Often management is in day-to-day operations mode, dealing with crisis after crisis. No one steps back, looks at the big picture and says, “This is my biggest asset and investment, so I need to increase the value.” However, especially if you’re planning to sell or pass your company to the next generation, you need to evaluate the drivers for creating value in your organization.
“The real value drivers that most people think about are growth and profitability. And those truly are important factors when you talk about a driver for value, but really the one area that companies will often overlook is the whole notion of risk — if you’re able to reduce or eliminate risk, you’re increasing value,” says Lewis Baum, director at SS&G Parkland Consulting.
Smart Business spoke with Baum about risk assessment and a strategic plan that will generate business value.
What are some value drivers?
Although value is driven by growth and profitability, a third attribute, which is often overlooked, is risk. The riskier something is, from the marketplace perspective, there’s less value attributed to it. All companies face risk, so it’s good to go through a valuation strategy and identify the various drivers affecting the business. Some factors are:
• Macroeconomic, such as interest rates, inflation, construction trends, etc.
• Microeconomic, such as supply and demand, how individuals make decisions and their impact, and what’s happening with competitors.
• The barriers to entry in your industry that impact the competition level.
• Substitutions, as in what other products or services could threaten your product or service.
• Suppliers and customers who have bargaining power and could affect price and quality.
• Technological, social and demographic changes.
It is also important to understand what the value drivers are for the industry. Certain industries measure value in different ways — a certain multiple or perhaps the number of subscribers might drive it. Intellectual property and trade secrets are becoming a larger component of value. Efforts should be made to document and safeguard such assets.
Other ways to reduce risk, and thus increase value, are ensuring your financials are in good shape and that you have well-documented systems in place.
How do you set up your strategic plan?
Once you’ve identified trends, often with the help of an outside service, you can set a course as part of an overall strategic plan. As part of the plan, management will essentially have a list of things to watch for and goals to meet, which can be broken down into smaller steps. Then, you’d need to set up a mechanism to monitor your progress. It’s something that should be revisited often and should be considered a ‘living and breathing’ plan. You need to be able to incorporate unforeseen changes in order for you to achieve your goal(s).
The ideal time for this kind of planning is when you have enough time to implement changes and create a track record. You want to make your company as effective, efficient and valuable as you can before leaving. Otherwise, your buyer will likely take the same steps to get that added value. Even if you’re not planning to sell, risk assessment and strategic planning may help assess which product lines are more valuable, where growth is really coming from and how to help your business in the future.
Do business owners need outside help?
Yes. Outside consultants can take an active role, or management can utilize the consultant as a coach to help direct the assessment. It’s difficult for business owners to see some of the economic factors and value drivers with fresh eyes. However, owners and management have valuable information as far as identifying their competitors, marketplace trends, etc.
How important are regular employees?
Ultimately, the entire organization needs to accept a value-driven strategic plan and understand their role(s). Employees have valuable insight and are often knowledgeable about inefficiencies and waste. Their involvement allows for ‘buy-in’ and can reduce turnover and frustration. Employees should have a voice in the process.
Lewis Baum, CPA/ABV/CFF, CVA, CFE, is director at SS&G Parkland Consulting. Reach him at (440) 394-6150 or LBaum@SSandG.com.
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For more than 1 million Americans annually diagnosed with heart disease, there’s great hope. Two-thirds survive the disease— 27 percent higher than a decade ago, and impressive new technologies and techniques show tremendous promise.
Smart Business turned to nationally prominent experts Gregory S. Thomas, MD, MPH, Medical Director, MemorialCare Heart & Vascular Institute at Long Beach Memorial and Shaun Setty, MD, Medical Director, Pediatric & Adult Congenital Heart Program at Miller Children’s Hospital Long Beach. The two hospitals share one campus, ensuring those facing heart disease can easily access a lifetime of world-class, comprehensive and coordinated services.
What risk factors are most prevalent?
Sedentary lifestyles, smoking, obesity, and consuming saturated and trans fats — prevalent in our society — negatively impact cholesterol counts and blood pressure levels and can cause dangerous plaque build-up in coronary arteries. One in three California children is overweight, many mirroring their parents’ unhealthy habits. This increases heart disease risks as adults, making family fitness and healthy eating essential.
Almost one in 100 babies are born with congenital heart disease. These abnormalities in cardiovascular structures may produce symptoms at birth, during childhood or as adults. While most defects are simple conditions or need no treatment, some require medical attention soon after birth and monitoring throughout adulthood.
How can health risks be lowered?
Lowering cholesterol and treating high blood pressure can reduce risks of dying of heart disease or needing invasive procedures. It’s important to maintain an appropriate weight, eat foods low in cholesterol and fat, reduce stress, control blood pressure, exercise frequently, access appropriate screenings and follow your doctor’s advice.
What advances are available locally?
MemorialCare Heart & Vascular Institute at Long Beach Memorial is one of the most comprehensive centers for diagnosis, treatment and rehabilitation of cardiovascular disease. Our nationally known cardiologists and cardiovascular surgeons perform 20,000 diagnostic and surgical procedures each year. Our Chest Pain Center was one of the first two in U.S. hospitals. Emergency treatment times at our cardiac paramedic receiving centers beat the national average, as do our cardiac outcomes. We’re the region’s only hospital with a 320-slice CT scanner, providing superior imaging for early and accurate diagnosis and treatment.
Miller Children’s Hospital pre-eminent Pediatric Cardiac Team diagnoses and treats children of all ages with congenital or acquired heart disease or who have a family history — from as early as in the womb during pregnancy to young adults. The Pediatric Cardiac Center, Cardiac Surgery Program and other specialized pediatric services provide comprehensive care to the patient, family and community.
MemorialCare hospitals perform among the highest numbers of robotic heart surgeries nationally. These procedures enable surgeons to operate with unprecedented precision through tiny incisions with less trauma to the body, faster recoveries, and minimal pain and scarring.
How can we create a healthier workplace?
The workplace can help achieve better health by ensuring exercise opportunities and availability of fruits, vegetables and nutritious foods.
MemorialCare provides work site prevention and screenings, as well as heart healthy programs in the community and schools. MemorialCare.org tools help evaluate medical risks. Health guides outline heart attack symptoms, healthy eating and women’s wellness.
MemorialCare Health System, a not-for profit, integrated delivery system, includes six top hospitals — Long Beach Memorial, Miller Children’s Hospital Long Beach, Community Hospital Long Beach, Orange Coast Memorial, and Saddleback Memorial in Laguna Hills and San Clemente; medical groups — MemorialCare Medical Group and Memorial Prompt Care; the Independent Practice Association (IPA) Greater Newport Physicians; retail health centers; and numerous outpatient centers throughout the Southland.
Gregory Thomas, MD, is medical director of MemorialCare Heart & Vascular Institute at Long Beach Memorial. Shaun Setty, MD, is medical director of the Pediatric & Adult Congenital Heart Program at Miller Children’s Hospital.
Learn more about heart disease by taking a quick assessment at memorialcare.org/heart
Have you been in “protect mode” ? a little cautious about taking chances with your business? Have you been waiting for sure signs that it’s time to invest in your company’s future?
Then you are the company leader economist Brian Beaulieu of the Institute for Trend Research wants to reach. At a recent Vistage All City meeting in Columbus, he encouraged those in the room to get out of “protect mode” and start taking risks and acting like entrepreneurs again by upping their game and being aggressive while market conditions are favorable for doing so.
Beaulieu says business leaders have the next 14 months to strengthen their company’s market position during this current period of economic recovery ? leading indicators show the potential for a milder recession late in 2013 and early 2014, followed by three years of economic growth.
He addressed about 150 CEOs of midsized companies and challenged them to be smarter than the curve. His message that now is the right time stemmed from signs of a recovering economy, low interest rates and the fact that banks are lending again, among others.
Beaulieu’s suggestion that by the time 2015 rolls around and the economy moves into a three-year growth spurt, being ahead of the curve will put your business in a great market position to maximize business growth. It makes sense, and here are his tips on how to get started.
What businesses should do in a recovering economy
Getting out of protect mode in a sense means leaving your comfort zone. Beaulieu challenged the CEOs in the room to do that, to sell boldly where they have never sold before, to determine where they need to be so they can capture market share and identify new markets that they can create.
But it’s not as daunting as it seems, if you consider his company’s Phase Management Objectives for “late recovery” and “early growth” recessionary phases. His list was rather extensive, but here are some that caught my attention from a marketing perspective:
1. Establish tactical goals which lead to strategic achievement. 2. Review and uncover competitive advantages. 3. Invest in customer market research to understand what customers value. 4. Add sales staff. 5. Begin advertising and sales promotions. 6. Increase prices. 7. Find the answer to “What’s next?” 8. Open distribution centers. 9. Use cash to create new competitive advantages.
Time to plan for growth
Now that you have a list of potential steps to take, you should feel a lift in your own spirit and an eagerness to return to your entrepreneurial roots. I know I did. What I took away was that the next few months are not about being passive — they are about being aggressive, pioneering new territory and taking risks. The next 14 months are critical to business growth and success. If we don’t position our companies to excel during the 2015 through 2017 growth years, our businesses may not survive the next recession which is sure to come.
Now is the time to plan for growth and invest in our businesses future. It is time to kick in our entrepreneurial passion, which for some of us means removing our Band-Aids, clearing the dust from our eyes and emerging from the day-to-day minutiae so we can refocus and find renewed energy.
Clear the path for enthusiasm
We need to clear the way for strategic, visionary, innovative work — the stuff CEOs love to do. In Beaulieu’s words, it is time to stop focusing on all the recessionary chatter that zaps our enthusiasm. It’s time to get back to leading our companies toward the future.
Whatever you do, don’t wait. Now is the time to shore up your game to position your business to maximize its potential for growth in 2015 and the two following years. Even though 2015 may seem like a long way off, in reality, it is not.
Positioning our companies for growth is really about the action we take in the next 14 months as the current economy is in recovery. So invest the time and resources needed to make the most of these next few months. The time is now.
Kelly Borth is CEO and chief strategy officer for Greencrest, a 21-year-old brand development, strategic marketing and digital media firm that turns market players into market leaders. Borth has received numerous honors for her business and community leadership. She serves on several local advisory boards and is one of 25 certified brand strategists in the United States. Reach her at (614) 885-7921 or firstname.lastname@example.org or for more information, visit www.greencrest.com.
Successful organizations achieve a diverse set of objectives. The pursuit of these objectives is especially challenging in today’s highly competitive environment.
Operational assessments assist organizations in achieving their objectives by ensuring that their strategic goals are appropriately translated into operational objectives and that the risks associated with the achievement of these operational objectives are mitigated.
“Operational assessments help firms evaluate how they are performing with respect to their goals and the chance they will continue to achieve these goals in the future,” says James P. Martin, CMA, CIA, CFE, managing director of Cendrowski Corporate Advisors. “Irrespective of the economic environment, operational assessments can provide significant benefits to firms.”
In last month’s issue, Smart Business spoke with Martin about the basics of operational assessments. This month’s issue provides further context regarding the purpose and execution of these assessments.
What is the purpose of an operational assessment?
All businesses, regardless of size, face risks in pursuing strategic objectives. Operational assessments focus on the mitigation of risks in the design and execution of processes created to achieve strategic goals.
The distinction between process design and execution is central to operational assessments, and different procedures must be followed depending on the type of assessment that is being performed within an organization.
What are the key components of a process design assessment?
The first step in a process design assessment is an evaluation of the organization’s process design objectives. More specifically, this evaluation will examine how process design objectives reinforce the organization’s strategic goals; if feedback from prior risk assessments was considered in the design process and whether or not process owners understand their role in achieving the organization’s strategic objectives.
After process design objectives have been evaluated, process design risks must be tabulated and assessed. The likelihood and impact of risks that may prevent the achievement of the organization’s objectives should be assessed by numerous individuals, and the results of these assessments should be shared with all participants. Special attention should be paid to outlying likelihood and impact assessments, as the individuals who provided an outlying estimate may have specialized knowledge of specific risks facing the organization.
Next, the design of process controls must be evaluated, along with the ability of these controls to bring risks in line with the organization’s risk tolerance. Those processes in which inefficiencies and inadequate controls exist must be redesigned in accordance with the organization’s risk tolerance.
Special attention should be paid to high likelihood/high impact risks, as these present the greatest level of exposure to the organization. Low likelihood/high impact risks should also receive attention, as the organization may rarely face these events and be unaccustomed to dealing with them should they occur.
What are the key components of a process execution assessment?
A process execution assessment begins with the disaggregation of designed processes into executable tasks. Process operators should be interviewed to determine their perception of a process’s tasks, and they should also be observed to make certain that any process tasks were not forgotten in the initial interview.
Once executable tasks have been identified, an assessor must determine the existing level of process controls that mitigate each task. This includes the tabulation of preventive controls, as well as detective and corrective controls designed to minimize the likelihood and impact of risks, respectively.
Subsequent to the evaluation of process controls, key controls are tested to ensure they are functioning as intended. Testing should focus on those risks identified by process operators as having a low likelihood of occurrence or low impact. An assessor should also consider altering a company’s internal audit plan and rotation schedule to make control testing a periodic activity.
Lastly, a plan must be developed to correct processes requiring improvement, especially high likelihood/high impact processes. The root cause behind a high likelihood or high impact score must be well understood prior to developing a process improvement plan.
What resources exist for organizations looking to perform operational assessments?
Interested parties should view Cendrowski Corporate Advisors’ Operational Assessment Guide included in this month’s issue of Smart Business, as well as last month’s introductory article. Both provide an excellent starting point for any organization looking to perform an operational assessment.
JAMES P. MARTIN, CMA, CIA, CFE, is managing director for Cendrowski Corporate Advisors LLC. Reach him at (866) 717-1607 or email@example.com.