bottom: 6.0pt; text-align: justify;">It is important to achieving the organization’s objectives to make certain that stakeholders in decisions, those responsible for carrying them out and those subject to their consequences, feel ownership in the decisions and are thoroughly bought into them. For this reason, the manner in which the meeting’s decisions are reached must allow for sufficient participation of the group’s members in both the discussions and decision-making process. The agenda should expressly reflect this in the agenda items, their description, and the time allowed for each activity.</div><div class="MsoNormal" style="margin-bottom: 6.0pt; text-align: justify;">Meeting participants can be expected to have individual perspectives on issues and often also have their own agendas that they wish to pursue. It is important to allow for expression of helpful perspectives relevant that are not in conflict with the overall corporate objectives. However, it is the job of a skilled facilitator to try not to let particular biases, individual agendas that may be inconsistent with corporate objectives, or particularly vocal participants dominate the discussions by encouraging broad group participation and reminding the team when appropriate of the corporate context of the objectives and related decisions that must be taken.</div><div class="MsoNormal" style="margin-bottom: 6.0pt; text-align: justify;">It is important that the meeting’s proceedings, including the discussions, any conclusions, and all decisions be well documented and shared after the meeting with all participants.</div><div class="MsoNormal" style="margin-bottom: 6.0pt; text-align: justify;">As previously stated in early discussions on effective meetings, the agenda should be carefully managed to keep as close as possible to the intended schedule and the meetings should always begin and end on time. Despite the fact that managers understand the time of meeting participants is extremely valuable, we often find the discipline of starting meetings on time and rapidly moving into the business items on the agenda is absent. Should you find this lack of discipline in your meetings we strongly suggest addressing it as an urgent priority. Make it clear to meeting participants that henceforth meetings will begin (and end) on time and they are expected to come on time as well and be prepared when they arrive.</div>Bruce Carpenterhttp://www.blogger.com/profile/00509920552835244724noreply@blogger.com0tag:blogger.com,1999:blog-2073286383972548773.post-10287476533239956822010-08-23T08:05:00.001-04:002010-08-23T08:08:17.212-04:00A Series of Discussions on Conducting Better Meetings - Creating a Strategic Agenda<div class="Section1"><div align="center" class="MsoNormal" style="text-align: center;"><b style="mso-bidi-font-weight: normal;"><span style="font-size: 14pt;">Creating a Strategic Agenda<o:p></o:p></span></b></div><div class="MsoNormal"><br />
</div><div class="MsoNormal"><div style="text-align: justify;">The first task in organizing an effective meeting is the creation of a strategic agenda with commonly understood goals and objectives that are meaningful and current to the success of the business. Even the most skilled facilitator cannot overcome a poor agenda.</div></div><div class="MsoNormal"><div style="text-align: justify;"><br />
</div></div><div class="MsoNormal"><div style="text-align: justify;">An effective strategic agenda clearly lays out the goals and objectives that the team of participants is expected to accomplish. These may include – questions that need to be answered, decisions required of the team, challenges for which solutions are being sought, assignments that need to be made, or some other such matters.</div></div><div class="MsoNormal"><div style="text-align: justify;"><br />
</div></div><div class="MsoNormal"><div style="text-align: justify;">The goals and objectives reflected in the agenda should be sufficiently meaningful and relevant to the success of the business to justify assembling the team of participants and taking time away from their day-to-day responsibilities. If the subject of the meeting is deemed by the participants to be less consequential to the success of the business than the activities and responsibilities they have left behind to attend the meeting, they will likely not be fully engaged and the meeting will be unfocused and unproductive.</div></div><div class="MsoNormal"><div style="text-align: justify;"><br />
</div></div><div class="MsoNormal"><div style="text-align: justify;">The goals and objectives for the meeting stated in the objective should be sufficiently meaningful and current to the success of the business to justify assembling the team to discuss them at this time. Assembling the team of participants required for the contemplated meeting will take time away from the day-to-day responsibilities of the participants. If the goals and objectives for the meeting are less consequential or immediate than those day-to-day activities to the success of the business, the meeting will only be perceived as a distraction and impediment to accomplishing those activities. While it is clearly important to address important matters on which the future success of the business depends, managers must be careful to balance intermediate to longer term planning and decision making with the urgent and essential current priorities of the business.</div></div><div class="MsoNormal"><div style="text-align: justify;"><br />
</div></div><div class="MsoNormal"><div style="text-align: justify;">A good strategic agenda should address both <u>meaningful</u> and <u>timely</u> goals and objectives.</div></div><div class="MsoNormal"><div style="text-align: justify;"><br />
</div></div><div class="MsoNormal"><div style="text-align: justify;">We generally use the acronym SMART to describe the characteristics of strategic objectives. SMART objectives are <b style="mso-bidi-font-weight: normal;"><u>S</u></b>pecific, <b style="mso-bidi-font-weight: normal;"><u>M</u></b>easurable, <b style="mso-bidi-font-weight: normal;"><u>A</u></b>ttainable, <b style="mso-bidi-font-weight: normal;"><u>R</u></b>ealistic, and <b style="mso-bidi-font-weight: normal;"><u>T</u></b>imely. Meeting organizers should carefully examine the goals and objectives for a meeting to be sure they meet these criteria.</div></div><div class="MsoNormal"><div style="text-align: justify;"><br />
</div></div><div class="MsoNormal"><div style="text-align: justify;">We like to see action verbs such as the following used to articulate meeting objectives: </div></div></div><div style="text-align: justify;"><span style="font-family: Arial; font-size: 10pt;"><br clear="ALL" style="mso-break-type: section-break; page-break-before: auto;" /> </span> </div><div class="Section2"><div class="MsoNormal"><div style="text-align: justify;">Analyze</div></div><div class="MsoNormal"><div style="text-align: justify;">Assign</div></div><div class="MsoNormal"><div style="text-align: justify;">Develop</div></div><div class="MsoNormal"><div style="text-align: justify;">Identify</div></div><div class="MsoNormal"><div style="text-align: justify;">Prioritize</div></div><div class="MsoNormal"><div style="text-align: justify;">Request</div><div style="text-align: justify;">Announce</div><div style="text-align: justify;">Brainstorm</div><div style="text-align: justify;">Decide</div><div style="text-align: justify;">Improve</div><div style="text-align: justify;">Reevaluate</div></div><div class="MsoNormal"><div style="text-align: justify;">Review</div><div style="text-align: justify;">Appropriate</div></div><div class="MsoNormal"><div style="text-align: justify;">Categorize</div></div><div class="MsoNormal"><div style="text-align: justify;">Delegate</div></div><div class="MsoNormal"><div style="text-align: justify;">Evaluate</div></div><div class="MsoNormal"><div style="text-align: justify;">Learn</div></div><div class="MsoNormal"><div style="text-align: justify;">Refine</div></div><div class="MsoNormal"><div style="text-align: justify;">Summarize</div></div><div class="MsoNormal"><div style="text-align: justify;">Approve</div></div><div class="MsoNormal"><div style="text-align: justify;">Clarify</div></div><div class="MsoNormal"><div style="text-align: justify;">Determine</div></div><div class="MsoNormal"><div style="text-align: justify;">Explore</div></div><div class="MsoNormal"><div style="text-align: justify;">Plan</div></div><div class="MsoNormal"><div style="text-align: justify;">Teach</div></div><div class="MsoNormal"><div style="text-align: justify;">Choose</div><div style="text-align: justify;">Action</div></div></div><div class="MsoNormal"><div style="text-align: justify;"><br />
</div></div><div class="MsoNormal"><div style="text-align: justify;">Once the meeting objectives have been determined they should be prioritized. This allows the agenda to effectively deal not only with the relative importance of each objective but also dependencies and potential conflicts amongst the objectives. Prioritizing the objectives will often help sequence or order the agenda.</div></div><div class="MsoNormal"><div style="text-align: justify;"><br />
</div></div><div class="MsoNormal"><div style="text-align: justify;">It is also important to remember not to overload an agenda with too many objectives. An overloaded agenda can often result in over long meetings or a failure to accomplish the objectives within the time allotted for the meeting. It is important that meetings both begin and end in a timely manner so participants can plan their attendance appropriately and make any required accommodations in their schedules to attend.</div></div><div class="MsoNormal"><div style="text-align: justify;"><br />
</div></div><div class="MsoNormal"><div style="text-align: justify;">Generally, we feel that most good meetings should be not more than two hours in length to maintain optimum focus of the participants while achieving meaningful objectives. Generally, it is difficult to accomplish more than one or at most two significant objectives and two or three small items within such a time period. We feel it is better to hold multiple meetings on focused agendas than to overload a single agenda.</div></div>Bruce Carpenterhttp://www.blogger.com/profile/00509920552835244724noreply@blogger.com0tag:blogger.com,1999:blog-2073286383972548773.post-28483370090206684952010-08-22T02:48:00.001-04:002010-08-22T02:51:23.194-04:00A Series of Discussions on Conducting Better Meetings<div class="MsoNormal" style="text-align: left;"><b><div class="MsoNormal" style="text-align: center;"><b style="mso-bidi-font-weight: normal;"><span style="font-size: 14pt;">What Makes a Good Meeting?<o:p></o:p></span></b></div><div class="MsoNormal" style="text-align: justify;"><br />
</div><div class="MsoNormal" style="text-align: justify;"><span class="Apple-style-span" style="font-weight: normal;">There is probably no one reading this discussion that has not complained about going to poorly run, time wasting, and unproductive meetings. It seems to many of us that too many meetings are unsuccessful, too long, unfocused, petty, unproductive, led by domineering or disagreeable individuals, meandering, time wasting, boring … the list goes on and on. In our work with clients we often find that most companies conduct far too many poorly run and unproductive meetings. Many executives and managers are aware of how expensive and time wasting such meetings are but seem at a loss to know what is required to make them more meaningful and productive.<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><br />
</div><div class="MsoNormal" style="text-align: justify;"><span class="Apple-style-span" style="font-weight: normal;">This series of discussions is designed to help managers plan and run more effective meetings.</span><o:p></o:p></div><div class="MsoNormal" style="text-align: justify;"><br />
</div><div class="MsoNormal" style="text-align: justify;"><b style="mso-bidi-font-weight: normal;"><u>So, what makes a good meeting?<o:p></o:p></u></b></div><div class="MsoNormal" style="text-align: justify;"><br />
</div><div class="MsoListParagraph" style="margin-left: 20.4pt; text-align: justify; text-indent: -0.2in;"><span style="color: black; font-family: Symbol;">·<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span><span class="Apple-style-span" style="font-weight: normal;">A strategic agenda with commonly understood goals and objectives that are meaningful and current to the success of the business<o:p></o:p></span></div><div class="MsoListParagraph" style="margin-left: 20.4pt; text-align: justify; text-indent: -0.2in;"><span style="color: black; font-family: Symbol;"><span class="Apple-style-span" style="font-weight: normal;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span><span class="Apple-style-span" style="font-weight: normal;">A clear, agreed process for reaching those goals and objectives that is reflected in the manner in which the meeting is conducted<o:p></o:p></span></div><div class="MsoListParagraph" style="margin-left: 20.4pt; text-align: justify; text-indent: -0.2in;"><span style="color: black; font-family: Symbol;"><span class="Apple-style-span" style="font-weight: normal;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span><span class="Apple-style-span" style="font-weight: normal;">Consistent and well-understood ground rules for conducting the meeting<o:p></o:p></span></div><div class="MsoListParagraph" style="margin-left: 20.4pt; text-align: justify; text-indent: -0.2in;"><span style="color: black; font-family: Symbol;"><span class="Apple-style-span" style="font-weight: normal;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span><span class="Apple-style-span" style="font-weight: normal;">A skilled meeting facilitator / leader / chairperson who conveys to those attending a sense of involvement and empowerment. It is critically important that those who will carry out the decisions reached in the meeting feel ownership of the decisions and that they are able to do whatever needs doing to accomplish the stated goals and objectives<o:p></o:p></span></div><div class="MsoListParagraph" style="margin-left: 20.4pt; text-align: justify; text-indent: -0.2in;"><span style="color: black; font-family: Symbol;"><span class="Apple-style-span" style="font-weight: normal;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span><span class="Apple-style-span" style="font-weight: normal;">Proper preparation prior to the meeting to be certain<o:p></o:p></span></div><div class="MsoListParagraph" style="margin-left: 78pt; text-align: justify; text-indent: -0.25in;"><span style="font-family: 'Courier New';"><span class="Apple-style-span" style="font-weight: normal;">o</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span><span class="Apple-style-span" style="font-weight: normal;">The right participants are attending<o:p></o:p></span></div><div class="MsoListParagraph" style="margin-left: 78pt; text-align: justify; text-indent: -0.25in;"><span style="font-family: 'Courier New';"><span class="Apple-style-span" style="font-weight: normal;">o</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span><span class="Apple-style-span" style="font-weight: normal;">Participants come to the meeting properly prepared<o:p></o:p></span></div><div class="MsoListParagraph" style="margin-left: 78pt; text-align: justify; text-indent: -0.25in;"><span style="font-family: 'Courier New';"><span class="Apple-style-span" style="font-weight: normal;">o</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span><span class="Apple-style-span" style="font-weight: normal;">The facilitator / chairperson / leader is properly prepared</span><o:p></o:p></div><div class="MsoListParagraph" style="margin-left: 78pt; text-align: justify; text-indent: -0.25in;"><span class="Apple-style-span" style="font-weight: normal;"><br />
</span></div><div class="MsoNormal" style="text-align: justify;"><span class="Apple-style-span" style="font-weight: normal;">These seem like quite simple rules. When discussing them with our clients we seldom get any dispute on these critical elements to a successful meeting. However, when we ask them to reflect on how often these are carefully observed in their own meetings we generally find that at least one and often many of these elements are missing.<o:p></o:p></span></div><div class="MsoNormal" style="text-align: justify;"><br />
</div><div class="MsoNormal" style="text-align: justify;"><span class="Apple-style-span" style="font-weight: normal;">Training an organization to run effective and productive meetings is in many respects analogous to preparing a sports team to excel in competition. Most managers can be trained to develop a strategic agenda and facilitate or chair a good meeting, although it takes not only training, but also practice and repetition as well to become truly proficient. However, the more people within a group who have good meeting process and communication skills, the easier will be the task of the chairperson and the more satisfactory the end results of the meeting.</span><o:p></o:p></div></b></div><div align="center" class="MsoNormal" style="text-align: center;"></div>Bruce Carpenterhttp://www.blogger.com/profile/00509920552835244724noreply@blogger.com0tag:blogger.com,1999:blog-2073286383972548773.post-4631451036115756972010-03-19T18:05:00.015-04:002010-04-09T08:57:20.419-04:00Developing a Balanced Scorecard for Commercial Banking<div style="text-align: justify;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">In recent months HBV has been working with a large regional Bank on a Business Transformation exercise. Essentially the purpose of the engagement is to transform the current practices of the client to more closely comply with an industry best practices model. The results of this should include increased productivity, improved performance, increased customer satisfaction, enterprise growth, and improved utilisation of human resources. The Bank we have been working with expects rapid growth in the next several years both from organic growth and an aggressive acquisition strategy. This exercise will prepare the enterprise to better manage this growth as well as provide a better platform for the integration of future acquisitions.</span></span></div><div style="text-align: justify;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span><span class="Apple-style-span" style="font-size: small;"> </span></div><div style="text-align: justify;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">One of the topics we have spent time with our Banking client on is the importance of a Balanced Scorecard to track and measure performance of the enterprise.</span></span><br />
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<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">When implementing a Performance Management system for any enterprise, it is important to make certain to appropriately balance all competing priorities and imperatives of the business. The Balanced Scorecard approach is an effective methodology for accomplishing this balance.</span></span></div><div style="text-align: justify;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span><span class="Apple-style-span" style="font-size: small;"> </span></div><div style="text-align: justify;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">We felt that while the below comments were developed for our banking client, followers of the HBV Blog would be able to easily understand how to apply the same approach to their own enterprise using the below described approach as a model.</span></span><br />
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<span class="Apple-style-span" style="font-weight: bold;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">Developing a Balanced Scorecard</span></span></span><br />
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<span class="Apple-style-span" style="font-weight: bold;"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">When considering the strategic process, this provides an opportunity to consider the set of performance measures adopted by the Bank to measure the success of its strategy. To assess the effectiveness of any set of performance measures it is most appropriate to use the Balanced Scorecard concept.</span></span></span></span><br />
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<span class="Apple-style-span" style="font-weight: bold;"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-weight: bold;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">What is a Balanced Scorecard?</span></span></span></span></span><br />
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<span class="Apple-style-span" style="font-weight: bold;"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-weight: bold;"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">A new approach to strategic management was developed in the early 1990's by Drs. Robert Kaplan (Harvard Business School) and David Norton. They named this system the 'balanced scorecard'. Recognising some of the weaknesses and vagueness of previous management approaches, the balanced scorecard approach provides a clear prescription as to what companies should measure in order to 'balance' the financial perspective.</span></span></span></span></span></span><br />
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<span class="Apple-style-span" style="font-weight: bold;"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">The balanced scorecard is a </span></span></span><em><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">management system</span></span></span></em><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;"> (not only a measurement system) that enables organisations to clarify their vision and strategy and translate them into action. It provides feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results. When fully deployed, the balanced scorecard transforms strategic planning from an academic exercise into the nerve center of an enterprise.</span></span></span></span><br />
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<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">Kaplan and Norton describe the innovation of the balanced scorecard as follows:</span></span><br />
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<span class="Apple-style-span" style="font-weight: bold;"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-weight: bold;"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-weight: bold;"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">"The balanced scorecard retains traditional financial measures. But financial measures tell the story of past events, an adequate story for industrial age companies for which investments in long-term capabilities and customer relationships were not critical for success. These financial measures are inadequate, however, for guiding and evaluating the journey that information age companies must make to create future value through investment in customers, suppliers, employees, processes, technology, and innovation."</span></span></span></span></span></span></span></span><br />
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<span class="Apple-style-span" style="font-weight: bold;"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-weight: bold;"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-weight: bold;"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-weight: bold;"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">The balanced scorecard suggests that we view the organisation from </span></span></span><u><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">four</span></span></span></u><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;"> perspectives, and to develop metrics, collect data and analyze it relative to each of these perspectives:</span></span></span></span></span></span></span></span></span></span></div><div class="MsoBodyText"></div><ul><li><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">The Financial Perspective</span></span></span></li>
<li><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">The Customer Perspective</span></span></span></li>
<li><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">The Business Process Perspective</span></span></span></li>
<li><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">The Learning and Growth Perspective</span></span></span></li>
</ul><h2 style="text-align: justify;"><span lang="EN-GB"><h3 style="text-align: justify;"><span lang="EN-GB"> <span class="Apple-style-span" style="font-size: small;"><br />
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<div class="MsoCaption" style="text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg_LRCVfnDZ6mv06SJL-9Ag6nZxmwoGgo91UZc2w4ZrFfFUp39Pq0r1xz9WoSRzQ-AaP5auBOXU8Xfo8W5CEtUBjveo5djhsavzx6fdtvOcSx554uv_YJQE7lBHi7ZE0p7-Mrzl_-oGvYs/s1600-h/Balanced+Scorecard.gif" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><span class="Apple-style-span" style="font-size: small;"><img border="0" height="317" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg_LRCVfnDZ6mv06SJL-9Ag6nZxmwoGgo91UZc2w4ZrFfFUp39Pq0r1xz9WoSRzQ-AaP5auBOXU8Xfo8W5CEtUBjveo5djhsavzx6fdtvOcSx554uv_YJQE7lBHi7ZE0p7-Mrzl_-oGvYs/s400/Balanced+Scorecard.gif" width="400" /></span></a></div><span class="Apple-style-span" style="font-size: small;"><br />
</span> </div><div class="MsoCaption" style="text-align: center;"><span class="Apple-style-span" style="font-size: small;">Figure 1</span></div><div class="MsoBodyText" style="text-align: justify;"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-size: small;"><br />
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<span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-size: small;"> </span><span lang="EN-GB"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">The Balanced Scorecard approach is designed to address some of the weaknesses of other performance management systems that tend to create conflicting goals or objectives within an entity.</span></span><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;"> </span></span><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">This frequently results when objectives for organisational units are too closely tied to business unit goals rather than set to align with higher Entity level objectives.</span></span><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;"> </span></span><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">When the Bank’s objectives are established, measured, and managed across the four dimensions of the Balanced Scorecard this tends to “balance” the perspectives of the managing the enterprise to optimise both short term and long performance through the balanced considerations.</span></span><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;"> </span></span><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">Additionally, all organisational units should similarly take a balanced scorecard approach to business unit objectives making certain to focus on their ability to contribute to accomplishment of all of the Bank’s entity level objectives and measures.</span></span></span></span><br />
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<span class="Apple-style-span" style="font-weight: normal;"><span lang="EN-GB"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-weight: bold;"><span class="Apple-style-span" style="font-size: small;">The Balanced Scorecard and Measurement-Based Management</span></span></span></span></span><br />
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<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif; font-weight: normal;"><span class="Apple-style-span" style="font-size: small;">The balanced scorecard methodology builds on some key concepts of previous management ideas such as Total Quality Management (TQM), including customer-defined quality, continuous improvement, employee empowerment, and -- primarily -- measurement-based management and feedback.</span></span><br />
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<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif; font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial; font-weight: bold;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">Double-Loop Feedback</span></span><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;"> </span></span></span></span></span><br />
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<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif; font-weight: normal;"><span class="Apple-style-span" style="font-size: small;">In traditional industrial activity, "quality control" and "zero defects" were the watchwords. In order to shield the customer from receiving poor quality products, aggressive efforts were focused on inspection and testing at the end of the production line. The problem with this approach -- as pointed out by Deming -- is that the true causes of defects could never be identified, and there would always be inefficiencies due to the rejection of defects. What Deming saw was that variation is created at every step in a production process, and the causes of variation need to be identified and fixed. If this can be done, then there is a way to reduce the defects and improve product quality indefinitely. To establish such a process, Deming emphasized that all business processes should be part of a system with feedback loops. The feedback data should be examined by managers to determine the causes of variation, what are the processes with significant problems, and then they can focus attention on fixing that subset of processes.</span></span><br />
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<span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">The balanced scorecard incorporates feedback around internal business process </span></span></span><em><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">outputs</span></span></span></em><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">, as in TQM, but also adds a feedback loop around the </span></span></span><em><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">outcomes </span></span></span></em><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">of business strategies. This creates a "double-loop feedback" process in the balanced scorecard.</span></span></span><br />
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<span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-weight: bold;"><span class="Apple-style-span" style="font-size: small;">Outcome Metrics</span></span></span></span><br />
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<span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-weight: bold;"><span class="Apple-style-span" style="font-family: Arial;"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">Y</span></span></span><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">ou can't improve what yo</span></span></span><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">u can't measure. So metrics must be developed based on the priorities of the strategic plan, which provides the key business drivers and criteria for metrics that managers most desire to watch. Processes are then designed to collect information relevant to these metrics and reduce it to numerical form for storage, display, and analysis. Decision makers examine the outcomes of various measured processes and strategies and track the results to guide the company and provide feedback.</span></span></span></span></span></span></span><br />
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span></span><br />
<span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-weight: bold;"><span class="Apple-style-span" style="font-family: Arial;"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">So the value of metrics is in their ability to provide a factual basis for defining:</span></span></span></span></span></span></span></div><h4 style="text-align: justify;"><span lang="EN"><h4 style="text-align: justify;"><span lang="EN"><h4 style="text-align: justify;"><span lang="EN"><ul><li><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">Strategic feedback to show the present status of the organization from many perspectives for decision makers</span></span></span></li>
<li><span lang="EN-GB"><span lang="EN-GB"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">Diagnostic feedback into various processes to guide improvements on a continuous basis</span></span></span></span></span></li>
<li><span lang="EN-GB"><span lang="EN-GB"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">Trends in performance over time as the metrics are tracked</span></span></span></span></span></li>
<li><span lang="EN-GB"><span lang="EN-GB"><span lang="EN-GB"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">Feedback around the measurement methods themselves, and which metrics should be tracked</span></span></span></span></span></span></li>
<li><span lang="EN-GB"><span lang="EN-GB"><span lang="EN-GB"><span lang="EN-GB"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">Quantitative inputs to forecasting methods and models for decision support systems</span></span></span></span></span></span></span></li>
</ul><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-weight: bold;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">Management by Fact</span></span></span><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;"> </span></span></span><span class="Apple-style-span" style="font-size: small;"><br />
</span> <span class="Apple-style-span" style="font-size: small;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"></span></span><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span></span><span class="Apple-style-span" style="font-size: small;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"></span></span><span class="Apple-style-span" style="font-size: small;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"></span></span><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">The goal of making measurements is to permit managers to see their company more clearly -- from many perspectives -- and hence to make wiser long-term decisions. The Baldrige Criteria (1997) booklet reiterates this concept of fact-based management:</span></span></span><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span><span class="Apple-style-span" style="font-size: small;"> </span><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;"> </span></span><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span><span class="Apple-style-span" style="font-size: small;"> </span><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;"> </span></span><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-size: small;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"></span></span></span><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">"Modern businesses depend upon measurement and analysis of performance. Measurements must derive from the company's strategy and provide critical data and information about key processes, outputs and results. Data and information needed for performance measurement and improvement are of many types, including: customer, product and service performance, operations, market, competitive comparisons, supplier, employee-related, and cost and financial. Analysis entails using data to determine trends, projections, and cause and effect -- that might not be evident without analysis. Data and analysis support a variety of company purposes, such as planning, reviewing company performance, improving operations, and comparing company performance with competitors' or with 'best practices' benchmarks."</span></span></span><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span><span class="Apple-style-span" style="font-size: small;"> </span><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;"> </span></span></span><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span><span class="Apple-style-span" style="font-size: small;"> </span><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;"> </span></span><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">"A major consideration in performance improvement involves the creation and use of performance measures or indicators. Performance measures or indicators are measurable characteristics of products, services, processes, and operations the company uses to track and improve performance. The measures or indicators should be selected to best represent the factors that lead to improved customer, operational, and financial performance. A comprehensive set of measures or indicators tied to customer and/or company performance requirements represents a clear basis for aligning all activities with the company's goals. Through the analysis of data from the tracking processes, the measures or indicators themselves may be evaluated and changed to better support such goals.</span></span></span><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span><span class="Apple-style-span" style="font-size: small;"> </span><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;"> </span></span><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-size: small;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"></span> </span><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;"> </span></span></span><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span><span class="Apple-style-span" style="font-size: small;"> </span><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;"> </span></span><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-weight: bold;"><span lang="EN-GB"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">Balanced Scorecard Perspectives</span></span></span><span lang="EN-GB"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;"> </span></span></span></span></span></span><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span><span class="Apple-style-span" style="font-size: small;"> </span><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;"> </span></span></span><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span><span class="Apple-style-span" style="font-size: small;"> </span><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;"> </span></span><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-weight: bold;"><span lang="EN-GB"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">The Balanced Scorecard is a framework for translating an entity’s strategic objectives into a set of four linked performance components. The Balanced Scorecard concept includes the following:</span></span></span></span></span></span><span class="Apple-style-span" style="font-size: small;"><br />
</span> <span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;"><br />
</span></span><br />
<h3 style="text-align: justify;"><span lang="EN-GB"><span class="Apple-style-span" style="font-weight: normal;"><ul><li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">Financial perspective - how does the Bank look to stakeholders?</span></span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">Customer or market perspective - how do customers see the Bank?</span></span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">Process perspective - what must the Bank excel at to succeed?</span></span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">Learning and growth perspective - can the Bank continue to improve and create value?</span></span></li>
</ul></span></span><span lang="EN-GB"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-weight: bold;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">The Financial Perspective</span></span><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;"> </span></span></span></span></span></span><span class="Apple-style-span" style="font-size: small;"><br />
</span> <span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-weight: normal;"> </span></span><span class="Apple-style-span" style="font-size: small;"><br />
</span><span lang="EN-GB"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-weight: bold;"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">Kaplan and Norton do not disregard the traditional need for financial data. Timely and accurate funding data will always be a priority, and managers will do whatever necessary to provide it. In fact, often there is more than enough handling and processing of financial data. With the implementation of a corporate database, it is hoped that more of the processing can be centralized and automated. But the point is that the frequent emphasis on financials leads to the "unbalanced" situation with regard to other perspectives.</span></span></span></span></span></span><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-size: small;"><br />
</span> </span></span><span class="Apple-style-span" style="font-size: small;"><br />
</span> <span lang="EN-GB"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-weight: bold;"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">There is perhaps a need to include additional financial-related data, such as risk assessment and cost-benefit data, in this category.</span></span></span></span></span></span></h3><h3 style="text-align: justify;"><span lang="EN-GB"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-weight: bold;"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-weight: bold;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">The Customer or Market Perspective </span></span></span></span></span></span></span></h3><h3 style="text-align: justify;"><span lang="EN-GB"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-weight: bold;"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-weight: bold;"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">Recent management philosophy has shown an increasing realization of the importance of customer focus and customer satisfaction in any business. These are leading indicators: if customers are not satisfied, they will eventually find other suppliers that will meet their needs. Poor performance from this perspective is thus a leading indicator of future decline, even though the current financial picture may look good.</span></span></span></span></span></span></span></span></h3><h3 style="text-align: justify;"><span lang="EN-GB"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-weight: bold;"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-weight: bold;"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">In developing metrics for satisfaction, customers should be analyzed in terms of kinds of customers and the kinds of processes for which the Bank is providing a product or service to those customer groups.</span></span></span></span></span></span></span></span></h3><h3 style="text-align: justify;"><span lang="EN-GB"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-weight: bold;"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-weight: bold;"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-weight: bold;"><span class="Apple-style-span" style="font-size: small;">The Business Process Perspective </span></span></span></span></span></span></span></span></span></h3><h3 style="text-align: justify;"><span lang="EN-GB"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-weight: bold;"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-weight: bold;"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-weight: bold;"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-size: small;">This perspective refers to internal business processes. Metrics based on this perspective allow managers to know how well the Bank is running, and whether its products and services conform to customer requirements (the mission). These metrics have to be carefully designed by those who know these processes most intimately; with Bank’s unique missions these are not something that can be developed by outside consultants.</span></span></span></span></span></span></span></span></span></span></h3><h3 style="text-align: justify;"><span lang="EN-GB"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-weight: bold;"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-weight: bold;"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-weight: bold;"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial; font-weight: bold;"><span lang="EN"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">In addition to the strategic management process, two kinds of business processes may be identified: a) resource management processes, and b) core business processes. </span></span></span></span><span lang="EN-GB"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">Resource management processes are business processes that both acquire and provide appropriate and sufficient resources to the other business processes. By their nature resource management processes are the province of management. They are also often more difficult to measure directly or to find appropriate peer group comparisons. Core business processes are the processes that develop, produce, sell, and distribute an entity’s products and services. These processes do not follow traditional organisational or functional lines, but reflect the grouping of related business activities. Core business processes because of their often more repetitive nature are easier to measure and benchmark using generic measurements and peer group comparisons.</span></span></span></span></span></span></span></span></span></span></span></span></span></span></h3><h3 style="text-align: justify;"><span lang="EN-GB"><h4 style="text-align: justify;"><span lang="EN"><h4 style="text-align: justify;"><span lang="EN"><h4 style="text-align: justify;"><span lang="EN"><span class="Apple-style-span" style="font-weight: normal;"><b><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-weight: bold;"><span lang="EN-GB"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">Mission-oriented processes are the special functions of executive management, and many unique problems are encountered in these processes. The support processes which are more repetitive in nature, and hence easier to measure and benchmark using generic metrics.</span></span></span></span></span></span></b></span></span></h4><h4 style="text-align: justify;"><span lang="EN"><span class="Apple-style-span" style="font-weight: normal;"><b><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-weight: bold;"><span lang="EN-GB"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-weight: bold;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">The Learning and Growth Perspective </span></span></span></span></span></span></span></b></span></span></h4><h4 style="text-align: justify;"><span lang="EN"><span class="Apple-style-span" style="font-weight: normal;"><b><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-weight: bold;"><span lang="EN-GB"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-weight: bold;"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">This perspective includes employee training and corporate cultural attitudes related to both individual and corporate self-improvement. In a knowledge-worker organization such as a Bank, </span></span></span><i><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">people</span></span></span></i><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;"> -- the only repository of knowledge -- are the main resource. In the current climate of rapid technological change, it is becoming necessary for knowledge workers to be in a continuous learning mode. Banks sometimes find themselves unable to identify, recruit, and hire new qualified knowledge workers, and at the same time there is sometimes a lack of training of existing employees. This is a leading indicator of 'brain drain' that must be reversed. Metrics can be put into place to guide managers in focusing training funds where they can help the most. In any case, </span></span></span><i><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">learning and growth constitute the essential foundation for success of any knowledge-worker organization.</span></span></span></i></span></span></span></span></span></b></span></span></h4><h4 style="text-align: justify;"><span lang="EN"><span class="Apple-style-span" style="font-weight: normal;"><b><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-weight: bold;"><span lang="EN-GB"><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-weight: bold;"><i><span class="Apple-style-span" style="font-weight: normal;"><span class="Apple-style-span" style="font-style: normal;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: small;">Kaplan and Norton emphasize that 'learning' is more than 'training'; it also includes things like mentors and tutors within the organization, as well as that ease of communication among workers that allows them to readily get help on a problem when it is needed. It also includes technological tools; what the Baldrige criteria call "high performance work systems."</span></span></span></span></i></span></span></span></span></span></b></span></span></h4></span></h4></span></h4></span></h3></span></h4></span></h4></span></h4></span></h3></span></h2><div class="Section2"><div class="MsoBodyText" style="text-align: center;"><span class="Apple-style-span" style="font-weight: bold;"><span lang="EN-GB"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">A Balanced Scorecard for a Bank - at the Strategic Level</span></span></span></div><div class="MsoBodyText" style="text-align: center;"><b><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><br />
</span> </b></div></div><table border="1" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-bottom-style: none; border-collapse: collapse; border-left-style: none; border-right-style: none; border-top-style: none; margin-left: 0.2in; text-align: justify;"><tbody>
<tr><td style="background: #b2b2b2; border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; border-right: windowtext 1pt solid; border-top: windowtext 1pt solid; mso-border-alt: solid windowtext .75pt; mso-pattern: gray-30 auto; mso-shading: windowtext; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 202.5pt;" valign="top" width="203"><div class="TableHeader"><span lang="EN-GB"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Financial</span></span></div></td><td style="background: #b2b2b2; border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; border-right: windowtext 1pt solid; border-top: windowtext 1pt solid; mso-border-alt: solid windowtext .75pt; mso-border-left-alt: solid windowtext .75pt; mso-pattern: gray-30 auto; mso-shading: windowtext; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 202.5pt;" valign="top" width="203"><div class="TableHeader"><span lang="EN-GB"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Customer or Market</span></span></div></td></tr>
<tr><td style="border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; border-right: windowtext 1pt solid; border-top: windowtext 1pt solid; mso-border-alt: solid windowtext .75pt; mso-border-top-alt: solid windowtext .75pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 202.5pt;" valign="top" width="203"><div class="MsoBodyText" style="margin: 0in 0.3in 0in 0.05in;"><span lang="EN-GB"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><br />
</span> </span><br />
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span lang="EN-GB"></span></span><br />
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span lang="EN-GB"></span></span><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span lang="EN-GB"></span></span><br />
<div style="text-align: left;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Return on Equity</span></div><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><br />
</span></div><div class="MsoBodyText" style="margin: 0in 0.3in 0in 0.05in;"><div style="text-align: left;"><span lang="EN-GB"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Return on Assets</span></span></div></div><div class="MsoBodyText" style="margin: 0in 0.3in 0in 0.05in;"><div style="text-align: left;"><span lang="EN-GB"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Net Interest Margin</span></span></div></div><div class="MsoBodyText" style="margin: 0in 0.3in 0in 0.05in;"><div style="text-align: left;"><span lang="EN-GB"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Revenue Mix</span></span></div></div><div class="MsoBodyText" style="margin: 0in 0.3in 0in 0.05in;"><div style="text-align: left;"><span lang="EN-GB"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Revenue Growth</span></span></div></div><div class="MsoBodyText" style="margin: 0in 0.3in 0in 0.05in;"><div style="text-align: left;"><span lang="EN-GB"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Return on Equity Growth</span></span></div></div><div class="MsoBodyText" style="margin: 0in 0.3in 0in 0.05in;"><div style="text-align: left;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><br />
</span></div></div></td><td style="border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: medium none; mso-border-alt: solid windowtext .75pt; mso-border-left-alt: solid windowtext .75pt; mso-border-top-alt: solid windowtext .75pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 202.5pt;" valign="top" width="203"><div class="MsoBodyText" style="margin: 0in 0.3in 0in 0.05in;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><br />
</span><br />
<div style="text-align: left;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><br />
</span></div><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span lang="EN-GB"></span></span><br />
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span lang="EN-GB"></span></span><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span lang="EN-GB"></span></span><br />
<div style="text-align: left;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Market Share (by Segment)</span></div><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><br />
</span></div><div class="MsoBodyText" style="margin: 0in 0.3in 0in 0.05in;"><div style="text-align: left;"><span lang="EN-GB"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Customer Retention</span></span></div></div><div class="MsoBodyText" style="margin: 0in 0.3in 0in 0.05in;"><div style="text-align: left;"><span lang="EN-GB"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Customer Satisfaction Survey</span></span></div></div><div class="MsoBodyText" style="margin: 0in 0.3in 0in 0.05in;"><div style="text-align: left;"><span lang="EN-GB"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Customer Acquisition</span></span></div></div></td></tr>
<tr><td style="background: #b2b2b2; border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; border-right: windowtext 1pt solid; border-top: windowtext 1pt solid; mso-border-alt: solid windowtext .75pt; mso-border-top-alt: solid windowtext .75pt; mso-pattern: gray-30 auto; mso-shading: windowtext; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 202.5pt;" valign="top" width="203"><div class="TableHeader"><div style="text-align: left;"><span lang="EN-AU"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Process</span></span><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span lang="EN-GB"></span></span></div></div></td><td style="background: #b2b2b2; border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: medium none; mso-border-alt: solid windowtext .75pt; mso-border-left-alt: solid windowtext .75pt; mso-border-top-alt: solid windowtext .75pt; mso-pattern: gray-30 auto; mso-shading: windowtext; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 202.5pt;" valign="top" width="203"><div class="TableHeader"><div style="text-align: left;"><span lang="EN-AU"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Learning and Growth</span></span><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span lang="EN-GB"></span></span></div></div></td></tr>
<tr><td style="border-bottom: windowtext 1pt solid; border-left: windowtext 1pt solid; border-right: windowtext 1pt solid; border-top: windowtext 1pt solid; mso-border-alt: solid windowtext .75pt; mso-border-top-alt: solid windowtext .75pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 202.5pt;" valign="top" width="203"><div class="MsoBodyText" style="margin: 0in 0.3in 0in 0.05in;"><div style="text-align: left;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><br />
</span></div></div><div class="MsoBodyText" style="margin: 0in 0.3in 0in 0.05in;"><div style="text-align: left;"><span lang="EN-GB"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Error Rates</span></span></div></div><div class="MsoBodyText" style="margin: 0in 0.3in 0in 0.05in;"><div style="text-align: left;"><span lang="EN-GB"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Investment in Technology</span></span></div></div><div class="MsoBodyText" style="margin: 0in 0.3in 0in 0.05in;"><div style="text-align: left;"><span lang="EN-GB"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Number of complaints</span></span></div></div><div class="MsoBodyText" style="margin: 0in 0.3in 0in 0.05in;"><div style="text-align: left;"><span lang="EN-GB"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Cross sell ratio</span></span></div></div></td><td style="border-bottom: windowtext 1pt solid; border-left: medium none; border-right: windowtext 1pt solid; border-top: medium none; mso-border-alt: solid windowtext .75pt; mso-border-left-alt: solid windowtext .75pt; mso-border-top-alt: solid windowtext .75pt; padding-bottom: 0in; padding-left: 5.4pt; padding-right: 5.4pt; padding-top: 0in; width: 202.5pt;" valign="top" width="203"><div class="MsoBodyText" style="margin: 0in 0.3in 0in 0.05in;"><div style="text-align: left;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><br />
</span></div></div><div class="MsoBodyText" style="margin: 0in 0.3in 0in 0.05in;"><div style="text-align: left;"><span lang="EN-GB"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Revenues from New Products</span></span></div></div><div class="MsoBodyText" style="margin: 0in 0.3in 0in 0.05in;"><div style="text-align: left;"><span lang="EN-GB"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Product Development Cycle</span></span></div></div><div class="MsoBodyText" style="margin: 0in 0.3in 0in 0.05in;"><div style="text-align: left;"><span lang="EN-GB"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Employee Survey</span></span></div></div><div class="MsoBodyText" style="margin: 0in 0.3in 0in 0.05in;"><div style="text-align: left;"><span lang="EN-GB"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Revenue per Employee</span></span></div></div><div class="MsoBodyText" style="margin: 0in 0.3in 0in 0.05in;"><div style="text-align: left;"><span lang="EN-GB"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Employee Turnover</span></span></div></div><div class="MsoBodyText" style="margin: 0in 0.3in 0in 0.05in;"><div style="text-align: left;"><span lang="EN-GB"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Training Hours per Employee</span></span></div></div><div class="MsoBodyText" style="margin: 0in 0.3in 0in 0.05in;"><div style="text-align: left;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><br />
</span></div></div></td></tr>
</tbody></table><div class="MsoNormal" style="text-align: justify;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><br />
</span></div><div class="MsoCaption" style="text-align: center;"><span lang="EN-GB"><b><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Figure </span></b></span><span lang="EN-GB"><b><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">2</span></b></span><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span lang="EN-GB"></span></span></div><div class="MsoNormal" style="text-align: justify;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><br />
</span></div><div class="MsoBodyText" style="text-align: justify;"><span lang="EN-AU"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">A Best Practice Bank will typically have from 15 to 20 Key Performance Indicators (KPI’s) to measure the success of its strategy.</span></span></div><div class="MsoBodyText" style="text-align: justify;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><br />
</span><br />
<span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif; font-weight: bold; line-height: 24px;">Summary: A Good Balanced Scorecard Tells the Story of Your Strategy</span></div><div class="MsoBodyText" style="text-align: justify;"></div><ul><li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Every measure is part of a chain of cause and effect linkages</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">Every measure ultimately ties to financial results</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">A balance exists between outcome measures (lagging indicators) and performance drivers (leading indicators)</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;">It includes performance drivers which will redefine a process or change behaviour</span></li>
</ul><div><br />
</div>Bruce Carpenterhttp://www.blogger.com/profile/00509920552835244724noreply@blogger.com0tag:blogger.com,1999:blog-2073286383972548773.post-39565824036650223432010-01-12T11:47:00.004-05:002010-08-23T08:24:03.449-04:00The Importance of Early Customers to a Startup<div class="MsoNormal" style="text-align: center;"><b style="mso-bidi-font-weight: normal;">If a Tree Falls and No One Is There to Hear It …</b></div><div align="center" class="MsoNormal" style="text-align: center;"><b style="mso-bidi-font-weight: normal;">The Importance of Customers<o:p></o:p></b></div><div align="center" class="MsoNormal" style="text-align: center;"><br />
</div><div class="MsoNormal" style="text-align: justify;">My wife and I recently attended a wonderful Orlando Philharmonic Concert and had the most marvelous opportunity to enjoy Itzhak Perlman perform Beethoven’s Concerto for Violin in D major, Opus 61 with the Orchestra. For those among you who may not be familiar with Itzhak Perlman, he is undeniable the reigning violin virtuoso and enjoys a superstar status rarely afforded a classical musician. Mr. Perlman, born in 1945, is known and acclaimed worldwide and perhaps the most accomplished violin virtuoso of this and many other lifetimes.</div><div class="MsoNormal" style="text-align: justify;"><br />
</div><div class="MsoNormal" style="text-align: justify;">Before describing the concert briefly and explaining my reasons for writing about the experience here, first a few words about the Beethoven composition performed by the Orchestra and Mr. Perlman.</div><div class="MsoNormal" style="text-align: justify;"><br />
</div><div class="MsoNormal" style="text-align: justify;">Beethoven composed this Violin Concerto in 1806 during one of his most productive periods. The work was both inspired by and composed for Franz Clement, who was regarded from childhood as the most accomplished violin virtuoso of the times. Beethoven was so moved by Clement’s performances that he composed this Violin Concerto, which continues to be regarded by many as the benchmark and cornerstone concerto of the violin repertory. Indeed, the Concerto for Violin in D Major, Op 61 has become a signature performance in the hands of Itzhak Perlman. After hearing it performed by him, I understand why it has become a signature piece in his repertory.</div><div class="MsoNormal" style="text-align: justify;"><br />
</div><div class="MsoNormal" style="text-align: justify;">The integration of the violin solo part within the orchestral fabric is at times subtle and others powerful, yet always hauntingly beautiful and expressive. The violin solo is given the room it needs to sing, and yet perhaps the most beautiful moments are in the quietest passages where Beethoven speaks not with the bluster of the thunder, but with the quiet voice of the Romantic poet. To hear this piece played by Mr. Perlman is to listen to the Angels play orchestral music. Surely, Beethoven and Clement were smiling at the performance and were standing with us as we recalled Mr. Perlman to the stage with our applause.</div><div class="MsoNormal" style="text-align: justify;"><br />
</div><div class="MsoNormal" style="text-align: justify;">How does this performance speak to entrepreneurs? What is the important message hidden within this experience?</div><div class="MsoNormal" style="text-align: justify;"><br />
</div><div class="MsoNormal" style="text-align: justify;">We have all heard the classic existential argument concerning the falling of a tree in the forest with no one there to hear it. Does it make a noise? A more practical application of this in business is – If a startup company has a great product or service to offer, but no customers, is it a business? The answer we offer to our clients and prospects is – NO!</div><div class="MsoNormal" style="text-align: justify;"><br />
</div><div class="MsoNormal" style="text-align: justify;">No matter how great a musical composition, without its performance it is only uninterrupted silence, mere notes on a page. Most importantly, it is only through the accomplished performance of a great work for an appreciative audience in a venue that complements the work that the composition reaches its full potential. So it is for a startup company. While its value proposition may address a significant market opportunity and afford great potential, without customers it falls far short of not only that potential, it is merely a shell and will likely be yet another startup business failure.</div><div class="MsoNormal" style="text-align: justify;"><br />
</div><div class="MsoNormal" style="text-align: justify;">We often advise entrepreneurs we speak with that without customers a startup remains little more than a hobby for the entrepreneur. Early customers provide market validation for your opportunity. They serve as early adopters and help to polish your value proposition for the customers who follow. Often, these early customers become your most enthusiastic supporters and help to earn others for business.</div><div class="MsoNormal" style="text-align: justify;"><br />
</div><div class="MsoNormal" style="text-align: justify;">Investors love opportunities with enthusiastic and supportive customers, revenues, and positive cash flows. If you hope to attract the capital your opportunity requires to grow, nothing will impress potential investors more than these.<br />
<br />
</div><div class="MsoNormal" style="text-align: justify;">Our advice to you is to get your value proposition out and into the market. Attract, close, and then more than satisfy those early customers, whatever it takes to accomplish this. Remember to ask for their views and thoughts on your value proposition – its strengths and weaknesses, its benefits to their business, and how it might be improved. Listen to their feedback and ideas and do your best to address them. Keep pushing to earn new customers and keep them more than satisfied.</div><div class="MsoNormal" style="text-align: justify;"><br />
</div><div class="MsoNormal" style="text-align: justify;">Now you have a real business. Listen and you too will hear the music followed by the applause.</div><div class="MsoNormal" style="text-align: justify;"><br />
</div><div class="MsoNormal" style="text-align: justify;">____________________________________________________</div><div class="MsoNormal" style="text-align: justify;"><br />
</div><div class="MsoNormal" style="text-align: justify;">Please share your thoughts with us on this and our other postings to the Harbour Bridge Ventures Blog. If you wish, you may also contact us through our website at http:// www.HBVinc.com or at via E-mail at contact@HBVinc.com.</div><div class="MsoNormal" style="text-align: justify;"><br />
</div><div class="MsoNormal" style="text-align: justify;">Thank you.</div><div class="MsoNormal" style="text-align: justify;">Bruce Carpenter, Principal</div><div class="MsoNormal" style="text-align: justify;">Harbour Bridge Ventures</div>Bruce Carpenterhttp://www.blogger.com/profile/00509920552835244724noreply@blogger.com0tag:blogger.com,1999:blog-2073286383972548773.post-68918563589608125842009-11-13T15:34:00.003-05:002009-11-13T16:53:08.075-05:00Are You Ready to Raise Capital? - A Series of Posts on Raising Capital<div class="MsoNormal" style="text-align: center;"><b><span style="font-size: small;">Are You Ready to Raise Capital?</span><span style="font-size: small;"><o:p></o:p></span></b><br />
</div><div class="MsoNormal" style="text-align: center;"><br />
</div><div class="MsoNormal" style="margin-bottom: 6pt; text-align: justify;"><span style="font-size: small;">Entrepreneurs continually tell us how difficult starting a new venture is in the current economic climate. Newsflash! Talk to every entrepreneur who has ever started a new company, it has never been easy. You have a brilliant new idea, surround it with the right management team to make it a success, and acquire your first customers. Lots of hurdles along the way, but the most challenging of all for most entrepreneurs is finding the capital required to launch and sustain the company through to positive cash flow.</span><br />
</div><div class="MsoNormal" style="margin-bottom: 6pt; text-align: justify;"><span style="font-size: small;">The idea that investors will quickly grasp the brillance of your idea and eagerly write the checks to finance it, is a fantasy common to many entrepreneurs until faced with the stark realities and challenges of raising capital. If you hope to be among the ten percent (1 in 10) of entrepreneurs seeking early stage capital that obtains funding, it is important that you approach it in a disciplined and professional manner with an understanding of what is required to be successful.</span><br />
</div><div class="MsoNormal" style="text-align: justify;"><span style="font-size: small;">The intention of this series of posts is to assist entrepreneurs in self-assessment of their readiness to raise capital. Entrepreneurs seeking early stage funding for their new company will learn how to prepare for seeking capital.</span><br />
</div><div class="MsoNormal" style="text-align: justify;"><br />
</div><div class="MsoNormal" style="margin-bottom: 6pt; text-align: justify;"><span style="font-size: small;">There are three primary areas to consider prior to seeking funding:</span><br />
</div><div class="MsoListParagraph" style="margin-bottom: 6pt; text-align: justify; text-indent: -0.25in;"><br />
</div><ul><li><span style="font-size: small;">1.</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span><span style="font-size: small;"><a href="http://hbvinc.blogspot.com/2009/11/are-you-ready-to-raise-capital-what.html">What stage of development is the company currently seeking to fund and what types and sources of funding best match that stage?</a></span></li>
<li><span style="font-size: small;">2.</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span><span style="font-size: small;"><a href="http://hbvinc.blogspot.com/2009/11/are-you-ready-to-raise-capital_13.html">Completion of a comprehensive and professional business plan for presentation to investors.</a></span></li>
<li><span style="font-size: small;">3.</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> <a href="http://www.blogger.com/goog_1258144133036"> </a></span></span><span style="font-size: small;"><a href="http://hbvinc.blogspot.com/2009/11/are-you-ready-to-raise-capital-what-are.html">Understanding what investors are looking for and being certain to address those concerns and interests.</a></span></li>
</ul><br />
<div class="MsoNormal" style="margin-bottom: 6pt; text-align: justify;"><b><i><span style="font-size: small;">Follow the above links to the posts on each of these topics</span><o:p></o:p></i></b><br />
</div>Bruce Carpenterhttp://www.blogger.com/profile/00509920552835244724noreply@blogger.com4tag:blogger.com,1999:blog-2073286383972548773.post-43050916910000482412009-11-13T15:28:00.001-05:002009-11-13T16:54:47.815-05:00Are You Ready to Raise Capital? - What Stage of Capitalization is the Company Seeking to Fund?<div style="text-align: justify;"><br />
</div><div class="MsoNormal" style="margin-bottom: 6pt; text-align: justify;"><b><span style="font-size: small;">What Stage of Capitalization is the Company Seeking to Fund?</span><span style="font-size: small;"><o:p></o:p></span></b><br />
</div><div class="MsoNormal" style="margin-bottom: 6pt; text-align: justify;"><span style="font-size: small;">It is important to understand the stage of company development you are seeking to fund and making sure it is well matched to the type of funding sought and the sources you intend to approach. Experienced investors have a preference for funding particular stages of a company’s growth recognizing well that company’s in earlier stages of their development many afford higher returns but are accompanied by a much higher degree of risk. These investors will expect the type of financing sought and the uses planned for the capital to match the stage of the company’s development.</span><br />
</div><div class="MsoNormal" style="margin-bottom: 6pt; text-align: justify;"><span style="font-size: small;">While there may be exceptions the following stages of capital generally match the stage of development of the company:</span><br />
</div><div class="MsoListParagraph" style="margin-bottom: 6pt; margin-left: 0.7in; margin-right: 0in; margin-top: 0in; text-align: justify; text-indent: -0.2in;"><span style="color: black; font-family: Symbol;"><span style="font-size: small;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></span><span style="font-size: small;">Embryonic capital may be sought for concept research</span><br />
</div><div class="MsoListParagraph" style="margin-bottom: 6pt; margin-left: 0.7in; margin-right: 0in; margin-top: 0in; text-align: justify; text-indent: -0.2in;"><span style="color: black; font-family: Symbol;"><span style="font-size: small;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></span><span style="font-size: small;">Seed or development capital may be sought for concept and business plan validation</span><br />
</div><div class="MsoListParagraph" style="margin-bottom: 6pt; margin-left: 0.7in; margin-right: 0in; margin-top: 0in; text-align: justify; text-indent: -0.2in;"><span style="color: black; font-family: Symbol;"><span style="font-size: small;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></span><span style="font-size: small;">Startup capital is generally sought for launch of a new company and initial operations</span><br />
</div><div class="MsoListParagraph" style="margin-bottom: 6pt; margin-left: 0.7in; margin-right: 0in; margin-top: 0in; text-align: justify; text-indent: -0.2in;"><span style="color: black; font-family: Symbol;"><span style="font-size: small;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></span><span style="font-size: small;">Mezzanine or growth capital is generally sought at multiple levels for expansion of mature and growing companies</span><br />
</div><div class="MsoNormal" style="margin-bottom: 6pt; text-align: justify;"><span style="font-size: small;">Most entrepreneurial ventures find it difficult to obtain debt financing of either a traditional or no-traditional nature. Having said this, we often encourage our clients to consider the use of convertible debt in very early stages of capital raises as it may be quite difficult to establish a realistic valuation for equity investment at this stage. Conversion terms for this debt may be established that are tied to a discount or preferences to the valuation established in future financing rounds. We also often suggest that interest on this convertible debt be capitalized to principal at the company’s option for a reasonable period of time or until the company reaches a certain level of positive cash flow. This preserves the company’s cash in critical early stages of development and launch.</span><br />
</div><div class="MsoNormal" style="margin-bottom: 6pt; text-align: justify;"><span style="font-size: small;">We also encourage our clients to be sure to consider all financing options including customer revenues and deposits, supplier financing terms, leasing rather than purchase of assets, and asset based financing (factoring) among their plans. We find that entrepreneurs often overlook these options in developing their financing strategies.</span><br />
</div><div class="MsoNormal" style="margin-bottom: 6pt; text-align: justify;"><span style="font-size: small;">The remainder of this article will deal with the traditional forms equity financing most commonly employed by entrepreneurial ventures.</span><br />
</div><div class="MsoNormal" style="margin-bottom: 6pt; text-align: justify;"><span style="font-size: small;">Investors typically balance two considerations in their investing decisions:</span><br />
</div><div class="MsoListParagraph" style="margin-bottom: 6pt; margin-left: 0.7in; margin-right: 0in; margin-top: 0in; text-align: justify; text-indent: -0.2in;"><span style="color: black; font-family: Symbol;"><span style="font-size: small;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></span><span style="font-size: small;">Risk – the measurable probability of losing or not gaining value on an investment, and</span><br />
</div><div class="MsoListParagraph" style="margin-bottom: 6pt; margin-left: 0.7in; margin-right: 0in; margin-top: 0in; text-align: justify; text-indent: -0.2in;"><span style="color: black; font-family: Symbol;"><span style="font-size: small;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></span><span style="font-size: small;">Return – the expected or necessary return on investment (ROI) expected by the investor to compensate for the degree of risk associated with the investment</span><br />
</div><div class="MsoNormal" style="margin-bottom: 6pt; text-align: justify;"><span style="font-size: small;">Most sophisticated equity investors are willing to assume a reasonable degree of risk in return for the higher returns associated with equity investments in early stage companies.</span><br />
</div><div class="MsoNormal" style="margin-bottom: 6pt; text-align: justify;"><b><span style="font-size: small;">Traditional Sources of Equity Investment</span><span style="font-size: small;"><o:p></o:p></span></b><br />
</div><div class="MsoNormal" style="margin-bottom: 6pt; text-align: justify;"><span style="font-size: small;">Equity investors are the owners of the company. A point often overlooked by some entrepreneurs in the way their investors are regarded. Hearing entrepreneurs continually refer to “my company,” rather than “our company,” or speak disparagingly on the company’s investors distresses me. Equity investors have bought ownership in the company with their investment, in exchange for the hoped for opportunity to sell that investment as a later time when the company’s value has significantly increased. It is important to understand the investors’ expectation of a future sale of their ownership at a higher price and address this issue when seeking investors. While they may be pleased by returns on their investment in the form of dividends, they most often are seeking long-term capital gains and the more favorable tax treatment these receive over dividend income.</span><br />
</div><div class="MsoNormal" style="margin-bottom: 6pt; text-align: justify;"><span style="font-size: small;">The most common rounds or sources of equity investment are as follows and should be approached in this order:</span><br />
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</div><ul><li style="text-align: justify;"><span style="font-size: small;">1.</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span><span style="font-size: small;">Founders</span></li>
<li style="text-align: justify;"><span style="font-size: small;">2.</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span><span style="font-size: small;">Friends and family</span></li>
<li style="text-align: justify;"><span style="font-size: small;">3.</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span><span style="font-size: small;">Suppliers, business vendors, relationship partners, and customers</span></li>
<li style="text-align: justify;"><span style="font-size: small;">4.</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span><span style="font-size: small;">Angel investors and wealthy individuals (accredited or qualified investors)</span></li>
<li style="text-align: justify;"><span style="font-size: small;">5.</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span><span style="font-size: small;">Venture Capital – A and B rounds</span></li>
</ul><br />
<div class="MsoNormal" style="margin-bottom: 6pt; text-align: justify;"><b><span style="font-size: small;">Founders: </span></b><span style="font-size: small;"> Unless those closest to the company and responsible for its launch and development have “skin in the game,” it will be very difficult to attract money from any other sources. We generally advise that Founders be responsible for all embryonic funding. Typically, they will also be responsible for much of the seed or development capital as well. It is extremely difficult to find funding for these stages of a company’s development from outside sources. Additionally, when the later startup stage capital is sought, those potential investors approached will want to know that founders have already placed their own capital at risk. </span><br />
</div><div class="MsoNormal" style="margin-bottom: 6pt; text-align: justify;"><span style="font-size: small;">We often hear from entrepreneurs that they consider their “sweat equity” as their investment. Sophisticated investors respect the effort of the entrepreneurs they back, but assign little monetary value to it in their decisions. This is often a harsh reality for many entrepreneurs, but a reality nonetheless. Sources of founders “bootstrap” capital can include personal savings, self-directed IRAs, home mortgages, credit cards, and small bank loans.</span><br />
</div><div class="MsoNormal" style="margin-bottom: 6pt; text-align: justify;"><span style="font-size: small;">A good general rule of thumb we find helpful is that by the time the entrepreneur commences the search for startup capital, the company should be able to demonstrate that the founders and/or friends and family have already contributed a minimum of 20% of the investment funding sought. While this may not always be the case, a lower level of funding from those sources closest to the opportunity will significantly decrease the odds of successfully obtaining the startup capital sought.</span><br />
</div><div class="MsoNormal" style="margin-bottom: 6pt; text-align: justify;"><b><span style="font-size: small;">Friends and Family:</span></b><span style="font-size: small;"> Most entrepreneurs also turn for funding to friends, relatives, business associates, and other non-professional investors and acquaintances who have personal connections to the company’s founders. These investments, generally made in the early stages of capitalization of the company are made primarily based on the relationships of the investors to the founders. There is typically a lower level of due diligence preceding the investment than for more sophisticated angel investors. Therefore, entrepreneurs should be careful to assign realistic valuations or use the previously suggested approach of convertible debt for these investments to avoid later ill feelings caused by unrealistic valuations. Also, entrepreneur should not be lulled into a sense of complacency by the ease of raising these monies. Later investors will exercise much greater due diligence and may well negotiate for more favorable terms to contribute their capital. We often find that entrepreneurs the terms and valuations assigned in the founders or friends and family rounds are unsupportable when seeking investment from sophisticated angels. This can easily result in either an unsuccessful startup capital raise or dilution or a “down round” for the early investors and consequent ill feelings. If is for this reason that we always suggest the assistance of a professional and experienced capital advisor in any capital raise, even those amongst founders or friends and family.</span><br />
</div><div class="MsoNormal" style="margin-bottom: 6pt; text-align: justify;"><b><span style="font-size: small;">Suppliers, Customers and Other Relationship Partners:</span></b><span style="font-size: small;"> Most entrepreneurs totally ignore these important potential sources of financing. Often larger companies amongst the list of suppliers have internal venture groups established specifically for the purpose of investing in up and coming young companies that could assist in expanding their business. Such suppliers will understand your business vertical and markets well and can help ensure a steady supply of their products or services on attractive financial terms. </span><br />
</div><div class="MsoNormal" style="margin-bottom: 6pt; text-align: justify;"><span style="font-size: small;">This same concept also applies to other potential relationship partners such as Original Equipment Manufacturers (OEMs) or Private Label partners, Value Added Resellers (VARs), Licensors, and channel distribution partners.</span><br />
</div><div class="MsoNormal" style="margin-bottom: 6pt; text-align: justify;"><span style="font-size: small;">Early customers can also be excellent sources of funding. They have a special interest in the success of the company, can provide market validation for your value proposition, and are often among the most committed supporters of a young company’s offerings. Such companies are generally early adopters, always seeking an edge on their competition, and may be great sources of funding. In return they may expect “favored nation” pricing, input on product or service development, and a close relationship with the company and its offerings. Strong support and commitment from early customers is also a strong endorsement of the company and its prospects from the viewpoint of professional investors.</span><br />
</div><div class="MsoNormal" style="margin-bottom: 6pt; text-align: justify;"><b><span style="font-size: small;">Angel investors and Wealthy Individuals:</span></b><span style="font-size: small;"> Angel networks or groups and individual angels defined under securities regulations as accredited investors are high net worth individuals who typically allocate a portion of their investment portfolio to early stage opportunities. A true angel investor will generally commit from $250,000 to several million dollars of their investable net worth to early stage opportunities in return for the higher potential returns. Generally these angels will invest in 10 or more such opportunities with individual investments ranging from $25K to $250K. Individual angels may band together into an Angel Network or Angel Group to pool their investments in early stage companies and take on opportunities of as large as several million dollars. Angels typically expect an exit opportunity in three to seven years and ROIs ranging from 25% to 100% depending upon the degree of risk and anticipated term of the investment.</span><br />
</div><div class="MsoNormal" style="margin-bottom: 6pt; text-align: justify;"><b><span style="font-size: small;">Venture Capital - First and Mezzanine Rounds:</span></b><span style="font-size: small;"> Venture Capital and other sources of institutional investment capital are typically available only to companies having reached 3 to 5 million in revenues and now requiring growth capital. Although there are rare exceptions, usually in the case of entrepreneurs with whom the VC has a prior record of success, VCs do not invest in early stage companies. Also, it is rare to find a VC or institutional investor making investments of less than several million dollars – although the funds may well be advanced in multiple draws or stages based on performance benchmarks or hurdles. Often VCs expect that several rounds of financing may be required to reach the agreed growth targets and exit point.</span><br />
</div><div class="MsoNormal" style="margin-bottom: 6pt; text-align: justify;"><span style="font-size: small;">VCs are investing monies from funds they manage. The VCs obtain those funds through raises from their limited partners who may be wealthy individuals, pension or retirement funds, endowment funds, or other forms of institutional investors.</span><br />
</div><div class="MsoNormal" style="margin-bottom: 6pt; text-align: justify;"><span style="font-size: small;">VC funds have particular investment interests and guidelines for each fund they manage. It is important when approaching a VC to be certain that the offered investment matches their interests and meets their guidelines. Generally, these can be found on the VCs website. Seldom does an investment opportunity “coming in over the transom” receive much serious attention from a VC. Those most likely to receive serious attention are introduced to the VC from a source with which they have experience. There are many such introduction sources. The point for entrepreneurs is that blindly sending business plans to dozens of VCs is unlikely to generate any serious interest in funding your opportunity.</span><br />
</div><div class="MsoNormal" style="margin-bottom: 6pt; text-align: justify;"><span style="font-size: small;">Often times VCs will bring strategic value as well as money to an investment opportunity. In fact, their strategic may well be much more important than the capital they contribute. Examples of strategic value may come from potential relationships and other synergy with their other portfolio companies, operational expertise, particular industry knowledge or experience, relationships with the market and potential customers, or other strategic value.</span><br />
</div><div class="MsoNormal" style="margin-bottom: 6pt; text-align: justify;"><span style="font-size: small;">VCs typically seek 7x to 10x returns on their investments in a three to five year period. This is because their typical experience is that of 10 investments, 3 to 5 will show few if any returns, 2 or 3 will produce moderate returns, and the remainder will deliver the home runs they seek. Therefore, they need and seek the home runs to reach the levels of return anticipated by their limited partner investors.</span><br />
</div><div class="MsoNormal" style="margin-bottom: 6pt; text-align: justify;"><b><span style="font-size: small;">Investment Banking Firms:</span></b><span style="font-size: small;"> Another source of funding at the growth stage may be through an investment banking firm who may assist with a securities placement. Investment banking firms range in size from boutique firms to very large global firms. It is important to seek a reputable firm, with a successful track record in placements of the size being sought. Generally, these securities placements will range in size from a low of $7 million to $10 million and up to very large raises. The securities offering may be a registered or unregistered offering depending upon the size and nature of the raise.</span><br />
</div><div class="MsoNormal" style="margin-bottom: 6pt; text-align: justify;"><span style="font-size: small;">Companies experiencing rapid growth and well into profitability often require significant investment to expand their sales and marketing efforts, enter new markets, launch new products, open new facilities, etc. Later stage investments can be particularly helpful in financing these types of endeavors that may not lend themselves well to debt financing. These later stage investors will all be of the institutional or professional investment categories and have the capability to infuse the larger amounts of capital that may be required.</span><br />
</div><div class="MsoNormal" style="margin-bottom: 6pt; text-align: justify;"><b><span style="font-size: small;">Uses of Capital and Stages of Investment: </span></b><span style="font-size: small;">Investors will carefully consider the planned uses for capital being sought when making their investment decisions. Planned uses will vary depending upon the nature of your company’s business and its stage of development. However, it will be important to investors that the intended uses are well matched to the company’s stage of development. We frequently speak with entrepreneurs who have ignored or misunderstand this important consideration and have done a poor job of matching the intended uses with the type of capital being sought or the stage of the company’s development. The following table summarizes our thoughts on this topic.</span><br />
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<div class="MsoNormal" style="margin-bottom: 6pt; text-align: left;"><b><span style="font-size: small;">Overview of Capital Raise Uses of Funds</span><span style="font-size: small;"><o:p></o:p></span></b><br />
</div><table border="1" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-bottom-style: none; border-collapse: collapse; border-color: initial; border-left-style: none; border-right-style: none; border-top-style: none; border-width: initial; text-align: left; width: 414px;"><tbody>
<tr style="mso-yfti-firstrow: yes; mso-yfti-irow: 0; page-break-inside: avoid;"> <td style="border: solid black 1.0pt; mso-border-alt: solid black .75pt; padding: 0in 5.4pt 0in 5.4pt;" valign="top"><div class="MsoNormal" style="margin-bottom: 6pt; text-align: center;"><br />
</div></td> <td style="border-left: none; border: solid black 1.0pt; mso-border-alt: solid black .75pt; mso-border-left-alt: solid black .75pt; padding: 0in 5.4pt 0in 5.4pt; width: 148.45pt;" valign="top" width="148"><div class="MsoNormal" style="margin-bottom: 6pt; text-align: center;"><b><span style="font-size: small;">Rapid Growth</span><span style="font-size: small;"><o:p></o:p></span></b><br />
</div></td> <td style="border-left: none; border: solid black 1.0pt; mso-border-alt: solid black .75pt; mso-border-left-alt: solid black .75pt; padding: 0in 5.4pt 0in 5.4pt; width: 130.5pt;" valign="top" width="131"><div class="MsoNormal" style="margin-bottom: 6pt; text-align: center;"><b><span style="font-size: small;">Steady Growth</span><span style="font-size: small;"><o:p></o:p></span></b><br />
</div></td> <td style="border-left: none; border: solid black 1.0pt; mso-border-alt: solid black .75pt; mso-border-left-alt: solid black .75pt; padding: 0in 5.4pt 0in 5.4pt; width: 53.05pt;" valign="top" width="53"><div class="MsoNormal" style="margin-bottom: 6pt; text-align: center;"><b><span style="font-size: small;">Source of Funds</span><span style="font-size: small;"><o:p></o:p></span></b><br />
</div></td> </tr>
<tr style="mso-yfti-irow: 1; page-break-inside: avoid;"> <td style="border-top: none; border: solid black 1.0pt; mso-border-alt: solid black .75pt; mso-border-top-alt: solid black .75pt; padding: 0in 5.4pt 0in 5.4pt;" valign="top"><div class="MsoNormal" style="margin-bottom: 6.0pt;"><b><span style="font-size: small;">Embryonic</span><span style="font-size: small;"><o:p></o:p></span></b><br />
</div></td> <td style="border-bottom: solid black 1.0pt; border-left: none; border-right: solid black 1.0pt; border-top: none; mso-border-alt: solid black .75pt; mso-border-left-alt: solid black .75pt; mso-border-top-alt: solid black .75pt; padding: 0in 5.4pt 0in 5.4pt; width: 148.45pt;" valign="top" width="148"><div class="MsoListParagraphCxSpFirst" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l12 level1 lfo7; tab-stops: list .2in; text-indent: -.2in;"><span style="color: black; font-family: Symbol;"><span style="font-size: small;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></span><span style="font-size: small;">Research and development</span><br />
</div><div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l12 level1 lfo7; tab-stops: list .2in; text-indent: -.2in;"><span style="color: black; font-family: Symbol;"><span style="font-size: small;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></span><span style="font-size: small;">Raise seed round of capital</span><br />
</div><div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l12 level1 lfo7; tab-stops: list .2in; text-indent: -.2in;"><span style="color: black; font-family: Symbol;"><span style="font-size: small;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></span><span style="font-size: small;">Building prototype and pilot</span><br />
</div><div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l12 level1 lfo7; tab-stops: list .2in; text-indent: -.2in;"><span style="color: black; font-family: Symbol;"><span style="font-size: small;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></span><span style="font-size: small;">Hiring initial management</span><br />
</div><div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l12 level1 lfo7; tab-stops: list .2in; text-indent: -.2in;"><span style="color: black; font-family: Symbol;"><span style="font-size: small;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></span><span style="font-size: small;">Market research</span><br />
</div><div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l12 level1 lfo7; tab-stops: list .2in; text-indent: -.2in;"><span style="color: black; font-family: Symbol;"><span style="font-size: small;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></span><span style="font-size: small;">Legal assistance</span><br />
</div><div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l12 level1 lfo7; tab-stops: list .2in; text-indent: -.2in;"><span style="color: black; font-family: Symbol;"><span style="font-size: small;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></span><span style="font-size: small;">Writing business plan</span><br />
</div><div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l12 level1 lfo7; tab-stops: list .2in; text-indent: -.2in;"><span style="color: black; font-family: Symbol;"><span style="font-size: small;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></span><span style="font-size: small;">Raising startup capital</span><br />
</div></td> <td style="border-bottom: solid black 1.0pt; border-left: none; border-right: solid black 1.0pt; border-top: none; mso-border-alt: solid black .75pt; mso-border-left-alt: solid black .75pt; mso-border-top-alt: solid black .75pt; padding: 0in 5.4pt 0in 5.4pt; width: 130.5pt;" valign="top" width="131"><div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l12 level1 lfo7; tab-stops: list .2in; text-indent: -.2in;"><span style="color: black; font-family: Symbol;"><span style="font-size: small;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></span><span style="font-size: small;">Concept research</span><br />
</div><div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l12 level1 lfo7; tab-stops: list .2in; text-indent: -.2in;"><span style="color: black; font-family: Symbol;"><span style="font-size: small;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></span><span style="font-size: small;">Writing business plan</span><br />
</div><div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l12 level1 lfo7; tab-stops: list .2in; text-indent: -.2in;"><span style="color: black; font-family: Symbol;"><span style="font-size: small;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></span><span style="font-size: small;">Raising startup capital</span><br />
</div><div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l12 level1 lfo7; tab-stops: list .2in; text-indent: -.2in;"><span style="color: black; font-family: Symbol;"><span style="font-size: small;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></span><span style="font-size: small;">Confirming market assumptions</span><br />
</div><div class="MsoListParagraphCxSpLast" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l12 level1 lfo7; tab-stops: list .2in; text-indent: -.2in;"><span style="color: black; font-family: Symbol;"><span style="font-size: small;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></span><span style="font-size: small;">Legal assistance</span><br />
</div><div class="MsoListParagraphCxSpLast" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l12 level1 lfo7; tab-stops: list .2in; text-indent: -.2in;"><span style="font-size: small;"><br />
</span><br />
</div><div class="MsoListParagraphCxSpLast" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l12 level1 lfo7; tab-stops: list .2in; text-indent: -.2in;"><span style="font-size: small;"><br />
</span><br />
</div><div class="MsoListParagraphCxSpLast" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l12 level1 lfo7; tab-stops: list .2in; text-indent: -.2in;"><span style="font-size: small;"><br />
</span><br />
</div></td> <td style="border-bottom: solid black 1.0pt; border-left: none; border-right: solid black 1.0pt; border-top: none; mso-border-alt: solid black .75pt; mso-border-left-alt: solid black .75pt; mso-border-top-alt: solid black .75pt; padding: 0in 5.4pt 0in 5.4pt; width: 53.05pt;" valign="top" width="53"><div class="MsoNormal" style="margin-bottom: 6.0pt;"><span style="font-size: small;">Founders</span><br />
</div></td> </tr>
<tr style="mso-yfti-irow: 2; page-break-inside: avoid;"> <td style="border-top: none; border: solid black 1.0pt; mso-border-alt: solid black .75pt; mso-border-top-alt: solid black .75pt; padding: 0in 5.4pt 0in 5.4pt;" valign="top"><div class="MsoNormal" style="margin-bottom: 6.0pt;"><b><span style="font-size: small;">Seed</span><span style="font-size: small;"><o:p></o:p></span></b><br />
</div></td> <td style="border-bottom: solid black 1.0pt; border-left: none; border-right: solid black 1.0pt; border-top: none; mso-border-alt: solid black .75pt; mso-border-left-alt: solid black .75pt; mso-border-top-alt: solid black .75pt; padding: 0in 5.4pt 0in 5.4pt; width: 148.45pt;" valign="top" width="148"><div class="MsoListParagraphCxSpFirst" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l12 level1 lfo7; tab-stops: list .2in; text-indent: -.2in;"><span style="color: black; font-family: Symbol;"><span style="font-size: small;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></span><span style="font-size: small;">Research and development</span><br />
</div><div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l12 level1 lfo7; tab-stops: list .2in; text-indent: -.2in;"><span style="color: black; font-family: Symbol;"><span style="font-size: small;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></span><span style="font-size: small;">Building prototype and pilot</span><br />
</div><div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l12 level1 lfo7; tab-stops: list .2in; text-indent: -.2in;"><span style="color: black; font-family: Symbol;"><span style="font-size: small;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></span><span style="font-size: small;">Hiring initial management</span><br />
</div><div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l12 level1 lfo7; tab-stops: list .2in; text-indent: -.2in;"><span style="color: black; font-family: Symbol;"><span style="font-size: small;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></span><span style="font-size: small;">Market research</span><br />
</div><div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l12 level1 lfo7; tab-stops: list .2in; text-indent: -.2in;"><span style="color: black; font-family: Symbol;"><span style="font-size: small;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></span><span style="font-size: small;">Legal assistance</span><br />
</div><div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l12 level1 lfo7; tab-stops: list .2in; text-indent: -.2in;"><span style="color: black; font-family: Symbol;"><span style="font-size: small;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></span><span style="font-size: small;">Writing business plan</span><br />
</div><div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l12 level1 lfo7; tab-stops: list .2in; text-indent: -.2in;"><span style="color: black; font-family: Symbol;"><span style="font-size: small;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></span><span style="font-size: small;">Raising startup capital</span><br />
</div></td> <td style="border-bottom: solid black 1.0pt; border-left: none; border-right: solid black 1.0pt; border-top: none; mso-border-alt: solid black .75pt; mso-border-left-alt: solid black .75pt; mso-border-top-alt: solid black .75pt; padding: 0in 5.4pt 0in 5.4pt; width: 130.5pt;" valign="top" width="131"><div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l12 level1 lfo7; tab-stops: list .2in; text-indent: -.2in;"><span style="color: black; font-family: Symbol;"><span style="font-size: small;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></span><span style="font-size: small;">Writing business plan</span><br />
</div><div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l12 level1 lfo7; tab-stops: list .2in; text-indent: -.2in;"><span style="color: black; font-family: Symbol;"><span style="font-size: small;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></span><span style="font-size: small;">Raising startup capital</span><br />
</div><div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l12 level1 lfo7; tab-stops: list .2in; text-indent: -.2in;"><span style="color: black; font-family: Symbol;"><span style="font-size: small;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></span><span style="font-size: small;">Confirming market assumptions</span><br />
</div><div class="MsoListParagraphCxSpLast" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l12 level1 lfo7; tab-stops: list .2in; text-indent: -.2in;"><span style="color: black; font-family: Symbol;"><span style="font-size: small;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></span><span style="font-size: small;">Legal assistance</span><br />
</div><div class="MsoListParagraphCxSpLast" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l12 level1 lfo7; tab-stops: list .2in; text-indent: -.2in;"><span style="font-size: small;"><br />
</span><br />
</div><div class="MsoListParagraphCxSpLast" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l12 level1 lfo7; tab-stops: list .2in; text-indent: -.2in;"><span style="font-size: small;"><br />
</span><br />
</div><div class="MsoListParagraphCxSpLast" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l12 level1 lfo7; tab-stops: list .2in; text-indent: -.2in;"><span style="font-size: small;"><br />
</span><br />
</div></td> <td style="border-bottom: solid black 1.0pt; border-left: none; border-right: solid black 1.0pt; border-top: none; mso-border-alt: solid black .75pt; mso-border-left-alt: solid black .75pt; mso-border-top-alt: solid black .75pt; padding: 0in 5.4pt 0in 5.4pt; width: 53.05pt;" valign="top" width="53"><div class="MsoNormal" style="margin-bottom: 6.0pt;"><span style="font-size: small;">Friends and Family</span><br />
</div></td> </tr>
<tr style="mso-yfti-irow: 3; page-break-inside: avoid;"> <td style="border-top: none; border: solid black 1.0pt; mso-border-alt: solid black .75pt; mso-border-top-alt: solid black .75pt; padding: 0in 5.4pt 0in 5.4pt;" valign="top"><div class="MsoNormal" style="margin-bottom: 6.0pt;"><b><span style="font-size: small;">Startup</span></b><br />
</div></td><td style="border-bottom: solid black 1.0pt; border-left: none; border-right: solid black 1.0pt; border-top: none; mso-border-alt: solid black .75pt; mso-border-left-alt: solid black .75pt; mso-border-top-alt: solid black .75pt; padding: 0in 5.4pt 0in 5.4pt; width: 148.45pt;" valign="top" width="148"><div class="MsoListParagraphCxSpFirst" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l11 level1 lfo8; tab-stops: list .2in; text-indent: -.2in;"><span style="color: black; font-family: Symbol;"><span style="font-size: small;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></span><span style="font-size: small;">Operating and refining pilot</span><br />
</div><div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l11 level1 lfo8; tab-stops: list .2in; text-indent: -.2in;"><span style="color: black; font-family: Symbol;"><span style="font-size: small;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></span><span style="font-size: small;">Equipment, facilities, and inventory</span><br />
</div><div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l11 level1 lfo8; tab-stops: list .2in; text-indent: -.2in;"><span style="color: black; font-family: Symbol;"><span style="font-size: small;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></span><span style="font-size: small;">Sufficient working capital requirements through to positive cash flow plus contingency factors from worst case analysis</span><br />
</div><div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l11 level1 lfo8; tab-stops: list .2in; text-indent: -.2in;"><span style="font-size: small;"><br />
</span><br />
</div><div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l11 level1 lfo8; tab-stops: list .2in; text-indent: -.2in;"><span style="font-size: small;"><br />
</span><br />
</div></td> <td style="border-bottom: solid black 1.0pt; border-left: none; border-right: solid black 1.0pt; border-top: none; mso-border-alt: solid black .75pt; mso-border-left-alt: solid black .75pt; mso-border-top-alt: solid black .75pt; padding: 0in 5.4pt 0in 5.4pt; width: 130.5pt;" valign="top" width="131"><div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l11 level1 lfo8; tab-stops: list .2in; text-indent: -.2in;"><span style="color: black; font-family: Symbol;"><span style="font-size: small;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></span><span style="font-size: small;">Launching business</span><br />
</div><div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l11 level1 lfo8; tab-stops: list .2in; text-indent: -.2in;"><span style="color: black; font-family: Symbol;"><span style="font-size: small;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></span><span style="font-size: small;">Hiring of management and staff</span><br />
</div><div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l11 level1 lfo8; tab-stops: list .2in; text-indent: -.2in;"><span style="color: black; font-family: Symbol;"><span style="font-size: small;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></span><span style="font-size: small;">Equipment and facilities</span><br />
</div><div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l11 level1 lfo8; tab-stops: list .2in; text-indent: -.2in;"><span style="color: black; font-family: Symbol;"><span style="font-size: small;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></span><span style="font-size: small;">Inventory</span><br />
</div><div class="MsoListParagraphCxSpLast" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l11 level1 lfo8; tab-stops: list .2in; text-indent: -.2in;"><span style="color: black; font-family: Symbol;"><span style="font-size: small;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></span><span style="font-size: small;">Sufficient working capital requirements through to positive cash flow plus contingency factors from worst case analysis</span><br />
</div></td> <td style="border-bottom: solid black 1.0pt; border-left: none; border-right: solid black 1.0pt; border-top: none; mso-border-alt: solid black .75pt; mso-border-left-alt: solid black .75pt; mso-border-top-alt: solid black .75pt; padding: 0in 5.4pt 0in 5.4pt; width: 53.05pt;" valign="top" width="53"><div class="MsoNormal" style="margin-bottom: 6.0pt;"><span style="font-size: small;">Angel Investors</span><br />
</div></td> </tr>
<tr style="mso-yfti-irow: 4; mso-yfti-lastrow: yes; page-break-inside: avoid;"> <td style="border-top: none; border: solid black 1.0pt; mso-border-alt: solid black .75pt; mso-border-top-alt: solid black .75pt; padding: 0in 5.4pt 0in 5.4pt;" valign="top"><div class="MsoNormal" style="margin-bottom: 6.0pt;"><b><span style="font-size: small;">Mezzanine or <br />
Growth Capital</span><span style="font-size: small;"><o:p></o:p></span></b><br />
</div></td> <td style="border-bottom: solid black 1.0pt; border-left: none; border-right: solid black 1.0pt; border-top: none; mso-border-alt: solid black .75pt; mso-border-left-alt: solid black .75pt; mso-border-top-alt: solid black .75pt; padding: 0in 5.4pt 0in 5.4pt; width: 148.45pt;" valign="top" width="148"><div class="MsoListParagraphCxSpFirst" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l5 level1 lfo9; tab-stops: list .2in; text-indent: -.2in;"><span style="color: black; font-family: Symbol;"><span style="font-size: small;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></span><span style="font-size: small;">Additional capacity to support growth and scale business</span><br />
</div><div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l5 level1 lfo9; tab-stops: list .2in; text-indent: -.2in;"><span style="color: black; font-family: Symbol;"><span style="font-size: small;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></span><span style="font-size: small;">Marketing and sales</span><br />
</div><div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l5 level1 lfo9; tab-stops: list .2in; text-indent: -.2in;"><span style="color: black; font-family: Symbol;"><span style="font-size: small;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></span><span style="font-size: small;">Additional working capital</span><br />
</div><div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l5 level1 lfo9; tab-stops: list .2in; text-indent: -.2in;"><span style="color: black; font-family: Symbol;"><span style="font-size: small;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></span><span style="font-size: small;">Facilities, equipment, and inventory to support growth</span><br />
</div></td> <td style="border-bottom: solid black 1.0pt; border-left: none; border-right: solid black 1.0pt; border-top: none; mso-border-alt: solid black .75pt; mso-border-left-alt: solid black .75pt; mso-border-top-alt: solid black .75pt; padding: 0in 5.4pt 0in 5.4pt; width: 130.5pt;" valign="top" width="131"><div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l5 level1 lfo9; tab-stops: list .2in; text-indent: -.2in;"><span style="color: black; font-family: Symbol;"><span style="font-size: small;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></span><span style="font-size: small;">Working Capital</span><br />
</div><div class="MsoListParagraphCxSpLast" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l5 level1 lfo9; tab-stops: list .2in; text-indent: -.2in;"><span style="color: black; font-family: Symbol;"><span style="font-size: small;">·</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></span><span style="font-size: small;">Facilities, equipment, and inventory to support growth</span><br />
</div><div class="MsoListParagraphCxSpLast" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l5 level1 lfo9; tab-stops: list .2in; text-indent: -.2in;"><span style="font-size: small;"><br />
</span><br />
</div><div class="MsoListParagraphCxSpLast" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l5 level1 lfo9; tab-stops: list .2in; text-indent: -.2in;"><span style="font-size: small;"><br />
</span><br />
</div><div class="MsoListParagraphCxSpLast" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l5 level1 lfo9; tab-stops: list .2in; text-indent: -.2in;"><span style="font-size: small;"><br />
</span><br />
</div><div class="MsoListParagraphCxSpLast" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l5 level1 lfo9; tab-stops: list .2in; text-indent: -.2in;"><span style="font-size: small;"><br />
</span><br />
</div></td> <td style="border-bottom: solid black 1.0pt; border-left: none; border-right: solid black 1.0pt; border-top: none; mso-border-alt: solid black .75pt; mso-border-left-alt: solid black .75pt; mso-border-top-alt: solid black .75pt; padding: 0in 5.4pt 0in 5.4pt; width: 53.05pt;" valign="top" width="53"><div class="MsoNormal" style="margin-bottom: 6.0pt;"><span style="font-size: small;">Venture Capital or Private Securities Placement</span><br />
</div></td> </tr>
</tbody></table><div class="MsoNormal" style="margin-bottom: 6pt; text-align: left;"><br />
</div><div class="MsoNormal" style="margin-bottom: 6pt; text-align: justify;"><span style="font-size: small;">Understanding the company’s intended growth path and timing allows for development of a capital plan matching the company’s capitalization plans with appropriate stages of growth and uses of funds. Capital raises should not be undertaken before building achieving appropriate stages of growth and maturity so as to optimize valuation at the time of each raise. It is also important not to raise less capital than may be required to deal with unexpected developments. Running short of capital prior to reaching performance targets and stages of the company’s growth will likely impair the company’s ability to successfully raise additional capital on favorable terms.</span><br />
</div>Bruce Carpenterhttp://www.blogger.com/profile/00509920552835244724noreply@blogger.com2tag:blogger.com,1999:blog-2073286383972548773.post-5944179864304080892009-11-13T15:13:00.001-05:002009-11-13T16:55:19.795-05:00Are You Ready to Raise Capital? - The Importance of a Comprehensive and Professional Business Plan<span style="font-size: small; font-weight: bold;">The Importance of a Comprehensive and Professional Business Plan</span><br />
<span style="font-size: small;"><b><br />
</b></span><br />
<div class="MsoNormal" style="margin-bottom: 6.0pt;"><span style="font-size: small;">A business plan serves as more than a tool simply to raise funds. A comprehensive and professional business plan becomes the roadmap showing the plan for the company’s journey to its planned success. It also serves as a basis against which the company’s progress toward its willed future can be measured. The business plan should describe clearly and precisely what you expect to achieve, in what time frame, how you intend to get there, who will lead and execute the plan, what challenges need to be overcome, what risks can be expected, how those risks will be contained or mitigated, and why the business should succeed. This business plan will become the foundation of all decisions made by the business, describe the performance targets against which the business will be measured, and for which the management team will be held accountable.</span><br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt;"><span style="font-size: small;">Everyone understands that businesses exist in dynamic and changing environments. Changes will not only be made along the way, but should be expected. The plan should not be immutable. However, changes should result from measurement against the plan and its assumptions combined with thoughtful and purposeful shifts in strategy and tactics to adapt to change and seize opportunities as they are presented.</span><br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt;"><span style="font-size: small;">Here are some essential questions every entrepreneur should ask and answer in a business plan.</span><br />
</div><div class="MsoListParagraphCxSpFirst" style="margin-bottom: 6.0pt; mso-add-space: auto; mso-list: l7 level1 lfo10; tab-stops: list .5in; text-indent: -.25in;"><span style="font-size: small;">1.</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span><b><span style="font-size: small;">Who are we and what do we want to do?<br />
</span> </b><span style="font-size: small;">Define what the business intends to do, what customers it intends to serve, why they will need its products or services, what markets it will target to find those customers, and why they will want to do business with the company. Be sure to define your product, your intended markets, revenue targets, and margin objectives.</span><br />
</div><div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 6.0pt; mso-add-space: auto; mso-list: l7 level1 lfo10; tab-stops: list .5in; text-indent: -.25in;"><b><span style="font-size: small;">2.</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></b><b><span style="font-size: small;">Why do we think we can be successful?<br />
</span> </b><span style="font-size: small;">Conduct a thorough competitive analysis of your company versus all other competitive alternatives and make the case that you have a unique and compelling value proposition that will attract customers from your targeted markets in sufficient quantities to make the company successful. Please remember that every company and every value proposition has competition. If you have no competition, there is likely no real market for your product or service. I also constantly remind entrepreneurs that whatever a customer is doing today to address the perceived need is competition. Prospective customers can always decide to continue whatever they are doing today or endure whatever pain you may perceive they have. Why will they choose your product or service over every other competitive alternative? What makes you different, unique, and compelling?</span><b><span style="font-size: small;"><o:p></o:p></span></b><br />
</div><div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 6.0pt; mso-add-space: auto; mso-list: l7 level1 lfo10; tab-stops: list .5in; text-indent: -.25in;"><b><span style="font-size: small;">3.</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></b><b><span style="font-size: small;">What actions are necessary to achieve your goals?<br />
</span> </b><span style="font-size: small;">This is a description of the strategies and tactics necessary to achieve the company’s objectives.</span><b><span style="font-size: small;"><o:p></o:p></span></b><br />
</div><div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 6.0pt; mso-add-space: auto; mso-list: l7 level1 lfo10; tab-stops: list .5in; text-indent: -.25in;"><b><span style="font-size: small;">4.</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></b><b><span style="font-size: small;">How much will it cost and over what time frame?<br />
</span> </b><span style="font-size: small;">This includes the resource planning for all the required company assets and resources including capital, people, facilities, equipment, inventory, raw materials, development, etc. We typically suggest the inclusion of three budget scenarios best case, most likely case, and worst case. The worst case scenario should stress test the business plan and financial forecasts to make certain that the company’s capital plan is sufficient to deal with unexpected developments and their consequences. All sophisticated investors will want to see the entrepreneur has addressed this consideration. It is best to have it prepared for presentation when asked, even if the worst case scenario is not included in the business plan. It will also be of help in building the risks section of the business plan.</span><b><span style="font-size: small;"><o:p></o:p></span></b><br />
</div><div class="MsoListParagraphCxSpLast" style="margin-bottom: 6.0pt; mso-add-space: auto; mso-list: l7 level1 lfo10; tab-stops: list .5in; text-indent: -.25in;"><b><span style="font-size: small;">5.</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></b><b><span style="font-size: small;">Can the business meet the objectives and financial plans that have been presented and what value will be achieved as a result?<br />
</span> </b><span style="font-size: small;">It is important to be realistic in answering these questions. The founders and management team will and should be held accountable for these results. We find most business plans we review are overly optimistic on the planned targets and assign excessive valuations to their achievement as well.</span><b><span style="font-size: small;"><o:p></o:p></span></b><br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt;"><b><span style="font-size: small;">Steps in Preparing a Business Plan</span><span style="font-size: small;"><o:p></o:p></span></b><br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt;"><span style="font-size: small;">The following steps should be followed in development of the business plan:</span><br />
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</div><ul><li><span style="font-size: small;">1.</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span><span style="font-size: small;">Identify the company’s objectives</span></li>
<li><span style="font-size: small;">2.</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span><span style="font-size: small;">Outline the business plan</span></li>
<li><span style="font-size: small;">3.</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span><span style="font-size: small;">Review the outline with your advisors or mentors</span></li>
<li><span style="font-size: small;">4.</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span><span style="font-size: small;">Research the outline topics thoroughly</span></li>
<li><span style="font-size: small;">5.</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span><span style="font-size: small;">Write an initial draft of the business plan</span></li>
<li><span style="font-size: small;">6.</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span><span style="font-size: small;">Review and edit the plan with the help of your advisors or mentors</span></li>
<li><span style="font-size: small;">7.</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span><span style="font-size: small;">Have the plan reviewed by several outsiders</span></li>
<li><span style="font-size: small;">8.</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span><span style="font-size: small;">Update and finalize the plan</span></li>
<li><span style="font-size: small;">9.</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span><span style="font-size: small;">Develop the Executive Summary</span></li>
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<div class="MsoNormal" style="margin-bottom: 6.0pt;"><b><span style="font-size: small;">Structure and Key Components of a Business Plan</span><span style="font-size: small;"><o:p></o:p></span></b><br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt;"><span style="font-size: small;">While there are many templates and suggested formats for business plans, most sophisticated investors will expect the following basic components at a minimum.</span><br />
</div><span style="font-size: small;"> 1.<span style="font-family: 'Times New Roman';"> </span><span style="font-size: small;">Cover Sheet</span><br />
</span><br />
<div><span style="font-size: small;"><span style="font-size: small;"></span> 2.</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span><span style="font-size: small;">Table of Contents</span><br />
<span style="font-size: small;"> 3.</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span><span style="font-size: small;">Executive Summary</span><br />
<span style="font-size: small;"> 4.</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span><span style="font-size: small;">Description of the Company - intended activities, target markets, and distinctive competencies</span><br />
<span style="font-size: small;"> 5.</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span><span style="font-size: small;">Market and Competitor Analysis</span><br />
<span style="font-size: small;"> 6.</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> P</span></span><span style="font-size: small;">roducts and Services</span><br />
<span style="font-size: small;"> 7.</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span><span style="font-size: small;">Operations</span><br />
<span style="font-size: small;"> 8.</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span><span style="font-size: small;">Management and Ownership</span><br />
<span style="font-size: small;"> 9.</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> F</span></span><span style="font-size: small;">unds Required and Their Uses</span><br />
<span style="font-size: small;"> 10.<span style="font-family: 'Times New Roman';"> </span></span><span style="font-size: small;">Financial Data</span><br />
<span style="font-size: small;"> 11.</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span><span style="font-size: small;">Risk analysis</span><br />
<span style="font-size: small;"> 12.</span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span><span style="font-size: small;">Supporting Appendices</span><br />
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</span><br />
<div class="MsoNormal" style="margin-bottom: 6.0pt;"><span style="font-size: small;">As there is much underlying detail behind each of these topics, we will not attempt to deal with that within the scope of this article.</span><br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt;"><span style="font-size: small;">The important point is to understand the need for a thorough and complete analysis of the opportunity and planned business. We urge particular attention to the go-to-market plans and market and competitive analysis sections. We find most business plans particularly weak in these areas that are so crucial to the success of any business.</span><br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt;"><b><span style="font-size: small;">Presentation of your Business Plan:</span><span style="font-size: small;"><o:p></o:p></span></b><br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt;"><span style="font-size: small;">While a comprehensive and professional business plan may well go into even a triple digit number of pages, it is important to be able to present your opportunity succinctly and clearly to prospective investors in 15 to 20 minutes. Your presentation should be compelling enough to cause the investor to spend enough time to wade through the entire business plan in order to more thoroughly understand the opportunity.</span><br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt;"><span style="font-size: small;">We always counsel entrepreneurs to focus on the analysis of the target market, the intended customers and their unmet needs, what makes the company’s offering unique and compelling, and how potential buyers will be attracted and acquired for the company’s products or services. Perhaps one of the most common mistakes made by entrepreneurs in these presentations is focusing too much on the company and its offerings, describing their technology, innovation, or value proposition in great detail, or spending too much time on the history of its development.</span><br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt;"><span style="font-size: small;">We always suggest rehearsing these presentations extensively with objective reviewers who know nothing about the company or its intended business to be certain they can be delivered smoothly and professionally and most importantly be easily understood and compelling.</span><br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt;"><b><span style="font-size: small;">The Importance of a Sound Business Model:</span><span style="font-size: small;"><o:p></o:p></span></b><br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt;"><span style="font-size: small;">Does your intended business have a sound business model? Have you carefully addressed pricing and margins? Does the business have strong sources of recurring revenue or does it depend on constantly earning new customers for one-time purchases? Are you early to market with a new, unique, and compelling offering? Have you significantly improved an already proven product or business proposition? Or, are you simple the next to market with a slightly better version of an idea or product others have already successfully positioned in the market? Are you approaching a rapidly growing market opportunity? Is your value proposition market ready? Do you already have your first customers or market validation of the product or service? All of these are questions that prospective investors will be considering.</span><br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt;"><span style="font-size: small;">We always suggest that entrepreneurs try to think from the investors’ point of view. Why would they be attracted to this particular investment opportunity? Is your company a good risk? Have you thoroughly analyzed its strengths and weaknesses? Do you have not only a unique and compelling value proposition, but also a go-to-market plan likely to succeed in attracting customers in sufficient volumes to achieve the projected financial results?</span><br />
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</div>Bruce Carpenterhttp://www.blogger.com/profile/00509920552835244724noreply@blogger.com0tag:blogger.com,1999:blog-2073286383972548773.post-52566741231028825512009-11-13T15:00:00.003-05:002009-11-13T16:56:46.034-05:00Are You Ready to Raise Capital? - What are Investors Seeking?<span style="font-family: 'Lucida Grande'; font-size: 11px; font-weight: bold;">What are Investors Seeking?</span><br />
<div><span style="font-family: 'Lucida Grande'; font-size: small;"><span style="font-size: 11px;"></span></span><br />
<span style="font-family: 'Lucida Grande'; font-size: small;"><span style="font-size: 11px;"></span></span><br />
<span style="font-family: 'Lucida Grande'; font-size: small;"><span style="font-size: 11px;"><div class="MsoNormal" style="margin-bottom: 6.0pt;">Investors are seeking risk-adjusted returns on their own funds or those they manage for others. They understand this well and expect entrepreneurs to appreciate their perspective. The relative attractiveness and attendant valuations they assign to prospective investments may vary widely from the views of the entrepreneurs. However, it is their capital that is required to your opportunity. This is a perspective entrepreneurs should keep in mind.<br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt;">The basics that investors are seeking and upon which they are evaluating opportunities include:<br />
</div><div class="MsoListParagraphCxSpFirst" style="margin-bottom: 6.0pt; margin-left: .7in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l0 level1 lfo1; tab-stops: list .7in; text-indent: -.2in;"><span style="color: black; font-family: Symbol;">·<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span><b style="mso-bidi-font-weight: normal;">Potential for Growth and Expansion<br />
</b>Investors are seeking opportunities that have the potential for significant growth and expansion. They are not seeking to build a nice, comfortable small business. Entrepreneurs need to realize the often the management team and talents required to launch a new company may be different than those required to transition the company to more rapid expansion and a more mature set of corporate disciplines. Founding entrepreneurs should carefully consider this matter when presenting the long term plans for growth of the company to prospective investors who well understand this reality.<b style="mso-bidi-font-weight: normal;"><o:p></o:p></b><br />
</div><div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 6.0pt; margin-left: .7in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l0 level1 lfo1; tab-stops: list .7in; text-indent: -.2in;"><span style="color: black; font-family: Symbol;">·<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span><b style="mso-bidi-font-weight: normal;">Capable, Proven Management Team<br />
</b>Sophisticated investors are like handicappers, they understand and value highly experience and past performance. They prefer a good opportunity and a great, proven management team to a great opportunity and a good management team. Poor management has destroyed the value of many good companies. We cannot overemphasize the importance to investors of the right management team. It is also important that the experience of the management team is relevant to the industry in which the company intends to compete. If the founding entrepreneurs do not have this proven experience, we highly recommend expanding the founding team to include this experience.<b style="mso-bidi-font-weight: normal;"><o:p></o:p></b><br />
</div><div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 6.0pt; margin-left: .7in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l0 level1 lfo1; tab-stops: list .7in; text-indent: -.2in;"><span style="color: black; font-family: Symbol;">·<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span><b style="mso-bidi-font-weight: normal;">Preparation and Thoughtful Planning<br />
</b>Has the business opportunity and the intended market and competition been thoroughly researched. It is highly likely that potential investors most attracted to an opportunity will be those with some experience in the relevant business or intended market. They may know as much or more about the target markets or industry as the founders. They will instantly spot a poorly researched opportunity or week planning.<b style="mso-bidi-font-weight: normal;"><o:p></o:p></b><br />
</div><div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 6.0pt; margin-left: .7in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l0 level1 lfo1; tab-stops: list .7in; text-indent: -.2in;"><span style="color: black; font-family: Symbol;">·<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span><b style="mso-bidi-font-weight: normal;">Board of Directors or Advisors<br />
</b>Investors will find companies with a strong Board of Directors or Advisory Board more attractive. Members should bring strategic value to the company in the form of industry knowledge, leverage with suppliers, strong relationships in the company’s target markets, and the ability to help the company achieve its intended growth. Early stage companies in particular benefit from an Advisory Board with the ability to provide warm introductions to prospective customers, and strong relationships and credibility in the company’s the target markets. In addition, the Advisory Board should be able to assist the entrepreneur in evaluation of strategic and tactical alternatives and provide a great sounding board to assist in key business decisions. We generally recommend the formation of an Advisory Board early in the launch of a company but suggest deferring the formation of a Board of Directors until the company is ready to conduct an outside capital raise. Advisors carry no corporate liability and it is easier to attract a strong Advisory Board. Once a Board of Directors is formed it is necessary for the company to provide full General Liability coverage as well as Officers and Directors Liability Insurance coverage. Directors carry significant liability as a consequence of their service and both the Board and management should take corporate governance responsibilities very seriously.<br />
</div><div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 6.0pt; margin-left: .7in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l0 level1 lfo1; tab-stops: list .7in; text-indent: -.2in;"><span style="color: black; font-family: Symbol;">·<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span><b style="mso-bidi-font-weight: normal;">Forthright Integrity and an Honest Assessment of the Opportunity and Its Risks<br />
</b>Experienced investors seek entrepreneurs who are open to honest and forthright critique of their business plans. They want to be certain that entrepreneurs they back are open to ‘two-way communication with their investors. Most investors will wish to back not only sound and attractive business propositions, but also those in industries in which they have an understanding. Often the investors in a young company can contribute much more than simply their capital toward the growth and success of the company. We always urge our clients to seek out investors who bring strategic value to the business as well as capital. We strongly urge entrepreneurs to include in their business plan and present to investors a carefully thought through and honest risk assessment. Be honest, tell potential investors of the challenges and hurdles the business will face. The investors may well be the very people who can help with those challenges. Many investors have a broad set of relationships that can be very important in assisting entrepreneurs in solving problems and resolving issues as they are encountered. When identifying risks be sure to describe the risk, the likelihood it will be encountered, what the potential impact may be on the business, and how it will be avoided, mitigated, or cured if encountered.<b style="mso-bidi-font-weight: normal;"><o:p></o:p></b><br />
</div><div class="MsoListParagraphCxSpLast" style="margin-bottom: 6.0pt; margin-left: .7in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l0 level1 lfo1; tab-stops: list .7in; text-indent: -.2in;"><span style="color: black; font-family: Symbol;">·<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span><b style="mso-bidi-font-weight: normal;">The “Been There, Done That” Factor<br />
</b>Investors are more attracted to propositions surrounded by experienced and successful management teams. This is particularly true when considering previous entrepreneurial success. Launching and growing a young company requires a much different set of core competencies and energy than being successful within a large corporate infrastructure. Nothing is a better predictor of future success, than prior performance. Those opportunities most attractive to experienced investors are ones presented by entrepreneurs with whom they have had prior success. Experienced entrepreneurs are more likely to anticipate problems and take corrective action early to avoid dire consequences. Investors love people who have the Know What, Know How, and most importantly the Know Who relationships get things done expeditiously and to make the opportunity successful.<b style="mso-bidi-font-weight: normal;"><o:p></o:p></b><br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt;"><b style="mso-bidi-font-weight: normal;">Conclusion<o:p></o:p></b><br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt;">A successful capital raise requires effectively dealing up front with valuation and control issues. We have seen so many entrepreneurs fail to raise the capital sought due to unrealistic valuations and stubborn refusal to retain absolute total control. We have heard time and again – “Why should I have to give up that much of my company to someone whose only contribution is their money.” This is a key genetic marker to identify entrepreneurs who will fail to accomplish not only a successful raise, but also likely trying to launch a company doomed to fail. As angel investors ourselves, we never back entrepreneurs who fail to understand the value contributed by their investors.<br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt;">We urge entrepreneurs to think like investors when dealing with issues of valuation and control. It is indeed the wise entrepreneur who carefully researches similar opportunities successfully funded by investors to understand both valuation and control. We often suggest an approach that reserves a significant percentage of the equity the founders might otherwise claim and tie it to performance. Investors are happy to have entrepreneurs earn a significant portion of their equity stake. This reinforces the perception of shared risk and reward. Likewise this same approach can be used to deal with control. As milestones are achieved the founders earn a greater stake in the enterprise and increase their control. This approach is fair to both the entrepreneur and the investors and often viewed favorably by potential investors.<br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt;">Concerns about valuation and control can be dealt with through the use of warrants and options tied to performance objectives. We always urge entrepreneurs to consider the potential increase in the value of their ownership, than the percentage of their ownership, when pondering the issues of valuation and control. If you fail to raise the capital today, can you still launch the business? How much faster would the business grow with the availability of the capital sought? Will the opportunity window remain open long enough to achieve success if the current capital raise fails?<br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt;">It always comes down to the decision of would you rather have 100% of a failed company, 80% or a company worth $2 million, 20% of a company worth $8 million, or 10% of a company worth $800 million? Easy decision.<br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt;">We also advise entrepreneurs not to use the approach of starting out negotiations and their offer to potential investors with more favorable terms to the entrepreneur than they think will be required to raise the capital and then settling for less favorable terms during negotiations. This is unlikely to be successful with potential investors. The entrepreneur will likely get only one shot at a potential investor and if the investor is not attracted to the offer the negotiations will never take place.<br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt;">Finally, you are ready, you have made the pitch to an investor, he has expressed interest, but have some concerns about some of the terms. Don’t fail to land the catch. The terms may not be ideal, but you need to remember, particularly in today’s economic and investment climate, you not get another chance. If you have to alter any of the terms of the offer, remember in any one raise, all investors must get the same basic financial terms.<br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt;">So, are you ready to raise the capital you need to launch your business? Has this article been helpful and allowed you to think through some of the issues?<br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt;">There is just one last piece of advice we will emphasize. Entrepreneurs should never attempt even a friends and family raise without the advice and assistance of an experienced professional advisory team. This professional team will include at a minimum your business advisors, an experienced securities attorney, and a trusted accountant to potentially assist with and review your financial projections.<br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt;">Now, prepare thoroughly and then go get the money you need to launch your dream. If we can help you as we have so many others prepare for and conduct a capital raise, please get in touch with us through the Harbour Bridge Ventures website at <a href="http://www.HBVinc.com/">www.HBVinc.com</a>. We wish you success.<br />
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</div>Bruce Carpenterhttp://www.blogger.com/profile/00509920552835244724noreply@blogger.com1tag:blogger.com,1999:blog-2073286383972548773.post-29622218590108467582009-10-15T20:58:00.003-04:002009-10-20T10:48:15.720-04:00Tips for Attracting Angel Investors<div align="center" class="MsoNormal" style="text-align: center;"><b style="mso-bidi-font-weight: normal;"><span style="font-size: 14pt;">Tips for Attracting Angel Investors<o:p></o:p></span></b><br />
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</div><div class="MsoNormal" style="text-align: justify;"><span style="font-size: small;">Entrepreneurs often find financing their vision is one of the more difficult challenges in launching a new venture. While bootstrapping is available as a means for many to develop the idea and perhaps even launch the company, most entrepreneurs quickly recognize the need to find investors who believe in their vision and are willing to invest the funds necessary to finance the company’s continued development and growth. For most early stage ventures, the most likely investors after the friends and family route has been exhausted are angel investors.</span><span style="font-size: small;"><o:p></o:p></span><br />
</div><div class="MsoNormal" style="text-align: justify;"><span style="font-size: small;"><br />
<span style="font-size: small;">Angels are a distinct class of investors. They are individuals who can financially afford to indulge their love of risk in exchange for the potential of higher returns on early stage opportunities. Frequently, they seek out early stage investment opportunities that match their individual passions and interests. To be an angel investor, one must be an “accredited investor.” Accredited investor is a term defined by various securities laws that delineates investors permitted to invest in certain types of higher risk investments. In the United States, for an individual to be considered an accredited investor under definition in the Securities Act of 1933, they must have a net worth of at least one million US dollars or have made at least $200,000 each year for the last two years ($300,000 with his or her spouse if married) and have the expectation to make the same amount in the current year. In Canada, the same prerequisites apply, however one’s net worth must be a minimum of one million dollars not including the value of equity of the principal residence.</span><span style="font-size: small;"><o:p></o:p></span><br />
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</div><div class="MsoNormal" style="text-align: justify;"><span style="font-size: small;"><br />
<span style="font-size: small;">It is important for entrepreneurs utilizing angel investors to finance their venture to be certain that they are only approaching and accept accredited investors. We strongly suggest to entrepreneurs seeking investor capital to use competent legal advisors to assist them with proper documentation and compliance with all securities laws and regulations.</span><span style="font-size: small;"><o:p></o:p></span><br />
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</div><div class="MsoNormal" style="text-align: justify;"><span style="font-size: small;"><br />
<span style="font-size: small;">While there has been some contraction of angel investor dollars in the current economic climate, there has been little change in the number of investments funded. Total angel investments in 2008 were $19.2 billion, a decrease of 26.2% over 2007, according to the Center for Venture Research at the University of New Hampshire. However, a total of 55,480 entrepreneurial ventures received angel funding in 2008, a modest 2.9% decrease from 2007, and the number of active investors in 2008 was 260,500 individuals, virtually unchanged from 2007. This significant decline in total dollars, coupled with the small decrease in investments resulted in a smaller total deal size for 2008 (a decline in deal size of 24% from 2007). In contrast to venture capital, in which money must be invested during the life of the fund and is in part based on the size of the fund, angel investing is an individual decision and angels invest from their net worth. This data suggests that while angels have not significantly decreased their investment activity, they are committing fewer dollars resulting from lower valuations and a cautions approach in the current economy.</span><span style="font-size: small;"><o:p></o:p></span><br />
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</div><div class="MsoNormal" style="text-align: justify;"><span style="font-size: small;"><br />
<span style="font-size: small;">Angels often provide additional value beyond their investment dollars; indeed we encourage entrepreneurs to seek out angel investors with strategic value to the investment being funded. Strategic value can come in the form of industry experience, executive knowledge, creative ideas, relationships with the target markets, or other contacts that can prove helpful to the company. When targeting angles we suggest entrepreneurs consider the following guidelines.</span><br />
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</div><span style="font-size: 12pt;"></span><br />
<span style="font-size: 12pt;"><ul><li style="text-align: justify;"><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span><b><i><span style="font-size: small;">Build a convincing case</span></i></b><span style="font-size: small;"> – Angel investors may be willing to take on more risk than most, but they still need to see a well thought out plan with a product that has a documented “must have” need and a competent management team surrounding it. It is rare that an entrepreneur can raise money from angels without clearly defining the competitive landscape of the business and how the product has a clear and unique advantage over competitor’s offerings. Investors will want to know how the company will create and exploit barriers to entry. Namely, how you will keep competitors from being in the same exact business or markets. Some barriers to entry might include patents, trade secrets, and proprietary processes. Additionally, it is not enough to have a strong value proposition and attractive market opportunity; entrepreneurs must have a winning go-to-market program that explains how the desired market share will be captured.</span></li>
<li style="text-align: justify;"><b><i><span style="font-size: small;">Create a prototype and line up beta customers to provide validation</span></i></b><span style="font-size: small;"> – Angels do get involved in the early stages of a company, but not usually before there is a working model of the product and potential customers have committed to test the product. Having a prototype and initial customers signed will greatly increase your chances of attracting angel investors. Demonstrating that you can get paying customers in the real world puts you far ahead of entrepreneurs who simply have a business plan and an idea. Later stage companies need to show they have accomplished revenue growth matching target assumptions and have paying customers who validate their pricing strategy.</span></li>
<li style="text-align: justify;"><b><i><span style="font-size: small;">Founders need to have “skin in the game”</span></i></b><span style="font-size: small;"> – If you want to start a business, be prepared to invest your own money. Entrepreneurs, who expect angels to risk money in their venture, better throw something into the pot themselves. Those entrepreneurs who are not willing to assume such risk are not considered serious by investors, and will most likely not receive funding. We generally suggest that the group of founders surrounding an opportunity be prepared to contribute twenty percent of the funding sought. If the current founders cannot show that this investment has already been put into the business by the founders or are not prepared to make such investment, the likelihood of receiving the investment sought is considerable lessened.</span></li>
<li style="text-align: justify;"><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span><b><i><span style="font-size: small;">Be prepared to have “sweat equity” disregarded by investors</span></i></b><span style="font-size: small;"> – While investors appreciate the idea, effort to bring it to the current state of maturity, and any intellectual property that has been created, they often assign little if any real value to “sweat equity” in their opinion of valuation. This is often at distinct odds with the view of entrepreneurs who tend to assign great value to their efforts to date and the idea. However, we remind entrepreneurs of the “Golden Rule” – he who has the gold, makes the rules.</span></li>
<li style="text-align: justify;"><span style="font-family: Arial;"><b><i><span style="font-size: small;">Focus your search for investors</span></i></b><span style="font-size: small;"> - Identifying angels who are suitable for your opportunity up-front will increase your chances of success. To help you identify appropriate angels when pitching, ask them what they look for in a company, how much they typically invest, and what kind of return they expect on their money. In addition:</span></span></li>
<ul><li style="text-align: justify;"><span style="font-family: Arial;"><span style="color: black; font-family: Symbol;"><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span></span><b><span style="font-size: small;">Concentrate on your industry vertical</span></b><span style="font-size: small;"> - Angels like to invest in companies whose business they know something about. Many angels, having previously been successful entrepreneurs, will tend to lean toward their prior industry experience.</span></span></li>
<li style="text-align: justify;"><span style="font-family: Arial;"><b><span style="font-size: small;">Target investors interested in companies at your stage of development and your deal size </span></b><span style="font-size: small;">- Some angels will only invest in seed or start-up companies, while others seek later stage ventures looking for expansion capital. Angel investors will have a dollar range they are comfortable investing. This can range from $25,000 to several million dollars. We suggest limiting investments to a minimum of at least $25,000 and actually prefer a minimum of $50,000. Truly accredited investors can meet this criteria and it is simply too hard to complete a raise of any size when taking smaller minimum investments.</span></span></li>
<li style="text-align: justify;"><span style="font-family: Arial;"><b><span style="font-size: small;">Look close to home</span></b><span style="font-size: small;"> - Angels frequently want to be actively involved in your business and prefer to invest in companies they can easily keep an eye on and communicate conveniently with management. Make it easy for them to do it in person by looking within a 50-mile radius of your corporate headquarters. You may have to expand your horizons, but try to stick as closely as possible to your home community or region.</span></span></li>
<li style="text-align: justify;"><span style="font-family: Arial;"><b><span style="font-size: small;">Look for risk takers</span></b><span style="font-size: small;"> – Since there's no such thing as a national directory of angels, you've got to put together your own list of prospective angels. Look for other interests that might indicate a risk taker, such as skydiving, motor sports, sailboat racing, or adventure travel. But remember just because someone is a risk taker, it doesn’t mean that they won’t do a lot of homework to control those risks.</span></span></li>
<li style="text-align: justify;"><span style="font-family: Arial;"><b><span style="font-size: small;">First ask people you know </span></b><span style="font-size: small;">–</span><span style="font-size: small;"> </span><span style="font-size: small;">The most likely angel investors for your opportunity are people who already know and trust you. Once you have obtained some of the funding you seek from these people, they may well know others they can refer to your opportunity. The first dollars raised after the founders’ money is often the hardest. Momentum is important and early dollars will help to convince others of the soundness of the opportunity.</span></span></li>
<li style="text-align: justify;"><span style="font-family: Arial;"><b><span style="font-size: small;">Be prepared for no’s </span></b><span style="font-size: small;">– Experience shows that amongst qualified accredited investors with a history of making such angel investments and assuming that your opportunity is an attractive one, an average of only ten percent (1 in 10) of those approached will say yes. So, be prepared for the nine no’s for every yes. Don’t be discouraged but be realistic. You will likely need a list of ten times as many potential investors as you require at the minimum investment amount in order to complete your raise.</span></span></li>
</ul>
<li style="text-align: justify;"><span style="font-family: Arial;"><b><i><span style="font-size: small;">Make connections and network constantly</span></i></b><span style="font-size: small;"> - While some investors do read business plans that come over the transom, plans referred to them by a trusted source, such as a business associate, lawyer or accountant get far more attention. Other options to meet people with deep pockets are to present or at the very least attend a venture capital conference or angel club meeting. Network to find out about these opportunities. Look for local entrepreneurial network and support groups and attend meetings and network aggressively and constantly. If you have a local university or college check to see if they have an entrepreneurial support program and seek out contacts there. SCORE, Economic Development Associations, and other entrepreneurial support resources should be approached and networked as well.</span></span></li>
<li style="text-align: justify;"><span style="font-family: Arial;"><b><i><span style="font-size: small;">Connect personally</span></i></b><span style="font-size: small;"> - Angels spend a lot of time with entrepreneurs especially in the early stages of building a company so getting along is crucial. Chemistry covers whether you like, trust and are in sync with each other. To have good chemistry you have to personally connect, and have similar expectations, vision, and objectives for the company. Being able to answer angels’ questions without feeling threatened is also crucial.</span></span></li>
<li style="text-align: justify;"><span style="font-family: Arial;"><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: small;"> </span></span><b><i><span style="font-size: small;">Be persistent and patient</span></i></b><span style="font-size: small;"> - Entrepreneurs must be committed, passionate, and thick-skinned. Raising capital is a time-consuming, ego-challenging process. It is not unusual for a startup entrepreneur to spend 50%-70% of his time raising capital from angel investors, a process that used to average 3-6 months at a minimum and in today’s more challenging economic climate is more likely to take even longer.</span></span></li>
<li style="text-align: justify;"><span style="font-family: Arial;"><b><i><span style="font-size: small;">Do due diligence on the investors</span></i></b><span style="font-size: small;"> - Entrepreneurs should be just as choosy about who they take money from as the investors are about their investments. Make certain that you really know your investors. This is a partnership with a long life and it is important that it is a good one. Understand his motivation and expectations for exit strategy and expected ROI (return on investment). Know what added value they can bring to the table and make sure they understand this also and are prepared to offer us that value along with their dollars. Knowledgeable angels with good connections can jump start a company and help it to thrive. Well-connected angels can even make it easier to get additional rounds of financing from other angels or even venture capital groups with whom they have a relationship.</span></span></li>
<li style="text-align: justify;"><span style="font-family: Arial;"><b><i><span style="font-size: small;">Don’t haggle over terms</span></i></b><span style="font-size: small;"> - Efforts to hoard stock and inflate valuations will make the company less attractive to investors. Let experienced professionals – capital advisors, valuation experts, lawyers, and accountants - handle terms and valuations. Heed their advice. We often encounter entrepreneurs who are reluctant “to give away so much of their company to people who only contribute money.“ This is an extremely unhealthy and unhelpful attitude and often results in entrepreneurs who own 100% of a failed company. If the company is a success, everyone will be a winner. We often suggest placing stock in a “bonus pool” to be awarded to management or founders based on performance and results. This often helps to make the investors more comfortable and retain a larger potential equity share for the entrepreneur if the company succeeds.</span></span></li>
<li style="text-align: justify;"><span style="font-family: Arial;"><b><i><span style="font-size: small;">Communicate with your investors regularly and openly</span></i></b><span style="font-size: small;"> - Angels want to know how the company is doing whether the news is good or bad. Staying in touch by phone, email and even a monthly newsletter will keep investors happy.</span></span></li>
<li style="text-align: justify;"><span style="font-family: Arial;"><b><i><span style="font-size: small;">Think like an investor</span></i></b><span style="font-size: small;"> – We always suggest the entrepreneur try to “think like an investor.” Keep your investors interests and their perspective in mind. They have placed their funds and trust in you. The more you can successfully maintain their perspective the more likely you will maintain an excellent relationship with your backers.</span></span></li>
</ul><div style="text-align: justify;"><span style="font-size: small;">© 2009, Harbour Bridge Ventures, Inc., All Rights Reserved</span><br />
</div></span>Bruce Carpenterhttp://www.blogger.com/profile/00509920552835244724noreply@blogger.com3tag:blogger.com,1999:blog-2073286383972548773.post-51124475075928121122009-10-02T16:06:00.000-04:002009-10-06T12:32:26.672-04:00Financing Strategies - Some Basic Rules for Entrepreneurs<div align="center" class="MsoNormal" style="line-height: 14.0pt; margin-bottom: 10.0pt; mso-layout-grid-align: none; mso-pagination: none; text-align: center; text-autospace: none;"><b style="mso-bidi-font-weight: normal;"><span style="font-size: 14pt;">Financing Strategies – Some Basic Rules<o:p></o:p></span></b><br />
</div><div class="MsoNormal" style="line-height: 14.0pt; margin-bottom: 6.0pt; mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none;">When launching a new venture it is important for the founders to understand how to finance the enterprise. The founding entrepreneur’s principal responsibility in this process is to make sure that the correct financing strategies are in place and well focused.<o:p></o:p><br />
</div><div class="MsoNormal" style="line-height: 14.0pt; margin-bottom: 6.0pt; mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none;">The founders should make sure that the financing strategies employed meet, at minimum, the following eight criteria:<o:p></o:p><br />
</div><div class="MsoNormalCxSpMiddle" style="line-height: 14.0pt; margin-bottom: 6.0pt; margin-left: 38.9pt; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-layout-grid-align: none; mso-list: l8 level1 lfo15; mso-pagination: none; tab-stops: list 39.2pt; text-align: justify; text-autospace: none; text-indent: -.25in;">1.<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span>Now is the appropriate time to seek the financing desired<o:p></o:p><br />
</div><div class="MsoNormalCxSpMiddle" style="line-height: 14.0pt; margin-bottom: 6.0pt; margin-left: 38.9pt; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-layout-grid-align: none; mso-list: l8 level1 lfo15; mso-pagination: none; tab-stops: list 39.2pt; text-align: justify; text-autospace: none; text-indent: -.25in;">2.<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span>The financing being pursued is adequate to meet the needs of the company<o:p></o:p><br />
</div><div class="MsoNormalCxSpMiddle" style="line-height: 14.0pt; margin-bottom: 6.0pt; margin-left: 38.9pt; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-layout-grid-align: none; mso-list: l8 level1 lfo15; mso-pagination: none; tab-stops: list 39.2pt; text-align: justify; text-autospace: none; text-indent: -.25in;">3.<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span>All the materials required to support the financing request are professional and completed to a high quality level<o:p></o:p><br />
</div><div class="MsoNormalCxSpMiddle" style="line-height: 14.0pt; margin-bottom: 6.0pt; margin-left: 38.9pt; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-layout-grid-align: none; mso-list: l8 level1 lfo15; mso-pagination: none; tab-stops: list 39.2pt; text-align: justify; text-autospace: none; text-indent: -.25in;">4.<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span>You have assembled an experienced and competent management team that can deliver on the plan<o:p></o:p><br />
</div><div class="MsoNormalCxSpMiddle" style="line-height: 14.0pt; margin-bottom: 6.0pt; margin-left: 38.9pt; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-layout-grid-align: none; mso-list: l8 level1 lfo15; mso-pagination: none; tab-stops: list 39.2pt; text-align: justify; text-autospace: none; text-indent: -.25in;">5.<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span>The right financial instruments are being used and conform to all necessary securities laws and regulations<o:p></o:p><br />
</div><div class="MsoNormalCxSpMiddle" style="line-height: 14.0pt; margin-bottom: 6.0pt; margin-left: 38.9pt; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-layout-grid-align: none; mso-list: l8 level1 lfo15; mso-pagination: none; tab-stops: list 39.2pt; text-align: justify; text-autospace: none; text-indent: -.25in;">6.<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span>The right sources being approached<o:p></o:p><br />
</div><div class="MsoNormalCxSpMiddle" style="line-height: 14.0pt; margin-bottom: 6.0pt; margin-left: 38.9pt; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-layout-grid-align: none; mso-list: l8 level1 lfo15; mso-pagination: none; tab-stops: list 39.2pt; text-align: justify; text-autospace: none; text-indent: -.25in;">7.<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span>The optimum capital structure is being put in place to sustain the company and allow for future capital raises if they are required<o:p></o:p><br />
</div><div class="MsoNormalCxSpMiddle" style="line-height: 14.0pt; margin-bottom: 6.0pt; margin-left: 38.9pt; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-layout-grid-align: none; mso-list: l8 level1 lfo15; mso-pagination: none; tab-stops: list 39.2pt; text-align: justify; text-autospace: none; text-indent: -.25in;">8.<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span>The company must be able to afford the financing being sought<o:p></o:p><br />
</div><div class="MsoNormalCxSpMiddle" style="line-height: 14.0pt; margin-bottom: 6.0pt; mso-add-space: auto; mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none;"><br />
</div><div class="MsoNormal" style="line-height: 14.0pt; margin-bottom: 6.0pt; mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none;">There are many financing options available to most new enterprises. In fact, in our experience the range of available options is generally much broader than the focus of most early stage management teams.<o:p></o:p><br />
</div><div class="MsoNormal" style="line-height: 14.0pt; margin-bottom: 6.0pt; mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none;">Many entrepreneurs complain to us of their difficulty in obtaining the financing they desire. We have often heard from entrepreneurs expressions of not only frustration in obtaining the financing they desire, but also doubt that sufficient capital is allocated by investors to early stage opportunities. While we understand their frustration, we would like to point out that there is no shortage of available capital. In fact, in our experience the shortage is actually one of good ideas, pointed at viable markets, with a sound plan on how to tap those market opportunities, and surrounded by talented management teams that can seize those opportunities and execute well. Even when all of those funding criteria exist, we often encounter entrepreneurs that have unrealistic valuation expectations and are unwilling to surrender sufficient equity to attract the capital they require. It seems many would prefer to own 100% of a failed enterprise than a smaller percentage of a very successful one,<o:p></o:p><br />
</div><div class="MsoNormal" style="line-height: 14.0pt; margin-bottom: 6.0pt; mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none;">Our regular conversations with both institutional and angel investors confirm these observations. We are aware of over a score of investment funds that have liquidated in the last 12 months, returning capital to their limited partners due to a shortage of qualified, attractive investment opportunities. We regularly speak with VC groups who tell us about their difficulty in finding attractive deals that meet their funding criteria.<o:p></o:p><br />
</div><div class="MsoNormal" style="line-height: 14.0pt; margin-bottom: 6.0pt; mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none;"><b style="mso-bidi-font-weight: normal;"><u>Financing Rules for Entrepreneurs:<o:p></o:p></u></b><br />
</div><ol start="1" style="margin-top: 0in;" type="1"><li class="MsoNormal" style="line-height: 14.0pt; margin-bottom: 6.0pt; mso-layout-grid-align: none; mso-list: l9 level1 lfo18; mso-pagination: none; tab-stops: list .5in; text-align: justify; text-autospace: none;"><u>Get the Timing Right<o:p></o:p></u></li>
</ol><div class="MsoNormal" style="line-height: 14.0pt; margin-bottom: 6.0pt; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none;">Is now the right time to seek financing? As in so many things in life, timing is all-important. Is the first generation of the product or solution complete and market ready? Is the product or solution market validated? Have the first clients been obtained and are they enthusiastic supporters? Is the company still in pre-revenue mode, or have you obtained some revenues, even if you are not yet cash flow positive? Has the company built sufficient real valuation to support the financing being sought? Do you have a sufficiently detailed and professional business plan and financing package to support the financing you seek? Does your progress and achievement of milestones to date match the projections first described in the business plan? Does the founding group have sufficient “skin in the game” or are you looking to have your investors absorb all or most of the risk? We advise entrepreneurs to carefully evaluate the answers to all of the above questions before seeking financing.<o:p></o:p><br />
</div><div class="MsoNormal" style="line-height: 14.0pt; margin-bottom: 6.0pt; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none;">In our experience, many entrepreneurs approach financing sources before they are truly prepared for either the conversations required with investors or lenders, or to properly employ the funds being sought to build the valuation of the enterprise at acceptable levels of risk to the investor or lender. Alternatively, we also see entrepreneurial ventures wait too long to seek financing with the hope that they can bootstrap their way to success. These entrepreneurs are sometimes victimized by the “hidden flaw” or simply too slow to launch to “break the pull of gravity” and fail to achieve “escape velocity.” The need for financing suddenly becomes desperate and there is an insufficient fuse on the pending financial or cash flow crisis to allow time to complete a financing. As a consequence the company fails. Both of these scenarios are ones we have unfortunately seen promising entrepreneurial fall prey to many times. Being careful to get the timing of your financing correct can help to assure not only the success of obtaining the financing on attractive terms to all parties but also help assure the success of the company.<o:p></o:p><br />
</div><ol start="2" style="margin-top: 0in;" type="1"><li class="MsoNormal" style="line-height: 14.0pt; margin-bottom: 6.0pt; mso-layout-grid-align: none; mso-list: l9 level1 lfo18; mso-pagination: none; tab-stops: list .5in; text-align: justify; text-autospace: none;"><u>Amount of Financing Sought is Adequate<o:p></o:p></u></li>
</ol><div class="MsoNormal" style="line-height: 14.0pt; margin-bottom: 6.0pt; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none;">We often find entrepreneurs significantly underestimate the amount of capital required to drive the enterprise to the next level. This happens for a number of reasons including the following:<o:p></o:p><br />
</div><div class="MsoNormal" style="line-height: 14.0pt; margin-bottom: 6.0pt; margin-left: 1.2in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l7 level1 lfo19; mso-pagination: none; tab-stops: list 1.2in; text-align: justify; text-autospace: none; text-indent: -.2in;"><span style="color: black; font-family: Symbol;">·<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span>The financial projections in the business plan are often overly optimistic and assume that everything will go according to plan – which is seldom the case. We generally encourage entrepreneurs to build three sets of financial projections – best case, worst case, and most likely scenario, along with documented assumptions supporting each scenario. When determining the financing required we will generally advice using something between with worst case and most likely scenario with a contingency factor built on top of that requirement to deal with unidentified risks.<o:p></o:p><br />
</div><div class="MsoNormal" style="line-height: 14.0pt; margin-bottom: 6.0pt; margin-left: 1.2in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l7 level1 lfo19; mso-pagination: none; tab-stops: list 1.2in; text-align: justify; text-autospace: none; text-indent: -.2in;"><span style="color: black; font-family: Symbol;">·<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span>The entrepreneur is reluctant to “give away” so much of his company and therefore desires to finance the business with as little capital as possible. If the initial capital sought proves insufficient to reach “escape velocity,” it is often much more difficult to obtain subsequent financing on attractive terms. This often results in a “down round” of financing, dilution of original investors, and ill feelings and unrest among the early investors and founders.<o:p></o:p><br />
</div><div class="MsoNormal" style="line-height: 14.0pt; margin-bottom: 6.0pt; margin-left: 1.2in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l7 level1 lfo19; mso-pagination: none; tab-stops: list 1.2in; text-align: justify; text-autospace: none; text-indent: -.2in;"><span style="color: black; font-family: Symbol;">·<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span>The natural and innate optimism of entrepreneurs causes them to assume that everything will go according to plan. This is seldom the case in the real world. As we have already said, we commonly advise the addition of a contingency amount to the financing being sought to accommodate unforeseen risks.<o:p></o:p><br />
</div><div class="MsoNormal" style="line-height: 14.0pt; margin-bottom: 6.0pt; margin-left: 1.2in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l7 level1 lfo19; mso-pagination: none; tab-stops: list 1.2in; text-align: justify; text-autospace: none; text-indent: -.2in;"><span style="color: black; font-family: Symbol;">·<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span>We have heard many times from entrepreneurs that “I can always get more money, if I need it.” In fact, if the initial capital obtained is insufficient, the likelihood that more will be available is significantly lower. In our experience it is always less difficult to raise somewhat more financing than you think will likely be required in the initial raise, than to have to go back a second time to get more capital after missing the targets set initially.<o:p></o:p><br />
</div><div class="MsoNormal" style="line-height: 14.0pt; margin-bottom: 6.0pt; margin-left: 1.2in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-list: l7 level1 lfo19; mso-pagination: none; tab-stops: list 1.2in; text-align: justify; text-autospace: none; text-indent: -.2in;"><span style="color: black; font-family: Symbol;">·<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span>Be realistic, but think BIG. We often see entrepreneurs seeking to build a “nice family-size business” providing a comfortable living for the founders and company management team. These plans are unlikely to attract any form of serious financing other than a small, personally guaranteed, and secured loan from a bank. Investors want to see a business with significant upside potential, not just one likely to afford a comfortable living for the founders. At the same time it is important to be realistic. You will be held accountable for the performance and projections in your business plan. You should have a high degree of confidence if the company’s ability to achieve these results.<o:p></o:p><br />
</div><ol start="3" style="margin-top: 0in;" type="1"><li class="MsoNormal" style="line-height: 14.0pt; margin-bottom: 6.0pt; mso-layout-grid-align: none; mso-list: l9 level1 lfo18; mso-pagination: none; tab-stops: list .5in; text-align: justify; text-autospace: none;"><u>The Package Supporting the Financing is Complete and of a High Quality<o:p></o:p></u></li>
</ol><div class="MsoNormal" style="line-height: 14.0pt; margin-bottom: 6.0pt; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none;">First impressions are very important when seeking financing from either investors or lenders. If you make a poor first impression, you are unlikely to get a second chance with that source. The materials supporting the financing request represent your enterprise to the prospective investor or lender. If they are incomplete, lack sufficient detail, fail to answer the investors’ questions, inadequately explain the business and why it will be successful, fail to identify competition and explain what makes your company’s value propositions different, do not adequately explain your go-to-market plan, or identify risks and appropriate contingency and risk mitigation strategies; you are unlikely to get expressions of interest from either investors or lenders. Entrepreneurial teams inexperienced in assembling a high quality package to support a financing request should seek professional assistance. Once the package is assembled we strongly encourage it be reviewed and critiqued by experienced outside third parties prior to being provided to any prospective financing source. This ensures that the package represents your opportunity well and has the best chance of success. We also suggest that the presenting team be rehearsed and critiqued prior to the first presentations to ensure they are prepared to put your best foot forward in an effective manner.<o:p></o:p><br />
</div><ol start="4" style="margin-top: 0in;" type="1"><li class="MsoNormal" style="line-height: 14.0pt; margin-bottom: 6.0pt; mso-layout-grid-align: none; mso-list: l9 level1 lfo18; mso-pagination: none; tab-stops: list .5in; text-align: justify; text-autospace: none;">The Team to Make It Happen is in Place<o:p></o:p></li>
</ol><div class="MsoNormal" style="line-height: 14.0pt; margin-bottom: 6.0pt; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none;">Experienced investors place great emphasis on the importance of an experienced and proven management team. The presence on the team of the “been there, done that” crowd of proven management talent will go a long way to reassuring the investors that the enterprise has the best chance of success come what may. Don’t leave holes in key positions in the organization chart to be filled later. Let the prospective investors meet the management team and be sure to point out their prior record of success. Recruit a strong advisory board and team of professional advisors to support the company from the beginning.<o:p></o:p><br />
</div><ol start="5" style="margin-top: 0in;" type="1"><li class="MsoNormal" style="line-height: 14.0pt; margin-bottom: 6.0pt; mso-layout-grid-align: none; mso-list: l9 level1 lfo18; mso-pagination: none; tab-stops: list .5in; text-align: justify; text-autospace: none;"><u>Use the Right Tools for the Job<o:p></o:p></u></li>
</ol><div class="MsoNormal" style="line-height: 14.0pt; margin-bottom: 6.0pt; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none;">Seek and take competent professional advice on building a capital plan for the business that not only meets the current needs but also allows for future financing if necessary to support growth. There are many different forms of both debt and equity that can be used to finance an enterprise. Additionally, there are many other forms of financing often ignored by entrepreneurs as well. Among these other forms of financing are favorable terms from suppliers, customer deposits, proper management of accounts receivable and accounts payable, grants, NGOs, asset based financing, outsourcing and solution partnerships, distribution partnerships, and on and on. We urge entrepreneurs to seek professional advice and broaden their horizons when building the capital plan for the business. Likewise, it is very important to take guidance from competent advisors to make certain that all financing documents comply with all legal and regulatory requirements. We have seen many instances where entrepreneurs have done early financing without competent advisors and as a consequence have used non-compliant documents or procedures in the financing. This may make it virtually impossible or at least very difficult and expensive to correct those mistakes in order to seek or accept later financing for growth even if the enterprise is successful.<o:p></o:p><br />
</div><ol start="6" style="margin-top: 0in;" type="1"><li class="MsoNormal" style="line-height: 14.0pt; margin-bottom: 6.0pt; mso-layout-grid-align: none; mso-list: l9 level1 lfo18; mso-pagination: none; tab-stops: list .5in; text-align: justify; text-autospace: none;"><u>Go to the Right Sources for Funding<o:p></o:p></u></li>
</ol><div class="MsoNormal" style="line-height: 14.0pt; margin-bottom: 6.0pt; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none;">In our experience, many entrepreneurs waste a lot of time and effort in seeking financing from the wrong sources. This failure takes many forms. Often they seek funding from VCs when they are not yet ready to seek institutional capital. If you have already been turned down by five or six venture capital groups, it is unlikely the seventh or eighth is going to say yes. Do seek to understand why a request is turned down. Address these observations in future approaches. Understand what stage of maturity the company is in and match the funding source to the stage of maturity. Are you in the founders round, a friends and family round, an angel investor round, or a VC or private equity raise. Should you seek assistance from an investment-banking firm? The sources you approach should be appropriate for the size of the raise being conducted, the company’s stage of maturity, and the nature of the business being financed.<o:p></o:p><br />
</div><div class="MsoNormal" style="line-height: 14.0pt; margin-bottom: 6.0pt; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none;">We also urge entrepreneurs to remember that all money is not equal. Some capital is just dollars, other capital comes from sources that bring strategic value or synergy. The source may have relationships with the market you are targeting, experience in your field or a closely related field, relationships with other potential investors, or some other form of potential value to the enterprise. Strategic dollars are always more valuable than just investor dollars. Try to identify funding sources with an interest in your business or market sector, or other form of strategic value. VCs who do not invest primarily in technology or healthcare opportunities are unlikely to be interested in a retail or manufacturing business opportunity.<o:p></o:p><br />
</div><ol start="7" style="margin-top: 0in;" type="1"><li class="MsoNormal" style="line-height: 14.0pt; margin-bottom: 6.0pt; mso-layout-grid-align: none; mso-list: l9 level1 lfo18; mso-pagination: none; tab-stops: list .5in; text-align: justify; text-autospace: none;"><u>Use the Optimum Capital Structure and Allow for Later Financing<o:p></o:p></u></li>
</ol><div class="MsoNormal" style="line-height: 14.0pt; margin-bottom: 6.0pt; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none;">We often see initial investors get “crushed” in later financing rounds due to poor structuring of initial financing rounds. This happens with great frequency, not simply because incorrect valuations were used in the initial allocation of equity, but often because of a lack of sophistication and experience of both the founding entrepreneurial team and the early investors as well. A company with prospects for significant growth seldom will almost always require additional capital after the initial financing round. In fact, the more successful the company, the more likely it will require later financing for growth capital. It is therefore unwise to fail to anticipate these later rounds when structuring the company’s capital base and establishing terms for the initial investors. This is another area where competent professional advisors can be most helpful to the entrepreneurial team.<o:p></o:p><br />
</div><ol start="8" style="margin-top: 0in;" type="1"><li class="MsoNormal" style="line-height: 14.0pt; margin-bottom: 6.0pt; mso-layout-grid-align: none; mso-list: l9 level1 lfo18; mso-pagination: none; tab-stops: list .5in; text-align: justify; text-autospace: none;"><u>Live Within Your Means<o:p></o:p></u></li>
</ol><div class="MsoNormal" style="line-height: 14.0pt; margin-bottom: 6.0pt; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none;">Be certain that the company can afford the financing being sought. Make certain that all debt and equity financing costs, both initial and carrying costs, are included in the financial forecasts, and then allow for contingencies. Time and time again we have seen instances in our Turnaround Management engagements where the company did not account for all of its financing costs in its budgets or allow for appropriate contingency levels and performance shortfalls.<o:p></o:p><br />
</div><div class="MsoNormal" style="line-height: 14.0pt; margin-bottom: 6.0pt; mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none;">Entrepreneurs who follow the basic rules in this discussion are likely not only to be much more successful at obtaining financing on attractive terms to both the entrepreneur and the investor or lender, but also more likely to find their company a successful enterprise.<o:p></o:p><br />
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<span class="Apple-style-span" style="font-size: small;">© Harbour Bridge Ventures, Inc., 2009, All Rights Reserved</span><br />
</div>Bruce Carpenterhttp://www.blogger.com/profile/00509920552835244724noreply@blogger.com2tag:blogger.com,1999:blog-2073286383972548773.post-65017663935083498442009-09-30T17:15:00.000-04:002009-10-06T12:33:10.368-04:00Beethoven's Ninth - A Lesson in Leadership for Entrepreneurs<div align="center" class="MsoNormal" style="text-align: center;"><b style="mso-bidi-font-weight: normal;"><span style="font-size: 14pt;">Beethoven’s Ninth – A Lesson in Leadership and Control<o:p></o:p></span></b><br />
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</div><div class="MsoNormal">Last Saturday evening my wife and I attended a wonderful concert by the Orlando Philharmonic Orchestra in which the featured work was Beethonven’s Symphony No. 9 in D minor Opus 125, conducted by Maestro Christopher Wilkins. This symphony is considered by many to be among the most iconic works in western art, let alone music. Beethoven’s Choral Symphony is a colossal masterpiece and one of the most difficult for an orchestra and choir to render well. Many believe it to be the standard against which all subsequent symphonies have been measured. It possesses unprecedented size, imposing grandeur of conception, and a revolutionary, for its time, choral finale. This symphony has both inspired and intimidated later composers and can often measure the competence of the orchestra and choir bold enough to dare its performance.<br />
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</div><div class="MsoNormal">Over 300 musicians and voices were assembled on stage for the performance, including many instrumental and vocal soloists for featured roles. This is the largest assemblage of musicians in the history of the Orlando Philharmonic. Although I have heard this symphony before, both live and in recorded versions, this performance could only be described as breathtaking in its scale and magnificence.<br />
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</div><div class="MsoNormal">We watched Maestro Wilkins conduct over 300 performers through the entire symphony without a single page of sheet music in front of him. The entire Philharmonic Orchestra, an assembled choir of over 230 voices formed from three separate chorus groups, and featured soloists assembled for the performance – all of these lead and controlled by Maestro Wilkins. Each voice, every instrument, each section of the orchestra and choir had a separate part to play for the Symphony to be performed in its perfection. All this led and controlled by a single conductor who already had each note, each measure, each phrase and theme assembled in his head. As the conductor led the pace, cued each performer, and controlled the assemblage of musicians and voices everything came together in perfect precision to produce the Symphony and Choral. The audience sat enthralled, worshipping the performance when it finished with a standing ovation.<br />
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</div><div class="MsoNormal">Readers of this Blog may well be asking now, what does this have to do with entrepreneurism or business? Ah, have patience good readers, please.<br />
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</div><div class="MsoNormal">In reflection, Maestro Wilkins reminds me of a successful entrepreneur leading a new enterprise to growth and success. The entrepreneur may not be working with “sheet music” in front of him, but he already knows the music by heart. He or she knows exactly what and who will be required and when. Key players have been identified and recruited for the endeavor. Risks have already been examined and analyzed. Contingency and risk mitigation plans made ahead of time to minimize the chances of a “wrong note” being played and plans made to deal with uncertainties and the hidden flaws. A successful entrepreneur may be a good manager, but must be a great leader. Just as 300 performers trusted Maestro Wilkins to lead them through the performance of such a difficult Choral Symphony, the enterprise team and stakeholders trust the successful entrepreneur to lead them through whatever challenges the business will face. No one doubts that the end result will be success. Everyone knows the part they are expected to play. They have rehearsed. They are prepared. And, most importantly, the team knows someone they trust and respect leads them.<br />
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</div><div class="MsoNormal">We cannot overemphasize the importance of leadership as a quality essential to the success of any enterprise. This is even more so for an entrepreneurial business. When investors, lenders, early customers, and other stakeholders evaluate a new business the quality of its leadership is among the most important criteria subjected to judgment. If the team of founders surrounding the business lacks these critical leadership skills, the likelihood of failure is high.<br />
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<span class="Apple-style-span" style="font-size: small; line-height: 18px;">© Harbour Bridge Ventures, Inc., 2009, All Rights Reserved</span><br />
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</div>Bruce Carpenterhttp://www.blogger.com/profile/00509920552835244724noreply@blogger.com3tag:blogger.com,1999:blog-2073286383972548773.post-5739684541044655392009-09-28T11:01:00.000-04:002009-10-06T12:33:49.757-04:00Smart-sourcing - What to Outsource<h2><span style="font-size: medium; font-weight: normal;"><span style="font-size: x-large;"><b><br />
<div class="MsoNormal" style="margin-bottom: 17.0pt; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;"><b><span style="font-size: x-large;">What Should be Outsourced?</span></b><b><span style="font-size: 21pt;"><o:p></o:p></span></b><br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;"><span style="font-weight: normal;"><span style="font-size: medium;">When considering Smart-sourcing alternatives, as with any strategic initiative, you must first assess your internal organization for overall strengths and weaknesses. A few guides to assist you with this process are as follows:</span></span><span style="font-weight: normal;"><span style="font-size: medium;"><o:p></o:p></span></span><br />
</div><div class="MsoListParagraph" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-layout-grid-align: none; mso-list: l0 level1 lfo1; mso-pagination: none; tab-stops: list .2in; text-autospace: none; text-indent: -.2in;"><span style="color: black; font-family: Symbol; font-size: 12pt;">·<span style="font: normal normal normal 7pt/normal 'Times New Roman';"><b> </b></span></span><span style="font-size: 12pt;">What are your “Core” competencies?</span><span style="font-size: 12pt;"><span style="font-weight: normal;"><o:p></o:p></span></span><br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;"><span style="font-weight: normal;"><span style="font-size: medium;">According to “The McKinsey Quarterly 1995 Number 1” in “Make versus Buy” the authors state “Two new strategic approaches, when properly combined, allow managers to leverage their companies’ skills and resources will beyond levels available with other strategies: Concentrate the firm’s own resources on a set of ‘core competencies’ where it can achieve definable preeminence and provide unique value for customers.”</span></span><span style="font-weight: normal;"><o:p></o:p></span><br />
</div><div class="MsoListParagraph" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-layout-grid-align: none; mso-list: l0 level1 lfo1; mso-pagination: none; tab-stops: list .2in; text-autospace: none; text-indent: -.2in;"><span style="color: black; font-family: Symbol; font-size: 12pt;">·<span style="font: normal normal normal 7pt/normal 'Times New Roman';"><b> </b></span></span><span style="font-size: 12pt;">Transforming the “Good to Great”</span><span style="font-size: 12pt;"><span style="font-weight: normal;"><o:p></o:p></span></span><br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;"><span style="font-size: 12pt;"><span style="font-weight: normal;">I<span style="font-size: medium;">n the book entitled “Good to Great: Why some companies make the leap … and others don’t” by Jim Collins, he conveys the fundamental message of core competencies around three basic things, identify:</span></span><span style="font-weight: normal;"><span style="font-size: medium;"><o:p></o:p></span></span></span><br />
</div><div class="MsoListParagraphCxSpFirst" style="margin-bottom: 6.0pt; margin-left: 49.0pt; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-layout-grid-align: none; mso-list: l1 level1 lfo2; mso-pagination: none; text-autospace: none; text-indent: -25.0pt;"><span style="font-weight: normal;"><span style="font-size: medium;">1.</span></span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: medium;"> </span></span><span style="font-weight: normal;"><span style="font-size: medium;">What you are good at</span></span><span style="font-weight: normal;"><span style="font-size: medium;"><o:p></o:p></span></span><br />
</div><div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 6.0pt; margin-left: 49.0pt; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-layout-grid-align: none; mso-list: l1 level1 lfo2; mso-pagination: none; text-autospace: none; text-indent: -25.0pt;"><span style="font-weight: normal;"><span style="font-size: medium;">2.</span></span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: medium;"> </span></span><span style="font-weight: normal;"><span style="font-size: medium;">What you are passionate about</span></span><span style="font-weight: normal;"><span style="font-size: medium;"><o:p></o:p></span></span><br />
</div><div class="MsoListParagraphCxSpLast" style="margin-bottom: 6.0pt; margin-left: 49.0pt; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-layout-grid-align: none; mso-list: l1 level1 lfo2; mso-pagination: none; text-autospace: none; text-indent: -25.0pt;"><span style="font-weight: normal;"><span style="font-size: medium;">3.</span></span><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span style="font-size: medium;"> </span></span><span style="font-weight: normal;"><span style="font-size: medium;">Where you make money</span></span><br />
</div><div class="MsoListParagraph" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-layout-grid-align: none; mso-list: l0 level1 lfo1; mso-pagination: none; tab-stops: list .2in; text-autospace: none; text-indent: -.2in;"><span style="color: black; font-family: Symbol; font-size: 12pt;">·<span style="font: normal normal normal 7pt/normal 'Times New Roman';"><b> </b></span></span><span style="font-size: 12pt;">Knowing the Integrated Supply Chain</span><span style="font-size: 12pt;"><span style="font-weight: normal;"><o:p></o:p></span></span><br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;"><span style="font-weight: normal;"><span style="font-size: medium;">But it is not just that simple; you must first really know what the entire supply chain of your organization looks like, how it operates, and how functions interact with other functions. For example what is the flow across your departmental functions from sales, to customer support, to development, to finance, etc?</span></span><span style="font-weight: normal;"><span style="font-size: medium;"><o:p></o:p></span></span><br />
</div><div class="MsoListParagraph" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-layout-grid-align: none; mso-list: l0 level1 lfo1; mso-pagination: none; tab-stops: list .2in; text-autospace: none; text-indent: -.2in;"><span style="color: black; font-family: Symbol; font-size: 12pt;">·<span style="font: normal normal normal 7pt/normal 'Times New Roman';"><b> </b></span></span><span style="font-size: 12pt;">Deciding the fundamental processes</span><span style="font-size: 12pt;"><span style="font-weight: normal;"><o:p></o:p></span></span><br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;"><span style="font-weight: normal;"><span style="font-size: medium;">Then within that integrated supply chain, you will need to decompose the functions down into the fundamental processes performed within each of the departments. That is, you will need to understand what each function’s input requirements are, what process this function performs, and then what are the output requirements provided by this function. By understanding this flow and process, you will be able to begin identifying those areas that are really your “core competencies.”</span></span><span style="font-weight: normal;"><o:p></o:p></span><br />
</div><div class="MsoListParagraph" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-layout-grid-align: none; mso-list: l0 level1 lfo1; mso-pagination: none; tab-stops: list .2in; text-autospace: none; text-indent: -.2in;"><span style="color: black; font-family: Symbol; font-size: 12pt;">·<span style="font: normal normal normal 7pt/normal 'Times New Roman';"><b> </b></span></span><span style="font-size: 12pt;">Seeking alternative solutions</span><span style="font-size: 12pt;"><span style="font-weight: normal;"><o:p></o:p></span></span><br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;"><span style="font-weight: normal;"><span style="font-size: medium;">The other strategic approach referenced in the McKinsey Quarterly article “Make versus Buy” allowing managers to best leverage their companies’ skills and resources is to “strategically outsource other activities – including many traditionally considered integral to any company – for which the firm has neither a critical strategic need nor special capabilities.”</span></span><span style="font-weight: normal;"><span style="font-size: medium;"><o:p></o:p></span></span><br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;"><span style="font-weight: normal;"><span style="font-size: medium;">This means, find other companies (this could be sister companies within the organization or external 3</span></span><span style="font-weight: normal;"><span style="font-size: medium;">rd</span></span><span style="font-weight: normal;"><span style="font-size: medium;"> parties) where the function requiring outsourcing is their “core competency”.</span></span><span style="font-weight: normal;"><o:p></o:p></span><br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;"><span style="font-size: 14pt;">Start with Lowering Costs<span style="font-weight: normal;"><o:p></o:p></span></span><br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;"><span style="font-weight: normal;"><span style="font-size: medium;">Once you’ve determined your core competencies and are ready to outsource the non-competency functions, you might want to first take an internal look at your existing operations and functions with a view of which areas might produce the most effective cost savings. The strategic initiative of lowering costs can be obtained by one or more of the following:</span></span><span style="font-weight: normal;"><o:p></o:p></span><br />
</div><div class="MsoListParagraph" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-layout-grid-align: none; mso-list: l0 level1 lfo1; mso-pagination: none; tab-stops: list .2in; text-autospace: none; text-indent: -.2in;"><span style="color: black; font-family: Symbol; font-size: 12pt;">·<span style="font: normal normal normal 7pt/normal 'Times New Roman';"><b> </b></span></span><span style="font-size: 12pt;">Internal functions</span><span style="font-size: 12pt;"><span style="font-weight: normal;"><o:p></o:p></span></span><br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;"><span style="font-weight: normal;"><span style="font-size: medium;">You may be able to lower internal costs to acceptable levels without outsourcing considerations, by overall efficiencies with increased productivity, streamlined processes, more automation and less manual intervention, and such. You should always seek efficiencies and cost reductions from within before looking outside the organization.</span></span><span style="font-weight: normal;"><o:p></o:p></span><br />
</div><div class="MsoListParagraph" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-layout-grid-align: none; mso-list: l0 level1 lfo1; mso-pagination: none; tab-stops: list .2in; text-autospace: none; text-indent: -.2in;"><span style="color: black; font-family: Symbol; font-size: 12pt;">·<span style="font: normal normal normal 7pt/normal 'Times New Roman';"><b> </b></span></span><span style="font-size: 12pt;">Shared functions</span><span style="font-size: 12pt;"><span style="font-weight: normal;"><o:p></o:p></span></span><br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;"><span style="font-weight: normal;"><span style="font-size: medium;">Next, you should look at those areas where you may be sharing functions across departments or business units to seek improved levels of service at lower costs. Examples that might be shared include: telecommunications functions, facilities, purchasing, HR administration, and the like. Many times when functions are shared, both parties are focused on the output and now always the efficiencies. Go to your partner and seek ways to lower costs without sacrificing service levels.</span></span><span style="font-weight: normal;"><o:p></o:p></span><br />
</div><div class="MsoListParagraph" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-layout-grid-align: none; mso-list: l0 level1 lfo1; mso-pagination: none; tab-stops: list .2in; text-autospace: none; text-indent: -.2in;"><span style="color: black; font-family: Symbol; font-size: 12pt;">·<span style="font: normal normal normal 7pt/normal 'Times New Roman';"><b> </b></span></span><span style="font-size: 12pt;">Outsourced functions</span><span style="font-size: 12pt;"><span style="font-weight: normal;"><o:p></o:p></span></span><br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;"><span style="font-weight: normal;"><span style="font-size: medium;">Then, there are the existing outsourced functions across your organization. You should re-look at your existing contracts, agreements, and the overall relationship for areas of improvement. Many times these functions are negotiated well in the up-front, but once the process and work begin to flow, we forget about the original objectives and get on with “business as usual”. Go back and revisit the relationship and look for those unnecessary costs that may have crept into the process over time.</span></span><span style="font-weight: normal;"><o:p></o:p></span><br />
</div><div class="MsoListParagraph" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-layout-grid-align: none; mso-list: l0 level1 lfo1; mso-pagination: none; tab-stops: list .2in; text-autospace: none; text-indent: -.2in;"><span style="color: black; font-family: Symbol; font-size: 12pt;">·<span style="font: normal normal normal 7pt/normal 'Times New Roman';"><b> </b></span></span><span style="font-size: 12pt;">Increased productivity</span><span style="font-size: 12pt;"><span style="font-weight: normal;"><o:p></o:p></span></span><br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;"><span style="font-weight: normal;"><span style="font-size: medium;">Lastly, no matter which of the above (or combinations of several) you consider, it is all about increased productivity not just lowering costs. Productivity increases are obtained in one of two ways, either you reduce the input and maintain the same level of output (cut staff to perform same level of revenue) or you increase output using the same level of input (increased revenues from same level of staffing).</span></span><span style="font-weight: normal;"><span style="font-size: medium;"><o:p></o:p></span></span><br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;"><span style="font-weight: normal;"><span style="font-size: medium;">Productivity gains come from innovation in the fundamental way a company delivers products or services. Companies generate innovation by deploying new technology along with improved processes and capabilities. By more effectively managing the Input/output control levers of your organization you can obtain dramatic results in your overall strategic objectives of lowering costs.</span></span><span style="font-weight: normal;"><o:p></o:p></span><br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;"><span style="font-size: 14pt;">Move on to Raising Quality</span><span style="font-size: 14pt;"><span style="font-weight: normal;"><o:p></o:p></span></span><br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;"><span style="font-weight: normal;"><span style="font-size: medium;">The next key strategic objective for the organization is about raising quality, some might say it’s about “raising the bar”. It is this initiative that can provide leverage across the organization in order to have significant impact on your results and not just minor improvements along the way.</span></span><span style="font-size: 12pt;"><span style="font-weight: normal;"><o:p></o:p></span></span><br />
</div><div class="MsoListParagraph" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-layout-grid-align: none; mso-list: l0 level1 lfo1; mso-pagination: none; tab-stops: list .2in; text-autospace: none; text-indent: -.2in;"><span style="color: black; font-family: Symbol; font-size: 12pt;">·<span style="font: normal normal normal 7pt/normal 'Times New Roman';"><b> </b></span></span><span style="font-size: 12pt;">Excelling in your core competencies</span><span style="font-size: 12pt;"><span style="font-weight: normal;"><o:p></o:p></span></span><br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;"><span style="font-weight: normal;"><span style="font-size: medium;">Once you’ve determined your “core competencies” you must now exploit them. You must excel in these factors as if there is no stopping you from achieving market dominance (if you already have market share, this is what will keep you there).</span></span><span style="font-weight: normal;"><span style="font-size: medium;"><o:p></o:p></span></span><br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;"><span style="font-weight: normal;"><span style="font-size: medium;">The passion about doing what you do better than anyone else, being able to do that function at higher levels of quality than the competition, and demonstrating that value-add to your customer in the measured results that they gain by benefit of doing business with you; must permeate your entire organization.</span></span><span style="font-size: 12pt;"><span style="font-weight: normal;"><o:p></o:p></span></span><br />
</div><div class="MsoListParagraph" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-layout-grid-align: none; mso-list: l0 level1 lfo1; mso-pagination: none; tab-stops: list .2in; text-autospace: none; text-indent: -.2in;"><span style="color: black; font-family: Symbol; font-size: 12pt;">·<span style="font: normal normal normal 7pt/normal 'Times New Roman';"><b> </b></span></span><span style="font-size: 12pt;">Leveraging the competencies of your supplier and distribution partners<span style="font-weight: normal;"><o:p></o:p></span></span><br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;"><span style="font-weight: normal;"><span style="font-size: medium;">Then, by leveraging the core competencies of your suppler and distribution partners and allowing them to excel at what they do best, while you are doing what you do best; all creates the compelling proposition that extends beyond anything that your customer could do for themselves in-house or with any other competitor.</span></span><span style="font-size: 12pt;"><span style="font-weight: normal;"><o:p></o:p></span></span><br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;"><span style="font-size: 14pt; letter-spacing: -0.35pt;">Next Add Improving Services</span><span style="font-size: 14pt; letter-spacing: -0.35pt;"><span style="font-weight: normal;"><o:p></o:p></span></span><br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;"><span style="letter-spacing: -0.35pt;"><span style="font-weight: normal;"><span style="font-size: medium;">In today’s business pressures of finding 20+% gains in revenues or profit margins or market share, etc.; this last key strategic reason for Smart-sourcing your operations is about ways to get the jump on the competition and keep your organization out in front.</span></span><span style="font-weight: normal;"><span style="font-size: medium;"><o:p></o:p></span></span></span><br />
</div><div class="MsoListParagraph" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-layout-grid-align: none; mso-list: l0 level1 lfo1; mso-pagination: none; tab-stops: list .2in; text-autospace: none; text-indent: -.2in;"><span style="color: black; font-family: Symbol; font-size: 12pt; letter-spacing: -0.35pt;">·<span style="font: normal normal normal 7pt/normal 'Times New Roman';"><b> </b></span></span><span style="font-size: 12pt; letter-spacing: -0.35pt;">Faster time-to-market</span><span style="font-size: 12pt; letter-spacing: -0.35pt;"><span style="font-weight: normal;"><o:p></o:p></span></span><br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;"><span style="letter-spacing: -0.35pt;"><span style="font-weight: normal;"><span style="font-size: medium;">By leveraging the combined core competencies of a Smart-sourced proposition, you should find new and innovative solutions coming to market availability in unprecedented time frames. This faster time-to-market factor can propel your organization to be “top of mind” with your existing customers and also with your prospects.</span></span><span style="font-weight: normal;"><o:p></o:p></span></span><br />
</div><div class="MsoListParagraph" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-layout-grid-align: none; mso-list: l0 level1 lfo1; mso-pagination: none; tab-stops: list .2in; text-autospace: none; text-indent: -.2in;"><span style="color: black; font-family: Symbol; font-size: 12pt; letter-spacing: -0.35pt;">·<span style="font: normal normal normal 7pt/normal 'Times New Roman';"><b> </b></span></span><span style="font-size: 12pt; letter-spacing: -0.35pt;">Enhanced offerings</span><span style="font-size: 12pt; letter-spacing: -0.35pt;"><span style="font-weight: normal;"><o:p></o:p></span></span><br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;"><span style="letter-spacing: -0.35pt;"><span style="font-weight: normal;"><span style="font-size: medium;">Your value proposition is not just about getting base functional services to the market in an expeditious manner, but rather, when you leverage your core competencies it is about bringing better, more enhanced offerings to the market with you. The two things you have that are part of your core competencies and are the most difficult to Smart-source are your business domain knowledge and business process expertise (pattern development). You need to leverage this to enhance your offering beyond just the normal and routine product development cycles.</span></span><span style="font-weight: normal;"><o:p></o:p></span></span><br />
</div><div class="MsoListParagraph" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-layout-grid-align: none; mso-list: l0 level1 lfo1; mso-pagination: none; tab-stops: list .2in; text-autospace: none; text-indent: -.2in;"><span style="color: black; font-family: Symbol; font-size: 12pt; letter-spacing: -0.35pt;">·<span style="font: normal normal normal 7pt/normal 'Times New Roman';"><b> </b></span></span><span style="font-size: 12pt; letter-spacing: -0.35pt;">Expanded value proposition</span><span style="font-size: 12pt; letter-spacing: -0.35pt;"><span style="font-weight: normal;"><o:p></o:p></span></span><br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;"><span style="letter-spacing: -0.35pt;"><span style="font-weight: normal;"><span style="font-size: medium;">When your value proposition includes the core competencies of partnered solutions, you should be looking for additional ways to expand that solution to your customers and your market. By adding additional products or services from Smart-sourced providers, you can push more revenue through your brand and distribution channel without having to add the direct costs of the solution. Not only does this provide you with more to sell, but it can also add to the reasons why you are “top of mind” with your customers.</span></span><span style="font-weight: normal;"><o:p></o:p></span></span><br />
</div><div class="MsoListParagraph" style="margin-bottom: 6.0pt; margin-left: .2in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-layout-grid-align: none; mso-list: l0 level1 lfo1; mso-pagination: none; tab-stops: list .2in; text-autospace: none; text-indent: -.2in;"><span style="color: black; font-family: Symbol; font-size: 12pt; letter-spacing: -0.35pt;">·<span style="font: normal normal normal 7pt/normal 'Times New Roman';"><b> </b></span></span><span style="font-size: 12pt; letter-spacing: -0.35pt;">“Doing more with less”</span><span style="font-size: 12pt; letter-spacing: -0.35pt;"><span style="font-weight: normal;"><o:p></o:p></span></span><br />
</div><div class="MsoNormal" style="margin-bottom: 6.0pt; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;"><span style="letter-spacing: -0.35pt;"><span style="font-weight: normal;"><span style="font-size: medium;">All of the above is about “doing more with less” and this is the magic formula that all firms aspire to achieve. By blending the right components of your market solution that exploits your core competencies and those of your Smart-sourcing partners you can truly make an impact on this old adage.
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<span style="font-size: small;"><div style="mso-element: footnote-list;"><div id="ftn" style="mso-element: footnote;"></div></div></span>Bruce Carpenterhttp://www.blogger.com/profile/00509920552835244724noreply@blogger.com0tag:blogger.com,1999:blog-2073286383972548773.post-4158036114722356822009-09-26T15:44:00.000-04:002009-10-06T12:37:17.472-04:00Smart-sourcing - A Strategic Approach to Outsourcing<h2><span style="font-size: x-large;">What is Smart-sourcing? </span><o:p></o:p></h2><div style="mso-element-anchor-horizontal: page; mso-element-anchor-vertical: page; mso-element-frame-height: 141.1pt; mso-element-frame-hspace: 9.35pt; mso-element-frame-width: 2.35in; mso-element-left: 86.3pt; mso-element-top: 174.2pt; mso-element-wrap: around; mso-element: frame; mso-height-rule: exactly;"><table align="left" cellpadding="0" cellspacing="0" height="141" hspace="0" style="width: 178px;" vspace="0"><tbody>
<tr> <td height="141" style="padding-bottom: 0in; padding-left: 9.35pt; padding-right: 9.35pt; padding-top: 0in;" valign="top"><div style="background: #FEFEFE; border: double windowtext 2.5pt; mso-border-alt: triple windowtext 2.5pt; mso-element: para-border-div; mso-pattern: solid white; mso-shading: white; padding: 4.0pt 7.0pt 4.0pt 7.0pt;"><div class="MsoNormal" style="background: #FEFEFE; border: none; margin-left: 0in; mso-border-alt: triple windowtext 2.5pt; mso-element-anchor-horizontal: page; mso-element-anchor-vertical: page; mso-element-frame-height: 141.1pt; mso-element-frame-hspace: 9.35pt; mso-element-frame-width: 2.35in; mso-element-left: 86.3pt; mso-element-top: 174.2pt; mso-element-wrap: around; mso-element: frame; mso-height-rule: exactly; mso-padding-alt: 4.0pt 7.0pt 4.0pt 7.0pt; mso-pattern: solid white; mso-shading: white; padding: 0in;"><b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;"><span style="font-size: 10pt;"><br />
Definition of Smart-sourcing<o:p></o:p></span></i></b><br />
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</div><div class="MsoNormal" style="background: #FEFEFE; border: none; margin-left: 0in; mso-border-alt: triple windowtext 2.5pt; mso-element-anchor-horizontal: page; mso-element-anchor-vertical: page; mso-element-frame-height: 141.1pt; mso-element-frame-hspace: 9.35pt; mso-element-frame-width: 2.35in; mso-element-left: 86.3pt; mso-element-top: 174.2pt; mso-element-wrap: around; mso-element: frame; mso-height-rule: exactly; mso-padding-alt: 4.0pt 7.0pt 4.0pt 7.0pt; mso-pattern: solid white; mso-shading: white; padding: 0in; text-align: justify;"><b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;"><span style="font-size: 10pt;">Smart-sourcing</span></i></b><i style="mso-bidi-font-style: normal;"><span style="font-size: 10pt;"> is a set of strategies that focus on the conception and implementation of an optimal, enterprise business process model that integrates all essential business processes to produce maximum value at the lowest possible cost for all stakeholders<o:p></o:p></span></i><br />
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</tbody></table></div><div class="MsoBodyText"><span style="font-size: 10pt;">With the many buzz words floating around the industry like out-sourcing, in-sourcing, off-shore, near-shore, off-shore out-sourcing, off-sourcing, Greenfield out-sourcing, co-sourcing, and the like; you may be confused as to exactly what is ‘Smart-sourcing’ and how does it apply to you? Therefore let us define ‘Smart-sourcing’ - Smart-sourcing is a set of strategies that focus on the conception and implementation of an optimal enterprise business process model that integrates all essential business processes to produce maximum value at the lowest possible cost for all stakeholders.<b style="mso-bidi-font-weight: normal;"> </b> No ‘single sourcing strategy’, regardless of the size or breadth of the enterprise, will produce optimal value for all stakeholders. A better approach is a Smart-sourcing strategy that recognizes those ‘Opportunity’ activities that produce competitive advantage and represent core competencies of the enterprise, as distinct from those ‘Risk’ activities that require sound execution to avoid competitive disadvantage but do not produce competitive distinction. Smart-sourcing strategies can then be implemented to focus on tighter ownership and control of the ‘Opportunity’ activities, while looking to support sound execution at the lowest possible cost of ‘Risk’ activities.</span><br />
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<span style="font-size: 10pt;"><span style="font-size: x-large; font-weight: bold;">Why Would You Consider Smart-sourcing?</span></span><br />
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<span style="font-size: small;"><h2><o:p></o:p></h2><div style="mso-element-anchor-horizontal: page; mso-element-anchor-vertical: paragraph; mso-element-frame-height: 148.85pt; mso-element-frame-hspace: 9.0pt; mso-element-frame-width: 163.8pt; mso-element-left: 86.65pt; mso-element-top: 25.15pt; mso-element-wrap: around; mso-element: frame; mso-height-rule: exactly;"><table align="left" cellpadding="0" cellspacing="0" height="149" hspace="0" style="width: 173px;" vspace="0"><tbody>
<tr> <td height="149" style="padding-bottom: 0in; padding-left: 9.0pt; padding-right: 9.0pt; padding-top: 0in;" valign="top"><div style="background: #FEFEFE; border: double windowtext 2.5pt; mso-border-alt: triple windowtext 2.5pt; mso-element: para-border-div; mso-pattern: solid white; mso-shading: white; padding: 4.0pt 7.0pt 4.0pt 7.0pt;"><div class="MsoNormal" style="background: #FEFEFE; border: none; margin-left: 0in; mso-border-alt: triple windowtext 2.5pt; mso-element-anchor-horizontal: page; mso-element-anchor-vertical: paragraph; mso-element-frame-height: 148.85pt; mso-element-frame-hspace: 9.0pt; mso-element-frame-width: 163.8pt; mso-element-left: 86.65pt; mso-element-top: 25.15pt; mso-element-wrap: around; mso-element: frame; mso-height-rule: exactly; mso-padding-alt: 4.0pt 7.0pt 4.0pt 7.0pt; mso-pattern: solid white; mso-shading: white; padding: 0in;"><b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;"><span style="font-size: 10pt;"><br />
Reasons for Smart-sourcing<o:p></o:p></span></i></b><br />
</div><div class="MsoNormal" style="background: #FEFEFE; border: none; margin-left: 0in; mso-border-alt: triple windowtext 2.5pt; mso-element-anchor-horizontal: page; mso-element-anchor-vertical: paragraph; mso-element-frame-height: 148.85pt; mso-element-frame-hspace: 9.0pt; mso-element-frame-width: 163.8pt; mso-element-left: 86.65pt; mso-element-top: 25.15pt; mso-element-wrap: around; mso-element: frame; mso-height-rule: exactly; mso-padding-alt: 4.0pt 7.0pt 4.0pt 7.0pt; mso-pattern: solid white; mso-shading: white; padding: 0in;"><br />
</div><div class="MsoNormal" style="background: #FEFEFE; border: none; margin-left: .25in; mso-border-alt: triple windowtext 2.5pt; mso-element-anchor-horizontal: page; mso-element-anchor-vertical: paragraph; mso-element-frame-height: 148.85pt; mso-element-frame-hspace: 9.0pt; mso-element-frame-width: 163.8pt; mso-element-left: 86.65pt; mso-element-top: 25.15pt; mso-element-wrap: around; mso-element: frame; mso-height-rule: exactly; mso-list: l0 level1 lfo1; mso-padding-alt: 4.0pt 7.0pt 4.0pt 7.0pt; mso-pattern: solid white; mso-shading: white; padding: 0in; tab-stops: list .25in; text-indent: -.25in;"><span style="font-family: Symbol; font-size: 10pt;">·<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span><i style="mso-bidi-font-style: normal;"><span style="font-size: 10pt;">Fluctuating capacity requirements<o:p></o:p></span></i><br />
</div><div class="MsoNormal" style="background: #FEFEFE; border: none; margin-left: .25in; mso-border-alt: triple windowtext 2.5pt; mso-element-anchor-horizontal: page; mso-element-anchor-vertical: paragraph; mso-element-frame-height: 148.85pt; mso-element-frame-hspace: 9.0pt; mso-element-frame-width: 163.8pt; mso-element-left: 86.65pt; mso-element-top: 25.15pt; mso-element-wrap: around; mso-element: frame; mso-height-rule: exactly; mso-list: l0 level1 lfo1; mso-padding-alt: 4.0pt 7.0pt 4.0pt 7.0pt; mso-pattern: solid white; mso-shading: white; padding: 0in; tab-stops: list .25in; text-indent: -.25in;"><span style="font-family: Symbol; font-size: 10pt;">·<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span><i style="mso-bidi-font-style: normal;"><span style="font-size: 10pt;">Cost pressures<o:p></o:p></span></i><br />
</div><div class="MsoNormal" style="background: #FEFEFE; border: none; margin-left: .25in; mso-border-alt: triple windowtext 2.5pt; mso-element-anchor-horizontal: page; mso-element-anchor-vertical: paragraph; mso-element-frame-height: 148.85pt; mso-element-frame-hspace: 9.0pt; mso-element-frame-width: 163.8pt; mso-element-left: 86.65pt; mso-element-top: 25.15pt; mso-element-wrap: around; mso-element: frame; mso-height-rule: exactly; mso-list: l0 level1 lfo1; mso-padding-alt: 4.0pt 7.0pt 4.0pt 7.0pt; mso-pattern: solid white; mso-shading: white; padding: 0in; tab-stops: list .25in; text-indent: -.25in;"><span style="font-family: Symbol; font-size: 10pt;">·<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span><i style="mso-bidi-font-style: normal;"><span style="font-size: 10pt;">Competitive pressures<o:p></o:p></span></i><br />
</div><div class="MsoNormal" style="background: #FEFEFE; border: none; margin-left: .25in; mso-border-alt: triple windowtext 2.5pt; mso-element-anchor-horizontal: page; mso-element-anchor-vertical: paragraph; mso-element-frame-height: 148.85pt; mso-element-frame-hspace: 9.0pt; mso-element-frame-width: 163.8pt; mso-element-left: 86.65pt; mso-element-top: 25.15pt; mso-element-wrap: around; mso-element: frame; mso-height-rule: exactly; mso-list: l0 level1 lfo1; mso-padding-alt: 4.0pt 7.0pt 4.0pt 7.0pt; mso-pattern: solid white; mso-shading: white; padding: 0in; tab-stops: list .25in; text-indent: -.25in;"><span style="font-family: Symbol; font-size: 10pt;">·<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span><i style="mso-bidi-font-style: normal;"><span style="font-size: 10pt;">Customer demands<o:p></o:p></span></i><br />
</div><div class="MsoNormal" style="background: #FEFEFE; border: none; margin-left: .25in; mso-border-alt: triple windowtext 2.5pt; mso-element-anchor-horizontal: page; mso-element-anchor-vertical: paragraph; mso-element-frame-height: 148.85pt; mso-element-frame-hspace: 9.0pt; mso-element-frame-width: 163.8pt; mso-element-left: 86.65pt; mso-element-top: 25.15pt; mso-element-wrap: around; mso-element: frame; mso-height-rule: exactly; mso-list: l0 level1 lfo1; mso-padding-alt: 4.0pt 7.0pt 4.0pt 7.0pt; mso-pattern: solid white; mso-shading: white; padding: 0in; tab-stops: list .25in; text-indent: -.25in;"><span style="font-family: Symbol; font-size: 10pt;">·<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span><i style="mso-bidi-font-style: normal;"><span style="font-size: 10pt;">Access to needed skills<o:p></o:p></span></i><br />
</div><div class="MsoNormal" style="background: #FEFEFE; border: none; margin-left: .25in; mso-border-alt: triple windowtext 2.5pt; mso-element-anchor-horizontal: page; mso-element-anchor-vertical: paragraph; mso-element-frame-height: 148.85pt; mso-element-frame-hspace: 9.0pt; mso-element-frame-width: 163.8pt; mso-element-left: 86.65pt; mso-element-top: 25.15pt; mso-element-wrap: around; mso-element: frame; mso-height-rule: exactly; mso-list: l0 level1 lfo1; mso-padding-alt: 4.0pt 7.0pt 4.0pt 7.0pt; mso-pattern: solid white; mso-shading: white; padding: 0in; tab-stops: list .25in; text-indent: -.25in;"><span style="font-family: Symbol; font-size: 10pt;">·<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span><i style="mso-bidi-font-style: normal;"><span style="font-size: 10pt;">Improve quality<o:p></o:p></span></i><br />
</div><div class="MsoNormal" style="background: #FEFEFE; border: none; margin-left: .25in; mso-border-alt: triple windowtext 2.5pt; mso-element-anchor-horizontal: page; mso-element-anchor-vertical: paragraph; mso-element-frame-height: 148.85pt; mso-element-frame-hspace: 9.0pt; mso-element-frame-width: 163.8pt; mso-element-left: 86.65pt; mso-element-top: 25.15pt; mso-element-wrap: around; mso-element: frame; mso-height-rule: exactly; mso-list: l0 level1 lfo1; mso-padding-alt: 4.0pt 7.0pt 4.0pt 7.0pt; mso-pattern: solid white; mso-shading: white; padding: 0in; tab-stops: list .25in; text-indent: -.25in;"><span style="font-family: Symbol; font-size: 10pt;">·<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span><i style="mso-bidi-font-style: normal;"><span style="font-size: 10pt;">Accelerate business growth<o:p></o:p></span></i><br />
</div><div class="MsoNormal" style="background: #FEFEFE; border: none; margin-left: .25in; mso-border-alt: triple windowtext 2.5pt; mso-element-anchor-horizontal: page; mso-element-anchor-vertical: paragraph; mso-element-frame-height: 148.85pt; mso-element-frame-hspace: 9.0pt; mso-element-frame-width: 163.8pt; mso-element-left: 86.65pt; mso-element-top: 25.15pt; mso-element-wrap: around; mso-element: frame; mso-height-rule: exactly; mso-list: l0 level1 lfo1; mso-padding-alt: 4.0pt 7.0pt 4.0pt 7.0pt; mso-pattern: solid white; mso-shading: white; padding: 0in; tab-stops: list .25in; text-indent: -.25in;"><span style="font-family: Symbol; font-size: 10pt;">·<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span><i style="mso-bidi-font-style: normal;"><span style="font-size: 10pt;">Extend and expand business<o:p></o:p></span></i><br />
</div></div></td> </tr>
</tbody></table></div><div class="MsoBodyText"><span style="font-size: 10pt;">Before embarking on a new journey, every senior executive of the firm must ask some fundamental questions, and ‘Why’ is a logical first step.</span><br />
<span style="font-size: medium;"><span style="font-size: 16px;"><b><br />
</b></span></span><br />
<span style="font-size: 16px; font-weight: bold;">Fluctuating Capacity Requirements</span><br />
</div><h3><span class="Apple-style-span" style="font-size: 13px; font-weight: normal;">Virtually every business has ‘peaks & valleys’ in their workload, and many have looked offshore for lower cost labor. For example, it seems in the IT industry there is always more demand from the user community than there is supply of IT resources to fulfill those requests. By establishing strong relationships with offshore IT service providers, many firms have found gross savings in excess of 50% over in-house programming skills. The attraction of offshore service partnerships for both staff augmentation and project work has seen a tremendous growth that is only projected to accelerate.</span></h3><div class="MsoBodyText"><span style="font-size: medium;"><span style="font-size: 16px;"><b><br />
</b></span></span><br />
<span style="font-size: 10pt;"><span style="font-size: 16px; font-weight: bold;">Cost Pressures</span></span><br />
<span style="font-size: medium;"><span style="font-size: 16px;"><b><br />
</b></span></span><br />
</div><div class="MsoBodyText"><span style="font-size: 10pt;">Cost pressures abound in business and very few firms are isolated from the increasing demand for business performance improvement. Pressures from customers, , competitors, analysts and shareholders are forcing many companies to aggressively seek new ways of delivering similar products and services but at reduced costs. For many businesses labor contributes a very significant portion of the cost of goods sold (CGS). When you couple this with the additional costs for recruiting and training new staff on an annual basis, it is easy to understand why so many businesses are moving costs to lower cost economies.</span><br />
<span style="font-size: small;"><span style="font-size: 13px;"><br />
</span></span><br />
<span style="font-size: 16px; font-weight: bold;">Competitive Pressures</span><br />
<span style="font-size: medium;"><span style="font-size: 16px;"><b><br />
</b></span></span><br />
<span style="font-size: 16px; font-weight: bold;"><span style="font-size: 13px; font-weight: normal;">Not only does the pressure to lower cost come from within, competition is another reason many firms are looking at Smart-sourcing strategies. To remain competitive, any internal function must offer a stronger value proposition (higher value coupled with lower costs) than other potential outside providers. And, just like the foreign automakers in the 1980s coming on-shore, providers from lower cost economies are looking to bring their quality solutions and lower-costs of manufacturing, execution, delivery, and support into higher cost North American and European markets.</span></span><br />
<span style="font-size: small;"><span style="font-size: 13px;"><br />
</span></span><br />
<span style="font-size: 16px; font-weight: bold;"><span style="font-size: 13px; font-weight: normal;"><span style="font-size: 16px; font-weight: bold;">Customer Demands</span></span></span><br />
<span style="font-size: medium;"><span style="font-size: 16px;"><b><br />
</b></span></span><br />
</div><div class="MsoBodyText"><span style="font-size: 10pt;">Ever increasing customer demands are another reason for Smart-sourcing, as businesses need to implement stronger retention strategies for their customers. By leveraging external resources, many businesses are able to meet (and exceed) customer requests for specialized services, enhanced and new products, and customized offerings that may not be part of current standard offerings or competencies. </span><br />
<span style="font-size: small;"><span style="font-size: 13px;"><br />
</span></span><br />
<span style="font-size: 10pt;"><span style="font-size: 16px; font-weight: bold;">Access to Needed Skills</span></span><br />
<span style="font-size: medium;"><span style="font-size: 16px;"><b><br />
</b></span></span><br />
</div><div class="MsoBodyText"><span style="font-size: 10pt;">With the advent of new technologies rapidly being embraced by businesses, many managers find themselves in need to access specialized skills to assist in their technology evolutionary path. One reason to look at Smart-sourcing these specialized skills may be to protect current staff supporting legacy operations and infrastructure and rapidly respond to newer technologies without having to add the direct expense of the labor, as well as eliminate the delay in time required to either hire new staff or retrain existing staff.</span><br />
<span style="font-size: small;"><span style="font-size: 13px;"><br />
</span></span><br />
<span style="font-size: 10pt;"><span style="font-size: 16px; font-weight: bold;">Improve Quality</span></span><br />
<span style="font-size: medium;"><span style="font-size: 16px;"><b><br />
</b></span></span><br />
</div><div style="mso-element: footnote-list;"><div class="MsoBodyText"><span style="font-size: 10pt;">While many companies initially go offshore to gain cost reductions and efficiencies, they stay and expand their offshore operations and sourcing and service partnerships because of improved quality and productivity. For example, in the IT industry Carnegie Mellon’s Software Engineering Institute’s Capability Maturity Model (SEI CMM) standards are now widely recognized as the benchmark for quality processes in software engineering and development. Of the five recognized levels within the SEI CMM standards, level 5 is the highest and at present, only 116 locations in 73 companies have been audited and certified at this level. Of these SEI CMM Level 5 organizations exhibiting the highest level of quality processes in software engineering and development, 71 of them, a remarkable 61%, are located in India. Only 30 of the level 5 certified locations are within the US and virtually all of those are related to the defense industry with only a small handful in the commercial software space.</span><br />
<span style="font-size: small;"><span style="font-size: 13px;"><br />
</span></span><br />
<span style="font-size: 10pt;"><span style="font-size: 16px; font-weight: bold;">Accelerate Business Growth</span></span><br />
<span style="font-size: medium;"><span style="font-size: 16px;"><b><br />
</b></span></span><br />
</div><div class="MsoBodyText"><span style="font-size: 10pt;">Investors these days do not seem pleased with firms unless they can grow their business in the range of 20 percent annually. During periods of ‘organic’ growth only, this is a very difficult task for management. Therefore, to assist in acceleration of the business, firms are looking at out-sourcing alternatives to assist in this growth. Examples include rapid sales cycles requiring additional resources for implementation and support and leveraging out-sourced staffing to assist in deployment and support. This provides increases in top line numbers, without added direct costs into the business.</span><br />
<span style="font-size: small;"><span style="font-size: 13px;"><br />
</span></span><br />
<span style="font-size: 10pt;"><span style="font-size: 16px; font-weight: bold;">Extend and Expand Business</span></span><br />
<span style="font-size: medium;"><span style="font-size: 16px;"><b><br />
</b></span></span><br />
</div><div style="mso-element: footnote-list;"><div class="MsoBodyText"><span style="font-size: 10pt;">Additionally, to assist in furthering the organic growth, more businesses are looking at extensions & expansion of their services and competencies, by leveraging strategic partnered solutions to be able to provide more to their existing customers and attract new customers with enhanced and new products. Again, smart-sourcing partnerships can provide a mechanism to add to additional products and services without taking on proportionate expenses.<o:p></o:p></span><br />
<span style="font-size: small;"><span style="font-size: 13px;"><br />
</span></span><br />
</div><div class="MsoBodyText"><span style="font-size: 10pt;">No matter what your pressure(s) may be today, it is only a matter of time that many of the above and combinations of the above will be facing you in your decisions of how to improve new and improved deliverables to external and internal customers and while also lowering costs.</span><br />
<span style="font-size: small;"><span style="font-size: 13px;"><br />
</span></span><br />
<span style="font-size: 10pt;"><span style="font-size: 16px; font-weight: bold;">Competing Priorities</span></span><br />
<span style="font-size: medium;"><span style="font-size: 16px;"><b><br />
</b></span></span><br />
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgLgaoSiKJo0EPJBBalQG4j7BNUw3NX7p9r6waZ8b2PDwHY6-OWXdPFEsao1wF4WXWGpSz9G9T1ieaoJBvs7v5sSFS4PHcdc07D2LwMHnH73YFfGQ80wux1XRrn0n-5EC5fttIoejVTyeY/s1600-h/Figure+1.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgLgaoSiKJo0EPJBBalQG4j7BNUw3NX7p9r6waZ8b2PDwHY6-OWXdPFEsao1wF4WXWGpSz9G9T1ieaoJBvs7v5sSFS4PHcdc07D2LwMHnH73YFfGQ80wux1XRrn0n-5EC5fttIoejVTyeY/s320/Figure+1.jpg" /></a><br />
</div><span style="font-size: medium;"><span style="font-size: 16px;"><b><br />
</b></span></span><br />
<span style="font-size: medium;"><span style="font-size: 16px;"><b><br />
</b></span></span><br />
<span style="font-size: 13px;">In every organization and across its many departments, units, and functions there are many competing priorities, activities, and processes. An important responsibility of executive management of the firm is to balance all of these competing priorities in the battle for budget allocations and funding dollars. To help create an analytical model to assist in understanding this, let us draw on the work conducted by the Boston Consulting Group and their famous BCG “box”. In the diagram shown in Figure 1, you find a classic BCG Box representing the situation in which businesses find themselves with initiatives and activities in various stages of the product maturity life cycle. These stages may be labeled: 1) High Potential, 2) Strategic, 3) Operational, and 4) Support.</span><br />
</div></div><div style="mso-element: footnote-list;"><span style="font-family: Arial; font-size: 10pt; letter-spacing: -0.25pt;"><br />
</span> <br />
<div class="MsoBodyText"><span style="font-size: small;"></span><br />
</div><div class="MsoBodyText"><span style="font-size: small;"><span style="font-size: 13px;"> <span style="font-family: Arial; font-size: 10pt; letter-spacing: -0.25pt;">As new products, services, or technology arrive on the scene, they typically represent ‘High Potential” opportunities. High Potential opportunities generally find acceptance from early adopters in the markets. Early adopters, while often eager and vocal supporters of a new line of business, still make up a relatively minor portion of the total potential market. Therefore, we attach the characterization of High Potential to products and services at this stage in the product life cycle. These early adopters often become market leaders and the new line of business begins to enjoy broader market adoption and growth. At this point, the initiative and its associated processes become “Strategic” to the organization. As the line of business achieves further market penetration and broad market acceptance, many organizations find the solution becoming fundamental to their business. At this point the sales, support, and development functions of the company associated with this line of business are considered in the “Operational” quadrant in our model. Lastly, as the product/service or technology becomes prolific throughout the industry, it becomes very much “business as usual” for the company and enters the “Support” quadrant of the model. In this model we see organizations derive competitive advantage by being excellent in the high potential and strategic quadrants of our model. An example of this movement of a new product / service and technology can be found in the banking industry in the ATMs of the 1970’s where it was very high potential as an innovative product for the banking community, then throughout the 1980’s ATMs became a strategic initiative for virtually every financial institution of size in North America, and then over the 1990’s this service transitioned into first operational and then support activities of the banking community. One might also say that on-line banking and the Internet have gone through similar stages at this point, albeit in a much more rapid cycle of adoption and product maturity for the industry. </span></span></span><br />
</div><div id="ftn" style="mso-element: footnote;"></div></div><div id="ftn" style="mso-element: footnote;"></div></div></span><br />
<br />
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgZNf9GTomlhsiuXN225DiOmkI4aiOQTePc6WkwrBZILtkZ3nnu_qVtAGd-6IOgImNGYewdebLZd1ZagjN3B1ndzu1Pj6Yfd0FVFtIbCvCxthdTWrK-mKOJs7eHxJrPoVtztiiI3hLvwpo/s1600-h/Figure+2.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgZNf9GTomlhsiuXN225DiOmkI4aiOQTePc6WkwrBZILtkZ3nnu_qVtAGd-6IOgImNGYewdebLZd1ZagjN3B1ndzu1Pj6Yfd0FVFtIbCvCxthdTWrK-mKOJs7eHxJrPoVtztiiI3hLvwpo/s320/Figure+2.jpg" /></a><br />
</div><br />
<div><br />
</div><div><span style="font-size: small;"><span style="font-size: 13px;"><br />
</span></span><br />
</div><div><span style="font-family: 'Lucida Grande'; font-size: small;"><span style="font-size: 11px;"><span style="font-family: Arial;"><span style="font-size: medium;"> <span style="font-family: Arial; font-size: 10pt; letter-spacing: -0.25pt;">The challenge for any organization is which high potential and strategic activities and opportunities to invest in, and how to shift existing funding to them from the operational and support activities of the business as they mature. The shift in funding priorities must be properly paced. While excellence in operational and support activities will not produce competitive advantage for an organization, if these activities are not done well they can become a competitive disadvantage. Thus in Figure 2, we see how the high potential and strategic quadrant represent the opportunity quadrants for a business in which competitive advantages are typically derived. The operational and tactical quadrants represent the areas in which risks and threats are experienced and competitive disadvantage can result for poor execution. </span> </span></span></span></span><br />
</div><div><span style="font-size: small;"><span style="font-size: 13px;"><br />
</span></span><br />
</div><div><span style="font-size: small;"><span style="font-size: 13px;"> <span style="font-family: Arial; font-size: 10pt; letter-spacing: -0.25pt;">This model can help managers better identify and understand how a Smart-sourcing strategy can help the organization achieve maximum value at the lowest cost to all stakeholders. Activities and processes in the high potential and strategic quadrants require the most attention, direct ownership and control as these activities are key to the success and growth of the enterprise and those from which competitive advantage is produced. Activities and processes in the operational and support quadrants should be done well enough to avoid competitive disadvantage but lower costs are often more important in these quadrants than direct ownership and control. A Smart-sourcing strategy would suggest that moving to outsource some functions in the operational and tactical quadrants to 3<sup>rd</sup> party service providers for whom those activities and processes are core competencies can produce quality processes at significantly lower costs. This frees the enterprise to concentrate more of its attention and resources on the high potential and strategic activities. Figure 2 illustrates the concept of moving your internal initiatives from quadrant 1 through 4 and looking for ways to offset your resources with those of “smart-source” service providers.</span> </span></span><br />
</div><div><span style="font-size: small;"><span style="font-size: 13px;"><br />
</span></span><br />
</div><div><b><span style="font-size: x-large;">Conclusion</span></b><br />
<span class="Apple-style-span" style="font-size: xx-large;"><b><br />
</b></span><br />
<b><span style="font-size: x-large;"><span class="Apple-style-span" style="font-size: 13px; font-weight: normal;">Leveraging offshore economies of scale will be a requirement of your business. You must recognize this fact. It is not a matter of should you outsource, it is just a matter of when you will do it and how (what approach) you’ll take in doing so.</span></span></b><br />
</div><div><span style="font-size: small;"><span style="font-size: 13px;"><div class="MsoBodyText"><br />
</div><div class="MsoBodyText"><span style="font-size: 10pt;">The competitive pressures within your industry will increase. Just like the retail manufacturing of the 1970’s, managers will be required to look at their internal operations and find significant ways to reduce costs to remain viable and competitive. The demand and pressure to reduce costs will only increase over time.<o:p></o:p></span><br />
</div><div class="MsoBodyText"><span style="font-size: 10pt;">To survive, and be able to turn from “Good to Great” you must discover your core competencies and begin to leverage them to your fullest advantage. And, in finding your core competencies you will also need to find sourcing partners where their core competencies fill in for your gaps and weaknesses in you’re bringing the total product, service, or solution to your user community. Therefore, you will need to implement Partnership Relationship Management (the Partnership Model) disciplines into your organization, and seek those sourcing partners that embrace that model as well.<o:p></o:p></span><br />
</div><div class="MsoBodyText"><br />
</div></span></span><span style="font-size: small;"><span style="font-size: 13px;"><span style="font-family: Arial; font-size: 10pt; letter-spacing: -0.25pt;">Smart-sourcing provides the means for you to source appropriate solutions for given business processes in your supply chain to your organization. It is a means to successful survival.</span> </span></span><br />
</div><div><span style="font-size: small;"><span style="font-size: 13px;"><br />
</span></span><br />
</div><div><span class="Apple-style-span" style="font-size: small;">© Harbour Bridge Ventures, Inc., 2009, All Rights Reserved</span> <br />
</div><div><span style="font-size: small;"><span style="font-size: 13px;"><br />
</span></span><br />
</div>Bruce Carpenterhttp://www.blogger.com/profile/00509920552835244724noreply@blogger.com0tag:blogger.com,1999:blog-2073286383972548773.post-44129483197848414252009-09-23T20:12:00.000-04:002009-10-06T12:40:46.819-04:00Successful Turnarounds<div align="center" class="MsoNormal" style="text-align: center;"><b style="mso-bidi-font-weight: normal;"><span style="font-size: 16pt;">Successful Turnarounds<o:p></o:p></span></b><br />
</div><div align="center" class="MsoNormal" style="text-align: center;"><br />
</div><div class="MsoNormal" style="text-align: justify;">Surprisingly often, it seems management of a troubled company is late to acknowledge a problem exists let alone recognize their role in both contributing to the challenges and the eventual decline of the company resulting from ignoring a pending crisis until it is too late. The Association of Insolvency and Restructuring Advisors, recognized professionals in Turnaround Management, have identified the leading cause of business failure (52%) as “internally generated problems within management’s control.” An additional 24% of the causes are a balance of internal and external factors that, although not under management’s control, are the responsibility of management to identify and address. 15% of the causes are internal problems triggered by external factors such as changing economic or market conditions and regulatory changes.<br />
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</div><div class="separator" style="clear: both; text-align: left;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgk1IEK9NiEiKG1sR3VSuKghIaP_kOCt9DBRjzs_FCdY1EucTXV5AFZJKP-Tmd1rRg7tIQHzzVQQQMcoiteUVH42HVHCFRcHj4TdNCBmuZJm0tXvYxrFBCennfStd1jZQi4cXwFS3rfZNY/s1600-h/Chart+of+the+Causes+of+a+Failing+Company.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgk1IEK9NiEiKG1sR3VSuKghIaP_kOCt9DBRjzs_FCdY1EucTXV5AFZJKP-Tmd1rRg7tIQHzzVQQQMcoiteUVH42HVHCFRcHj4TdNCBmuZJm0tXvYxrFBCennfStd1jZQi4cXwFS3rfZNY/s400/Chart+of+the+Causes+of+a+Failing+Company.jpg" /></a><br />
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<o:p></o:p><br />
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</div><div class="MsoNormal" style="mso-pagination: widow-orphan lines-together; text-align: justify;">The message for managers of these statistics is that in a vast majority of business crisis management was either partially to blame for the troubles or, at best, remains at fault for a failure to detect and react to changes in the company’s situation. Opportunity windows to turnaround a troubled company can quickly close when management ignores the early signs of trouble, misplaces blame, refuses to seek professional help, or procrastinates in taking necessary steps to address the problems. <o:p></o:p><br />
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</div><div class="MsoNormal" style="text-align: justify;"><b style="mso-bidi-font-weight: normal;"><span style="font-size: 14pt;">Picture of a Failing Company<o:p></o:p></span></b><br />
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</div><div class="MsoNormal" style="text-align: justify;">Analyzing the four Stages of Corporate Failure shown in the accompanying diagram - Stagnation, Underperforming, Significant Performance Impairment, and Crisis - serve well to understand how to detect trouble early, deal effectively with causes of the problems, and the concept of closing windows of opportunity as a pending crisis approaches.<o:p></o:p><br />
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</div><div class="MsoNormal" style="text-align: justify;">Picture of a Failed Company<br />
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</div><div class="separator" style="clear: both; text-align: left;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjZyuSjKEqPlONB5lXSfUhsyW9th5RVYcjZ7A7VEokJfYvF19ew3mt2N5jSbN4-eOirm7dIk2K43FC-SRjCh32VsCUdXmvRLpDckBSQNtsU4QyagWiqoRoxD_kRiNfF49iprtZtBfH-74w/s1600-h/Picture+of+a+Failing+Company.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjZyuSjKEqPlONB5lXSfUhsyW9th5RVYcjZ7A7VEokJfYvF19ew3mt2N5jSbN4-eOirm7dIk2K43FC-SRjCh32VsCUdXmvRLpDckBSQNtsU4QyagWiqoRoxD_kRiNfF49iprtZtBfH-74w/s400/Picture+of+a+Failing+Company.jpg" /></a><br />
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</div><div class="MsoNormal" style="text-align: justify;">The Stagnation Phase (Stage 1) is identified by the following characteristics:<o:p></o:p><br />
</div><div class="MsoNormal" style="text-align: justify;"><br />
</div><div class="MsoNormal" style="margin-left: .65in; mso-list: l0 level1 lfo1; tab-stops: list .65in; text-align: justify; text-indent: -.15in;"><span style="font-family: Wingdings;">●<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span>Operating margins and other key ratios falling behind industry averages<o:p></o:p><br />
</div><div class="MsoNormal" style="margin-left: .65in; mso-list: l0 level1 lfo1; tab-stops: list .65in; text-align: justify; text-indent: -.15in;"><span style="font-family: Wingdings;">●<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span>Appearance of cash flow or liquidity challenges<o:p></o:p><br />
</div><div class="MsoNormal" style="margin-left: .65in; mso-list: l0 level1 lfo1; tab-stops: list .65in; text-align: justify; text-indent: -.15in;"><span style="font-family: Wingdings;">●<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span>Period-over-period revenues flat or declining<o:p></o:p><br />
</div><div class="MsoNormal" style="margin-left: .65in; mso-list: l0 level1 lfo1; tab-stops: list .65in; text-align: justify; text-indent: -.15in;"><span style="font-family: Wingdings;">●<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span>Increased inventory write-downs<o:p></o:p><br />
</div><div class="MsoNormal" style="margin-left: .65in; mso-list: l0 level1 lfo1; tab-stops: list .65in; text-align: justify; text-indent: -.15in;"><span style="font-family: Wingdings;">●<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span>Lack of (or misguided) product investment<o:p></o:p><br />
</div><div class="MsoNormal" style="margin-left: .65in; mso-list: l0 level1 lfo1; tab-stops: list .65in; text-align: justify; text-indent: -.15in;"><span style="font-family: Wingdings;">●<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span>Problems with integration of acquisitions<o:p></o:p><br />
</div><div class="MsoNormal" style="margin-left: .65in; mso-list: l0 level1 lfo1; tab-stops: list .65in; text-align: justify; text-indent: -.15in;"><span style="font-family: Wingdings;">●<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span>Problems associated with business mission critical technology<o:p></o:p><br />
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</div><div class="MsoNormal" style="text-align: justify;">Changes in the environment (e.g. economic, competitive, or regulatory) combined with internal shortcomings (e.g., poor, fraudulent, or inattentive management) can cause a company’s problems to grow during this stage. Frequently, the Stagnation Phase is characterized by management being “in denial” on the severity of the problems and the need for immediate attention. Simply persevering, waiting patiently for a change in circumstances, operating on momentum, more of the same, ignoring the problem, or hoping for an improvement are all ineffective strategies for dealing with challenges at this stage. Yet all too often we find that these are the strategies employed by management of stagnating companies.<o:p></o:p><br />
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</div><div class="MsoNormal" style="text-align: justify;">The time for action is now! Careful and objective examination of the business can identify internal and external causes for the challenges surfacing now. Early focus on and correction of weak controls and reporting systems, increased emphasis on and attention to more profitable lines of business and products, improved understanding of customer needs and buying motivations, early attention to cash flow and liquidity challenges, more effective management of the supply chain and suppliers, objective evaluation of management actions and capabilities, attention to organizational culture, identification and retention of key employees, rightsizing the workforce to match demands, elimination of unnecessary expenses, closer attention to inventory management, examination of pricing strategies, and competitive analysis are all early steps which should be taken. Most importantly, NOW is the time to ask for help from a team of professionals available to the business – legal, finance, accounting, and tax advisors, as well as specialized turnaround professionals are all sources of important assistance and advice. Outside advisors often bring needed objectivity, professional and seasoned experience in your line of business, and in assisting in turnaround and workout situations. Qualified advisors can save the company much more than their cost and preserve value for all stakeholders through early and effective action.<o:p></o:p><br />
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</div><div class="MsoNormal" style="text-align: justify;">Inattention to turnaround activities early and effectively in the Stagnation Phase will result in further declines in the business as it moves into the Underperforming Stage (Stage 2). This stage is characterized by:<o:p></o:p><br />
</div><div class="MsoNormal" style="text-align: justify;"><br />
</div><div class="MsoNormal" style="margin-left: .65in; mso-list: l3 level1 lfo2; tab-stops: list .65in; text-align: justify; text-indent: -.15in;"><span style="font-family: Wingdings;">●<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span>Significant declines in revenue and/or EBITDA<o:p></o:p><br />
</div><div class="MsoNormal" style="margin-left: .65in; mso-list: l3 level1 lfo2; tab-stops: list .65in; text-align: justify; text-indent: -.15in;"><span style="font-family: Wingdings;">●<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span>Assets are not sufficiently liquid and cash flow challenges increase<o:p></o:p><br />
</div><div class="MsoNormal" style="margin-left: .65in; mso-list: l3 level1 lfo2; tab-stops: list .65in; text-align: justify; text-indent: -.15in;"><span style="font-family: Wingdings;">●<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span>Underutilization of fixed assets<o:p></o:p><br />
</div><div class="MsoNormal" style="margin-left: .65in; mso-list: l3 level1 lfo2; tab-stops: list .65in; text-align: justify; text-indent: -.15in;"><span style="font-family: Wingdings;">●<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span>Needed capital is tied up in receivables and inventories<o:p></o:p><br />
</div><div class="MsoNormal" style="margin-left: .65in; mso-list: l3 level1 lfo2; tab-stops: list .65in; text-align: justify; text-indent: -.15in;"><span style="font-family: Wingdings;">●<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span>Management attention is diverted from traditional functions due to cash shortage<o:p></o:p><br />
</div><div class="MsoNormal" style="margin-left: .65in; mso-list: l3 level1 lfo2; tab-stops: list .65in; text-align: justify; text-indent: -.15in;"><span style="font-family: Wingdings;">●</span>Changes in banking relationship marked by frequent overdrafts, changes in borrowing patterns, missed financial reporting deadlines, and requests for waivers of loan provisions<o:p></o:p><br />
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</div><div class="MsoNormal" style="text-align: justify;">This is the time to keep the brush fire from turning into a forest blaze. However, management often continues to be unwilling to accept that problems exist, appreciate the severity of the situation, or acknowledge their role in creating or addressing the problems. If effective action plans are not put in place quickly, needed outside assistance sought and advice heeded, it may soon be too late to save the company without the pain of a bankruptcy reorganization, or sale of the business.<o:p></o:p><br />
</div><div class="MsoNormal" style="text-align: justify;"><br />
</div><div class="MsoNormal" style="text-align: justify;">The next stage of the Corporate Demise Curve is the Significant Performance Impairment Stage (Stage 3). This stage is marked by many of the following characteristics:<o:p></o:p><br />
</div><div class="MsoNormal" style="text-align: justify;"><br />
</div><div class="MsoNormal" style="margin-left: .65in; mso-list: l2 level1 lfo3; tab-stops: list .65in; text-align: justify; text-indent: -.15in;"><span style="font-family: Wingdings;">●<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span>Credit and merchandise shortages occur<o:p></o:p><br />
</div><div class="MsoNormal" style="margin-left: .65in; mso-list: l2 level1 lfo3; tab-stops: list .65in; text-align: justify; text-indent: -.15in;"><span style="font-family: Wingdings;">●<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span>Cash and credit difficulties become apparent to both insiders and the general business community<o:p></o:p><br />
</div><div class="MsoNormal" style="margin-left: 1.5in; mso-list: l2 level2 lfo3; tab-stops: list 1.5in; text-align: justify; text-indent: -.25in;"><span style="font-family: 'Courier New';">o<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span>Creditors become unwilling to advance further credit<o:p></o:p><br />
</div><div class="MsoNormal" style="margin-left: 1.5in; mso-list: l2 level2 lfo3; tab-stops: list 1.5in; text-align: justify; text-indent: -.25in;"><span style="font-family: 'Courier New';">o<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span>Suppliers may refuse to ship altogether or require payment in advance<o:p></o:p><br />
</div><div class="MsoNormal" style="margin-left: .65in; mso-list: l2 level1 lfo3; tab-stops: list .65in; text-align: justify; text-indent: -.15in;"><span style="font-family: Wingdings;">●<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span>Increased risk of loan covenant defaults, if they have not already occurred<o:p></o:p><br />
</div><div class="MsoNormal" style="margin-left: .65in; mso-list: l2 level1 lfo3; tab-stops: list .65in; text-align: justify; text-indent: -.15in;"><span style="font-family: Wingdings;">●<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span>Potential loss of key customers and/or suppliers<o:p></o:p><br />
</div><div class="MsoNormal" style="margin-left: .65in; mso-list: l2 level1 lfo3; tab-stops: list .65in; text-align: justify; text-indent: -.15in;"><span style="font-family: Wingdings;">●<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span>Potential loss of key employees<o:p></o:p><br />
</div><div class="MsoNormal" style="margin-left: .65in; mso-list: l2 level1 lfo3; tab-stops: list .65in; text-align: justify; text-indent: -.15in;"><span style="font-family: Wingdings;">●<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span>Lenders begin to move quickly into workout scenarios<o:p></o:p><br />
</div><div class="MsoNormal" style="margin-left: 1.5in; mso-list: l2 level2 lfo3; tab-stops: list 1.5in; text-align: justify; text-indent: -.25in;"><span style="font-family: 'Courier New';">o<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span>Review credit documentation<o:p></o:p><br />
</div><div class="MsoNormal" style="margin-left: 1.5in; mso-list: l2 level2 lfo3; tab-stops: list 1.5in; text-align: justify; text-indent: -.25in;"><span style="font-family: 'Courier New';">o<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span>Compliance with loan covenants is audited more closely<o:p></o:p><br />
</div><div class="MsoNormal" style="margin-left: 1.5in; mso-list: l2 level2 lfo3; tab-stops: list 1.5in; text-align: justify; text-indent: -.25in;"><span style="font-family: 'Courier New';">o<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span>“Strict Compliance” letter sent by lender<o:p></o:p><br />
</div><div class="MsoNormal" style="margin-left: 1.5in; mso-list: l2 level2 lfo3; tab-stops: list 1.5in; text-align: justify; text-indent: -.25in;"><span style="font-family: 'Courier New';">o<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span>Waiver of covenants accompanied by “Forbearance” letter to protect lender and lender’s position<o:p></o:p><br />
</div><div class="MsoNormal" style="margin-left: .65in; mso-list: l2 level1 lfo3; tab-stops: list .65in; text-align: justify; text-indent: -.15in;"><span style="font-family: Wingdings;">●<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span>Tax lien and judgment searches performed by creditors<o:p></o:p><br />
</div><div class="MsoNormal" style="margin-left: .65in; mso-list: l2 level1 lfo3; tab-stops: list .65in; text-align: justify; text-indent: -.15in;"><span style="font-family: Wingdings;">●<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span>Communication commences amongst creditors<o:p></o:p><br />
</div><div class="MsoNormal" style="margin-left: .65in; mso-list: l2 level1 lfo3; tab-stops: list .65in; text-align: justify; text-indent: -.15in;"><span style="font-family: Wingdings;">●<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span>Management often develops “siege mentality” in this stage<o:p></o:p><br />
</div><div class="MsoNormal" style="text-align: justify;"><br />
</div><div class="MsoNormal" style="text-align: justify;">Without proper controls and forecasting, and as a result of management denials, severe cash shortages occur at this stage and may be the first time management acknowledges a problem. However, at this point it may be too late for independent management action to deal with the problems. The sleeping giant in the form of the senior lender has now been awakened. Indeed, an outside turnaround professional may now be imposed on the business by the senior lender or a creditors’ committee.<o:p></o:p><br />
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</div><div class="MsoNormal" style="text-align: justify;">At this stage the chances of the business’ survival as a going concern under present management is increasingly unlikely and the least painful outcomes may be a bankruptcy reorganization or sale of the business.<o:p></o:p><br />
</div><div class="MsoNormal" style="text-align: justify;"><br />
</div><div class="MsoNormal" style="text-align: justify;">The progression of stages to this point may have been relatively gradual with the cycle taking as much as twelve to eighteen months. This timeframe may accelerate due to 2005 changes in the US Bankruptcy code. Those changes may encourage creditors to take action more promptly forcing progression through the stages more quickly as cash demands accelerate on the business and creditors move more quickly to tighten controls. However, early management attention to the building signs of trouble in the business can head off problems before they grow to crisis proportions.<o:p></o:p><br />
</div><div class="MsoNormal" style="text-align: justify;"><br />
</div><div class="MsoNormal" style="text-align: justify;">The final stage or late stage is the Crisis Stage. The Crisis Stage generally includes almost all of the following:<o:p></o:p><br />
</div><div class="MsoNormal" style="text-align: justify;"><br />
</div><div class="MsoNormal" style="margin-left: .65in; mso-list: l1 level1 lfo4; tab-stops: list .65in; text-align: justify; text-indent: -.15in;"><span style="font-family: Wingdings;">●<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span>Company cannot pay obligations as they come due<o:p></o:p><br />
</div><div class="MsoNormal" style="margin-left: 1.5in; mso-list: l1 level2 lfo4; tab-stops: list 1.5in; text-align: justify; text-indent: -.25in;"><span style="font-family: 'Courier New';">o<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span>Inability to service either short or long term debt<o:p></o:p><br />
</div><div class="MsoNormal" style="margin-left: .65in; mso-list: l1 level1 lfo4; tab-stops: list .65in; text-align: justify; text-indent: -.15in;"><span style="font-family: Wingdings;">●<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span>Overall payables growth with delinquent payables becoming significant and unmanageable<o:p></o:p><br />
</div><div class="MsoNormal" style="margin-left: .65in; mso-list: l1 level1 lfo4; tab-stops: list .65in; text-align: justify; text-indent: -.15in;"><span style="font-family: Wingdings;">●<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span>Actual loss of key customers and/or suppliers<o:p></o:p><br />
</div><div class="MsoNormal" style="margin-left: .65in; mso-list: l1 level1 lfo4; tab-stops: list .65in; text-align: justify; text-indent: -.15in;"><span style="font-family: Wingdings;">●<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span>Actual loss of key employees<o:p></o:p><br />
</div><div class="MsoNormal" style="margin-left: .65in; mso-list: l1 level1 lfo4; tab-stops: list .65in; text-align: justify; text-indent: -.15in;"><span style="font-family: Wingdings;">●<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span>Actual or appearance of insolvency<o:p></o:p><br />
</div><div class="MsoNormal" style="margin-left: .65in; mso-list: l1 level1 lfo4; tab-stops: list .65in; text-align: justify; text-indent: -.15in;"><span style="font-family: Wingdings;">●<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span>Public acknowledgement of business failure<o:p></o:p><br />
</div><div class="MsoNormal" style="margin-left: .65in; mso-list: l1 level1 lfo4; tab-stops: list .65in; text-align: justify; text-indent: -.15in;"><span style="font-family: Wingdings;">●<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span>Current management may no longer remain in control of the business<o:p></o:p><br />
</div><div class="MsoNormal" style="margin-left: .65in; mso-list: l1 level1 lfo4; tab-stops: list .65in; text-align: justify; text-indent: -.15in;"><span style="font-family: Wingdings;">●<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span>Value of the business and its assets begins a rapid decline<o:p></o:p><br />
</div><div class="MsoNormal" style="margin-left: .65in; mso-list: l1 level1 lfo4; tab-stops: list .65in; text-align: justify; text-indent: -.15in;"><span style="font-family: Wingdings;">●<span style="font: normal normal normal 7pt/normal 'Times New Roman';"> </span></span>Bankruptcy may be unavoidable<o:p></o:p><br />
</div><div class="MsoNormal" style="text-align: justify;"><br />
</div><div class="MsoNormal" style="text-align: justify;">At this stage the only remaining options may be a distressed sale of the business or liquidation.<o:p></o:p><br />
</div><div class="MsoNormal" style="text-align: justify;"><br />
</div><div class="MsoNormal" style="text-align: justify;">The message here is that sound monitoring and controls, and management focus on key ratios and performance metrics of the business will result in early detection of problems. Once problems are detected, management should be eager to seek objective outside analysis and advice. The cost of inattention to building problems will far exceed the cost of professional advisory services and assistance.<o:p></o:p><br />
<br />
<span class="Apple-style-span" style="line-height: 18px;">© Harbour Bridge Ventures, Inc., 2009, All Rights Reserved</span><br />
</div>Bruce Carpenterhttp://www.blogger.com/profile/00509920552835244724noreply@blogger.com1tag:blogger.com,1999:blog-2073286383972548773.post-18757964852591643092009-09-21T22:50:00.000-04:002009-09-21T22:53:18.504-04:00Allocating Equity in Startup Companies<!--StartFragment--> <div class="Section1"> <p class="MsoNormal" align="center" style="text-align:center"><span style="font-size:14.0pt;mso-bidi-font-size:12.0pt">Allocating Equity in Startup Companies<o:p></o:p></span></p> <p class="MsoNormal" align="center" style="text-align:center"><span class="Apple-style-span" style="font-weight: bold; ">When multiple founders build a startup, how big a stake should each one get?</span></p></div> <p class="MsoNormal">Building a business is not unlike constructing a building, except that the required materials aren't tangibles like bricks and mortar, but intangibles such as a great idea, strategy, execution and most importantly capital.<span style="mso-spacerun: yes"> </span>However, with multiple founders showing up with varying contributions at different times, it's hard to know how to divide the ownership of the company. <span style="mso-spacerun: yes"> </span>This is particularly difficult when the company is in its early startup or development phases.<span style="mso-spacerun: yes"> </span>However, before outside capital is sought, the division of equity ownership amongst the founders is a matter than must be settled.<span style="mso-spacerun: yes"> </span>How much should be given to the entrepreneur bringing the idea versus the individuals required to execute? <span style="mso-spacerun: yes"> </span>What about the investors contributing the initial development and launch capital?</p> <p class="MsoNormal" style="text-align:justify">Fair and equitable allocation of equity ownership is a question frequently asked of Harbour Bridge Ventures.<span style="mso-spacerun: yes"> </span>While leaving this question ultimately to be settled by the entrepreneurial founding team, we have always suggested that a winning business partnership is built on compromise and fairness. <span style="mso-spacerun: yes"> </span>But to split up equity fairly, all founders must agree on exactly what "fair" is. <span style="mso-spacerun: yes"> </span>The option we most often suggest is for founders to think like investors when determining the value of their contributions, even if they have no plans to raise funds. <span style="mso-spacerun: yes"> </span>As there is a significant volume of information and experience of valuations conducted by investors, this can be useful in providing a market-tested, third-party framework for equity allocations.<span style="mso-spacerun: yes"> </span>By relying on such market-driven criteria, no party needs to prove the value of his or her particular contributions. </p> <p class="MsoNormal" style="text-align:justify">So let's take a closer look at how professional investors value founders' contributions in a Series A round, when a young company closes its first phase of financing. <span style="mso-spacerun: yes"> </span>Typically, after such a deal, founders will be left with 30% to 50% of the total equity.<span style="mso-spacerun: yes"> </span>That represents the product, the strategy, and other noncash contributions. <span style="mso-spacerun: yes"> </span>The investors will get 30% to 50% of the equity in exchange for 12 months to 24 months of operating capital. <span style="mso-spacerun: yes"> </span>Some 10% to 20% is reserved for future hires, including key managers.</p> <p class="MsoNormal" style="text-align:justify">Of the 30% to 50% set aside for the founders, the idea alone commands little payout. <span style="mso-spacerun: yes"> </span>If contributing nothing more, the person who came up with the idea—no matter how brilliant—can expect to hold on to less than 5% of the company. <span style="mso-spacerun: yes"> </span>After all, ideas are bound to evolve many times during the life of a startup. <span style="mso-spacerun: yes"> </span>Even the principals of venture successes such as Google and Facebook only began to see a premium after the Series B and C rounds, once the businesses started to gain traction.</p> <p class="MsoNormal" style="text-align:justify">Instead, the bulk of founders' equity is granted for developing the product, building a viable business plan, and leveraging relevant experience and contacts. <span style="mso-spacerun: yes"> </span>Founders responsible for the product or strategy should be compensated for their efforts, with a premium paid for a proprietary, working product.<span style="mso-spacerun: yes"> </span>Founders who join the company full-time deserve more equity than those making early, one-time contributions. <span style="mso-spacerun: yes"> </span>Opportunity costs are a factor, too. <span style="mso-spacerun: yes"> </span>Equity should not only compensate founders who are giving up lucrative careers but also motivate them to propel the startup over the next four to five years.</p> <p class="MsoNormal" style="text-align:justify">Then there's the importance of cash.<span style="mso-spacerun: yes"> </span>Even companies launched through bootstrap capital generally require some working capital to finance day-to-day operations until the company can support itself and its employees.<span style="mso-spacerun: yes"> </span>This may be far less than a venture capitalist is likely to invest, but that's partially offset by the fact that the company, and any investment, is much riskier in the early stages.<span style="mso-spacerun: yes"> </span>And these days, capital is frequently scarce and difficult to raise for early stage companies. <span style="mso-spacerun: yes"> </span>In a tough fund-raising climate, cash commands a premium.<span style="mso-spacerun: yes"> </span>In the current financial climate, Investors are valuing potential portfolio companies at 40% to 60% less than they did in 2007, when private equity flowed relatively more freely.</p> <p class="MsoNormal" style="text-align:justify">A final point is that, as time passes, the company will become less risky, and those who take on less risk deserve less equity. <span style="mso-spacerun: yes"> </span>So later investors in a business that is cash flow-positive will receive far less for their contributed capital.<span style="mso-spacerun: yes"> </span>Similarly, a founder or senior manager who joins a startup after it already has some traction should expect less equity — the foundation, after all, for later success and growth has already been laid — than an early founder who took potentially greater risk.</p> <!--EndFragment-->Bruce Carpenterhttp://www.blogger.com/profile/00509920552835244724noreply@blogger.com0tag:blogger.com,1999:blog-2073286383972548773.post-40867418397925914952009-09-21T22:24:00.043-04:002011-09-11T14:59:32.300-04:00What is Corporate Renewal?<div class="Section1"><h1 align="center" style="margin-top: 12.0pt; text-align: center;"><span style="font-family: Arial, Helvetica, sans-serif;">What is Corporate Renewal?<o:p></o:p></span></h1></div><div class="Section2"><div class="MsoNormal" style="text-align: justify;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: medium;">C</span><span class="Apple-style-span" style="font-size: medium;">orporate Renewal involves the formulation and implementation of a strategic plan and a set of actions for the turnaround and restructuring of a business, typically during times of severe corporate financial distress.</span><span class="Apple-style-span" style="font-size: medium;"> </span><span class="Apple-style-span" style="font-size: medium;">Often this turnaround of the business requires the assistance of a turnaround professional with specific expertise and experience in the corporate renewal/turnaround profession.</span></span></div><div class="MsoNormal" style="text-align: justify;"><o:p><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: medium;">Since the early 1990’s corporate renewal has gone from being an unknown and little used skill to being a full-fledged business discipline widely practiced and trusted by managers.</span><span class="Apple-style-span" style="font-size: medium;"> </span><span class="Apple-style-span" style="font-size: medium;">Much of that growth and development resulted from the professionalization of the field by the Turnaround Management Association (TMA).</span><span class="Apple-style-span" style="font-size: medium;"> </span><span class="Apple-style-span" style="font-size: medium;">TMA is the largest global professional organization dedicated exclusively to the corporate renewal profession.</span><span class="Apple-style-span" style="font-size: medium;"> </span><span class="Apple-style-span" style="font-size: medium;">Established in 1988, TMA has nearly 9,000 members in 45 chapters, including 32 in North America</span><b><span class="Apple-style-span" style="font-size: medium;">, </span></b><span class="Apple-style-span" style="font-size: medium;">and one each in Australia, Brazil, the Czech Republic, Finland, France, Germany, Italy, Japan, the Netherlands, Southern Africa, Spain, Taiwan and the UK, with a chapter in formation in China.</span><span class="Apple-style-span" style="font-size: medium;"> </span><span class="Apple-style-span" style="font-size: medium;">All TMA members must sign a Code of Ethics each year specifying high standards of professionalism, integrity, and competence.</span></span></o:p><br />
<o:p><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: medium;"><br />
</span></span></o:p></div><h2 style="text-align: justify;"><span style="font-family: Arial, Helvetica, sans-serif;">Why Use a Turnaround Professional?<span class="Apple-style-span" style="font-size: 14px; font-weight: normal;"> </span></span></h2><div class="MsoNormal" style="text-align: justify;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: medium;">Periods of economic and financial distress pose special challenges to the capabilities and decision-making processes of most management teams.</span><span class="Apple-style-span" style="font-size: medium;"> </span><span class="Apple-style-span" style="font-size: medium;">Not only do such occurrences increase demands on existing managerial abilities, but they also create a whole new spectrum of legal, accounting, and financial considerations that impact the renewal process.</span><span class="Apple-style-span" style="font-size: medium;"> </span><span class="Apple-style-span" style="font-size: medium;">Today’s increased competition, cyclical and volatile financial markets, and economic trends have created a climate in which no business can take stability for granted.</span></span></div><div class="MsoNormal" style="text-align: justify;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: medium;">As once-stable, profitable, and competitive companies struggle to improve operational and financial performance, the expertise of corporate renewal professionals is critical to this revitalization process.</span><span class="Apple-style-span" style="font-size: medium;"> </span><span class="Apple-style-span" style="font-size: medium;">The chances of successfully navigating the corporate renewal process increases through the use of qualified turnaround professionals, who have the experience and expertise to apply sound practices of turnaround management to failing businesses.</span></span></div></div><div class="Section4"><div class="MsoNormal" style="text-align: justify;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif; font-size: medium;">Harbour Bridge Ventures (HBV) Principals are long standing members of TMA and have access to the required resources and the experience to manage the turnaround of a business in a time of crisis.</span></div><div class="MsoNormal" style="text-align: justify;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span class="Apple-style-span" style="font-size: medium;">HBV professionals can enter a company with a fresh eye and complete objectivity. </span><span class="Apple-style-span" style="font-size: medium;"> </span><span class="Apple-style-span" style="font-size: medium;">This allows us to spot problems that may not be visible to company insiders.</span><span class="Apple-style-span" style="font-size: medium;"> </span><span class="Apple-style-span" style="font-size: medium;">HBV has no political agenda or other obligations to bias the decision-making process.</span><span class="Apple-style-span" style="font-size: medium;"> </span><span class="Apple-style-span" style="font-size: medium;">This enables us to take sometimes unpopular, yet necessary, steps required for a company’s survival.</span><span class="Apple-style-span" style="font-size: medium;"> </span><span class="Apple-style-span" style="font-size: medium;">In corporate renewal engagements, experience within a particular industry is less important than experience in crisis situations when a company is facing bankruptcy or the loss of millions of dollars in revenue.</span><span class="Apple-style-span" style="font-size: medium;"> </span><span class="Apple-style-span" style="font-size: medium;">Like an emergency room doctor, HBV professionals must make critical decisions quickly to staunch the financial bleeding and give a patient the best chance for recovery.</span><span class="Apple-style-span" style="font-size: medium;"> </span><span class="Apple-style-span" style="font-size: medium;">Operating in the eye of the storm, HBV will deal equitably with angry creditors, frightened employees, wary customers, and a nervous board of directors. Clearly this is no assignment for the faint-hearted.</span><span class="Apple-style-span" style="font-size: medium;"> </span><span class="Apple-style-span" style="font-size: medium;">That is why HBV’s professional corporate renewal experience and professional disciplines are so important in such crisis situations.</span><span class="Apple-style-span" style="font-size: medium;"> </span><span class="Apple-style-span" style="font-size: medium;">HBV professionals can preserve and often restore value when the only other alternative may be failure or bankruptcy.</span></span></div></div><div class="Section5"><h2 style="text-align: justify;"><span style="font-family: Arial, Helvetica, sans-serif;"><br />
</span></h2><h2 style="text-align: justify;"><span style="font-family: Arial, Helvetica, sans-serif;">What Causes Businesses to Fail?</span></h2><div class="MsoNormal" style="text-align: justify;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif; font-size: medium;">There are generally a limited number of “root causes” for the failure of a business:</span></div><div class="MsoNormal" style="text-align: justify;"></div><ul><li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif; font-size: medium;">“Acts of God” – Certain risks may occur and cause irreparable damage to a business (despite proper anticipation and thorough preparation)</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif; font-size: medium;">Poor vision or understanding of the market and the competitive landscape</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><span style="font: normal normal normal 7pt/normal 'Times New Roman';"><span class="Apple-style-span" style="font-size: medium;"> </span></span><span class="Apple-style-span" style="font-size: medium;">Inability to anticipate and properly prepare for change</span></span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif; font-size: medium;">Poor strategy</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif; font-size: medium;">Poor business model</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif; font-size: medium;">Poor execution</span></li>
</ul><div class="MsoNormal" style="text-align: justify;"><o:p><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif; font-size: medium;"> </span></o:p></div><div class="MsoNormal" style="text-align: justify;"><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif; font-size: medium;">Underlying many of the above root causes one often finds one or more of the following symptoms that likely contributed to the distress:</span></div><div class="MsoNormal" style="text-align: justify;"></div><ul><li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif; font-size: medium;">Lack of expertise or experience within the management team</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif; font-size: medium;">Market circumstances or changes</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif; font-size: medium;">Challenging economy</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif; font-size: medium;">Threat of bankruptcy of a holding company, major supplier, or major customer</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif; font-size: medium;">Board level controversy</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif; font-size: medium;">Fraud or at least insufficient financial controls</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif; font-size: medium;">Overly optimistic sales/revenue projections</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif; font-size: medium;">Financing problems, liquidity crisis, excessive debt burden, undercapitalization</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif; font-size: medium;">Operating cost levels are too high</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif; font-size: medium;">Very strong, successful competitor(s)</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif; font-size: medium;">Excess capacity (over-investment)</span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif; font-size: medium;">Insufficient resources (under-investment)</span></li>
</ul><h2 style="text-align: justify;"><span style="font-family: Arial, Helvetica, sans-serif;">What are the Steps in a Turnaround?<o:p></o:p></span></h2><div class="MsoNormal" style="text-align: justify;"><o:p><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"> </span></o:p></div><div class="MsoNormal" style="mso-pagination: widow-orphan lines-together; page-break-after: avoid; text-align: justify;"><span style=><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif; font-size: medium;">HBV employs a five-step process in our renewal engagements analogous to that employed in the medical profession:</span></span></div><div class="MsoNormal" style="mso-pagination: widow-orphan lines-together; page-break-after: avoid; text-align: justify;"></div><ol><li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><b><span class="Apple-style-span" style="font-size: medium;">D</span></b><b><span style=><span class="Apple-style-span" style="font-size: medium;">iagnosis</span></span></b><span style=><span class="Apple-style-span" style="font-size: medium;"> – Determine the chances of the business’ survival, reasons for failure, appropriate strategies for survival, and initial action plan</span></span></span></li>
<li><span style=font-family: Arial, Helvetica, sans-serif;"><b><span style=><span class="Apple-style-span" style="font-size: medium;">Triage</span></span></b><span style=><span class="Apple-style-span" style="font-size: medium;"> – Take immediate action to treat the wounds endangering the company’s survival.</span><span class="Apple-style-span" style="font-size: medium;"> </span><span class="Apple-style-span" style="font-size: medium;">This is necessary to provide the time and opportunity to effect necessary changes.</span></span></span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><b><span style=><span class="Apple-style-span" style="font-size: medium;">Treatment</span></span></b><span style=><span class="Apple-style-span" style="font-size: medium;"> - Develop and Implement the action plan to treat identified problems and effect necessary changes to turnaround the company’s fortunes.</span></span></span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><b><span style=><span class="Apple-style-span" style="font-size: medium;">Stabilize the Patient</span></span></b><span style=><span class="Apple-style-span" style="font-size: medium;"> – Once the emergency rescue plan has been implemented, it is necessary to turn attention to getting the company back on track to sustainability, increasing profitability, and generating acceptable cash flow and returns on assets and equity.</span></span></span></li>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif;"><b><span style=><span class="Apple-style-span" style="font-size: medium;">Restore Long-Term Health</span></span></b><span style=><span class="Apple-style-span" style="font-size: medium;"> – Effect long-term structural changes necessary to sustain improvements and ensure the long-term health of the business.</span></span></span></li>
</ol></div><div class="MsoNormal" style="text-align: justify;"><br />
</div><div class="MsoNormal"><o:p> </o:p></div><div class="MsoNormal" style="text-align: justify;"><o:p> </o:p></div>Bruce Carpenterhttp://www.blogger.com/profile/00509920552835244724noreply@blogger.com0