Written by Growthink on Wednesday, October 22, 2008
If you’ve glanced at newspaper headlines, turned on a television, or read any of our blog posts within the last several weeks, you know that this is a turbulent time for the global market. This brave new world has lead to widespread and palpable effects on small and middle market companies everywhere. The credit crunch, the volatility of the stock market, and the uncertainty of the new political landscape have left many entrepreneurs and small business owners experiencing emotions ranging from mild trepidation, to full-fledged panic.
As scary as the landscape can appear right now, we believe firmly that businesses that look for the opportunities provided by the current climate can position themselves to experience success. In order to help companies achieve that success, Growthink has launched a new service: Turnaround Strategy Consulting
Simply put, there are numerous steps businesses can take right now to turn the corner. Our decade of experience working with a broad spectrum of firms, from start-ups to Fortune 500 companies, has allowed us to develop comprehensive, analytical methodologies that indentify the cause of financial failures as well as realistic solutions that can be quickly implemented to turn businesses around.
Since 1999, Growthink has provided strategic guidance to companies through rapidly changing markets and economic climates, including the wake of huge economic crises, such as the end of the dot-com bubble and the post 9/11 financial landscape. Even in light of the 2008 “Credit Crunch,” Growthink is able to find opportunities within the chaos and create solid strategies for our clients.
Even businesses that have not experienced dramatic shifts, but have felt a recent downward trend can benefit from Growthink’s consulting. Improving margins, identifying the right customers, and implementing effective management are all areas that can make a significant difference for any firm in this economic environment.
Additionally, as a full-service firm, our turnaround strategy solutions can examine and assist with all aspects of business growth, from branding, public relations, business planning, web development, internet marketing, and investment banking.
If Turnaround Strategy Consulting can be of use to your business, please visit our service description page here
or contact us by phone at 1-800-967-6419.
Written by Jay Turo on Thursday, October 2, 2008
We are living through one of the most tumultuous periods in the history of the financial markets. It is rattling even the most steadfast and optimistic of investors. For better or for worse, we can only look with misty memory to the halcyon, golden, go-go market and investment days of the 1980's and 1990's. We are truly in a brave new world - one where the old assumptions and dogmas are truly on the dustbin of history.
A few takeaways:
Big is Not Safer Than Small. Whatever the results of the government mortgage bailout, both in terms of the House vote and its market impact, for equity holders of the big banks and mortgage and insurance players caught up in the mess (Bear Stearns, Fannie, Freddie, Lehman, AIG, WaMu, Wachovia, and to a lesser but still painful extent, Merrrill, Goldman, and Morgan), it is misery. For the big financials, if there wasn't horrendous news these last few weeks, there would have been no news at all. It is absolutely astounding – though not necessarily surprising when viewed through the prism of the dysfunctional and way over-blown incentive systems of key executives and traders at these firms – that so much value could be wiped out so quickly. Investors for a long time will have serious hangovers and reservations regarding investing in these entities in any form – stock, debt, and/or derivatives. Quite simply, the whole sector is tainted.
Cash Is Not Safe. Never in U.S. economic history have there been as many question marks as there are now around the security of cash – passbook savings, checking accounts, money markets, certificates of deposits and other cash-like instruments.
The question marks are threefold:
- The underlying entities holding cash are more sick than not, and, as such, their liabilities (i.e. your deposits) are exposed.
- The FDIC backstop/guarantee – as it gets stretched by Congress in terms of amount and type of cash instrument – is getting spread thin across an unprecedented number of defaults and in too tight a time frame.
- Inflation. The old truism is that governments never actually “default” on their debts. Rather, as expenditures for bailouts, wars, transfer payments between generations, and bridges to nowhere mushroom the budget deficit aside the enormous trade deficit the inevitable outcome has to be the government simply printing more and more money. Thus inflation.
So cash, our old friend – whether in the bank or under our mattress – is both under parking risk of default (a low risk for sure but much more so than just a few weeks ago) and under systemic, significant inflation risk. .
Executives Good, Traders Bad. In 2007, venture capital firms invested approximately $26 billion in startup and emerging companies. These companies were the best of the brightest stars in dynamic new industries like green/alternative energy, medical technology, digital media, and Internet software. In Washington, the nation's political leaders are committing more than 25 times this amount, effectively, in bailing out the residential mortgage market.
Now don't get me wrong, the housing and foreclosure crisis is real and painful in this country. But let's take a step back and think about priorities for a second:
- Would it be better to have more non-fossil fuel startups and technologies and fewer McMansions?Would we rather have more medical researchers and scientists or Wall Street derivatives traders?
- Who should be rewarded: the executives and visionaries working to build real operating companies, or the Wall Street whiz kids that made billions trading leveraged “house of cards” sub-prime mortgage portfolios?
- Quite simply, do we want to be a nation and a society that rewards entrepreneurship and business-building or one that rewards financial instrument manipulation?
Thinking about it for only a minute, the answer is obvious. It is even more obvious to the biggest investors in this toxic debt: the Chinese, the Koreans, the Japanese, the Russians, and the Arabs. Certainly, owning U.S. mortgage-backed securities now looks like a losing hand for these folks and far more disturbingly, owning U.S. treasury securities is far from being, as they say in the finance textbooks, a "riskless" investment.
So where is this foreign capital now going to go? Well, most of it will now in all likelihood stay home, or be invested in emerging/developing economies. But here is the key point: while the U.S. investment climate looks very, very unattractive compared to what it once was it is still by far the best place in the world to invest in startups, to invest in entrepreneurs, and to invest in operating companies. And it is not even close.
While most Americans – terrified by the hysterical financial media that the end of days are near – are increasingly blind to this fact, the more detached foreign investment players know the real deal. There are both uniquely and insanely great American operating companies all in our midst. Some are publicly traded, most are not. In the coming years, watch for a return to this kind of back-to-basics business-building/value creation investing. It can’t come soon enough.
Written by Jay Turo on Thursday, September 18, 2008
Amidst the extraordinary, mournful crisis in the financial markets these last few weeks, a few truths have become painfully evident:
- Leverage is a far more dangerous mechanism than any probable scenario models had predicted.
- The very ephemeral concept of public and market trust is the core asset of financial and insurance institutions. Even the slightest weakening of this trust can almost instantly cause a cascading effect – driving down asset and equity values, which in turn further erode trust and confidence. This negative feedback loop can quickly cause panic mindsets even among the most sober and experienced Wall Street hands.
- Financial markets and instruments – fundamentally transformed by the information technology revolution of the last 25 years – have and continue to morph at a far faster rate that both self-regulatory and government oversight bodies are equipped to handle.
From Growthink’s entrepreneurial economy perspective, a few more truths are less readily evident, but fundamentally more profound. Quite simply, Wall Street finance has lost connection these past few years with its core purpose and intent – namely to provide intelligent advice and capital to operating companies. While significant efficiencies (and correspondingly wealth-building) can be achieved from trading platform and instrument innovation, the value of this “innovation” is vastly over-rewarded in the marketplace.
The very fact that the most highly compensated roles in our economy over the past few years have been hedge fund managers, derivatives traders, and sub-prime mortgage hypsters points to the heart of the problem. While these folks serve a role, for sure, the combination of their almost comically (if it were not so anger-inducing) inflated compensation structures, combined with the systemic risk to which they exposed both their fellow workers and the economy as whole, is a failure of priorities for which we are all paying the price.
Where do we go from here? My hope is that finance and general marketplace incentive structures revert to more wholesome, “vanilla” dynamics. Traders are rewarded less, and company-builders rewarded more. Capital is more difficult to come by for hedge funds, and easier to come by for entrepreneurs. Harder for derivatives traders, and easier for scientists and engineers. Harder for debt, and easier for equity.
The fundamental good that can and should come out of this market cataclysm is a cleansing and a re-ordering of priorities. Provide a milieu and an incentive structure for operating companies to access capital and grow. And contrastingly – devalue activities that simply move capital as opposed to creating it.
Written by Pete Kennedy on Wednesday, September 3, 2008
During the process of growing a business, entrepreneurs, business owners and managers are often faced with the question of whether to bring in an outside business business planning consultant. This can be an especially challenging decision for entrepreneurs, who are by definition independent and self-reliant. However, it’s important to recognize that even the most talented businesspeople can benefit from the support and guidance of an experienced consultant (or consulting firm).
From our perspective, here are some of the key benefits to bringing on an outside business consultant.
Perhaps the most common benefit a consultant brings is his or her experience. More specifically, the consultant’s experience should directly fill gaps in the entrepreneur’s or management team’s own skillsets.
For example, a businessperson may be gifted at recruiting employees and partners, and motivating them to achieve the company’s strategic goals. But that same person may struggle to assemble a detailed financial model, conduct strategic market research, or convey the company’s growth plans in a succinct, marketable written document.
A skilled consultant or consulting firm often fills these functional gaps, in order to help the company complete a particular task or achieve a milestone.
Prior Domain Experience
Especially when venturing into new markets or devising a new product or service offering, a client may seek a consultant’s experience in a particular domain. Experienced consultants and consulting firms can apply past consulting experience to new client engagements. Aside from simply getting the project done, this familiarity with various markets and business models is a value-add that an entrepreneur or manager would not likely otherwise receive, without conducting months or years of competitive and industry research.
Engaging with a consulting firm provides more than smart, timely advice on crucial business decisions. Specifically because they are not engaged in the day-to-day operations of their clients' businesses, consultants are able to analyze a business decision from a position of greater objectivity. By working with an experienced, credible consultant, you receive 3rd party, objective analysis of your situation. This perspective is critical for gaining organizational consensus around one course of action out of a sea of competing choices, and it helps assure you that you’re following the best business opportunity.
Time (Opportunity Cost)
Aside from the expertise and objectivity that a consultant brings, perhaps the greatest value is the simple fact that another person (or firm) is handling a part of the burden. Engaging with an outside firm to assist with tactical or strategic responsibilities allows the internal management team to remain focused on the critical day-to-day actions and responsibilities that drive ongoing revenue and sustain the operations of a company. Each person and company may set a different value on their own time. However, often times it is economically beneficial to hire a qualified firm to efficiently manage a project, rather than allocating resources internally or hiring additional full-time staff to fulfill the need.
Aside from the direct value of a consultant’s domain and functional expertise, engaging with a consultant or consulting firm can provide other benefits. Because of their existing relationships, established consulting firms can introduce and connect clients with a wide array of potential customers, strategic partners, supplies, investors, and board members, etc.
What Do You Think?
What are other reasons why you have hired an outside consultant? What advice would you give regarding the pitfalls and benefits of hiring a consultant?
Written by Andrew Bordeaux on Wednesday, August 6, 2008
By now, most entrepreneurs have heard the old saying, "Businesses don't fail -- they just run out of money." While that saying often holds the most salience for fledgling ventures, it can and does apply to most small businesses and growing companies as well. The steps you take to deftly allocate your company's capital today can help ensure that you'll still have that company six months, six years, or six decades down the line.
The New York Times and AllBusiness
recently provided a list of tips for the best ways to manage cash flow. Most of the solutions that suggest frugality and thriftiness are somewhat intuitive -- limiting spending, avoiding wastefulness, keeping your inventory at practical levels and, for the austerity-minded, foregoing a salary. The most compelling suggestions on the list, however, are those rooted in strategic planning.
A strategic assessment of your business and some clever maneuvering can put your company in line to truly maximize each dollar. Crafting financial projections that anticipate your expenses and revenues for the next 12 months can help you determine if and when you'll need more capital. The formation of contingency plans that account for the worst case scenarios can prepare you for the unexpected.
One mistake many business owners make is purchasing equipment when it can be leased instead. While a cursory look at leasing vs. buying will reveal that leasing is usually more expensive over time, the leasing process prevents you from needing to shell out large sums of upfront capital, which then frees that capital to be allocated towards other important areas.
Lastly, effective cash flow management entails knowing what areas require patience, and which need to be expedited. When it comes to bringing on new employees, try to wait as long as you can. As permanent hires are a serious commitment of resources, it's recommended that you first strive to increase current employee productivity, investigate independent contractors, or even outsource some of the less essential aspects of your enterprise. On the other hand, when it comes to receiving customer payments, it behooves you to make these exchanges happen as soon as possible. Incentivize or reward early/timely payments, and don't shy away from penalizing late payments.
Written by Andrew Bordeaux on Wednesday, July 30, 2008
As individuals and businesses alike struggle to deal with a wayward economy, one of the first things we can do is look outward for tools and techniques to help weather the worst of the storm. Fast Company founder Bill Taylor recently examined three companies that seem impervious to market fluctuations and the economic turmoil faced by their respective competitors, and the lessons we can draw from their successes.
Honda, Netflix, and Southwest Airlines are the companies that make up last quarter's victorious triumvirate. While Detroit automakers have been suffering from staggering losses here at home, Honda has reported $1.7 billion in profits. Netflix has reached a subscriber base of 8.4 million households. And as airlines continue to flounder, Southwest Airlines showed a 15% increase over last year, hitting just over 17 years of consecutively profitable quarters.
What are the common threads between these companies that keep them flying high while others scrape by or shutter their doors?
1. Connect with Your Customers
Forging a relationship that goes deeper than the nuts and bolts of the product or service your company provides is a crucial component of success, especially when financial outlooks across the board are bleak. Relationships rooted in identity and emotion help a company tip from useful to essential.
2. Go Big or Go Home:
It used to be really easy for companies to aim for the middle. By being decent at a variety of things, they could hit the widest part of a market's bell curve. While that was a sound technique in the past, it is no longer the case. It is now integral to corporate success to be the best at something. A company must, with no exceptions, determine what they are the best at and execute on it. As Taylor states, "Southwest has always managed to combine low fares with great service--anything else is a distraction." By being the most affordable, having the greatest customer service, or providing the most exclusive product, a company can distinguish itself in the mind of the customer.
3. Be Yourself, Even When Things are Changing:
This rule might be "easier said than done" for many companies, but it holds true. To succeed, a company must stand by what they believe in. While it is important to test and tweak strategies, the overarching approach must be a steadfast attachment to your plan, and the value proposition you've developed in the aforementioned stage of defining your businesses' strengths. While many large companies like Ford appear to be in constant "react" mode, rushing to adapt in light of market conditions, companies like Honda reap the rewards of embracing their long term strategies. Finding consistency in your business will give success an opportunity to find you.
Written by Andrew Bordeaux on Wednesday, July 16, 2008
Imagine you are at a job interview. Right before the interviewer offers you a position he states, "Unfortunately, I cannot tell you the details of our project. You will have the opportunity to make mistakes and struggle, but eventually we may do something that we'll remember the rest of our lives." Would you eagerly jump at this project or would you stand up and walk out?
This was the real life scenario created by Scott Forstall, the senior vice president of Apple, who assembled the iPhone development team. He called in a handful of stand-out Apple employees from various departments in the company to speak with him, and only those who quickly leaped at the opportunity were offered positions. Forstall's approach to recruitment was based on the belief that the new project’s success would be dependent on individuals who were more attached to challenging themselves and pushing boundaries than the ego gratification that came from shining where they already were. In a recent New York Times article, such individuals were described as possessing a “growth mind-set.”
This classification was derived from the research of Carol Dweck, a Stanford psychologist and author of “Mindset: The New Psychology of Success.” She has carefully studied the ways in which people approach life, and research suggests two main groups: those like the aforementioned Apple employees who believe their own abilities can grow and change, and those who believe that talents and intelligence are intrinsic and unchanging (referred to as a “fixed mind-set”.)
These simple classifications can have a remarkable impact on all aspects of one’s life and likelihood to succeed. In her work, Dweck has found that a growth mind-set almost always trumps a fixed mind-set, due in part to the fact that many with a fixed mind-set are overly invested in the reputation of their talents, resulting in a fear of making mistakes and an attachment to looking smart. Dweck has said that those with a growth mind-set, “are the ones who really push, stretch, confront their own mistakes and learn from them.”
Case studies on many top executives from the ranks of General Electric, IBM, Xerox, and others show that a growth mind-set can not only lead to personal successes, but can revolutionize a work-force as well.
Which mind-set do you lead with?
Written by Growthink on Wednesday, July 9, 2008
In addition to our work with Twiistup
on July 17, we are also promoting Mashable's US Summer Tour 2008.
is the leading social networking and social media blog, and has spotted important trends in digital media over the past several years. To get your web startup reviewed favorably in Mashable is to have arrived as a digital media entrepreneur.
The purpose of Mashable's tour is to engage and unite the Social Media community of Founders, Developers, Bloggers, Influencers, Journalists, Venture Capitalists and Social Networking Users themselves.
Each event will have approximately 500 to 900 attendees, and will include networking, “Drink Tickets”, music, light appetizers, and Pete Cashmore himself. Needless to say, we are very excited to be involved.
The "SummerMash" events will be held in 7 cities: New York, Boston, Austin, LA, Seattle, SF and Miami.
Seattle: Saturday, July 12th
Buy Tickets Here
San Fransisco: Tuesday, July 15th
Buy Tickets Here
Los Angeles: Friday, JUly 18th
Buy Tickets Here
Austin, TX: Wednesday, July 30th
Buy Tickets Here
Miami: Saturday, August 2nd
Buy Tickets Here
Boston: Tuesday, August 5th
Buy Tickets Here
New York City: Thursday, August 7th
Buy Tickets Here
You can read more about the Summer Tour here
Written by Andrew Bordeaux on Wednesday, July 9, 2008
Before the ink has dried on newspapers reporting the impending close of 600 Starbucks locations nationwide, news has surfaced that clothing retailer Steve & Barry's is preparing to file for bankruptcy. For many years, both the coffee giant and the clothing chain have been two of the most-discussed, high-growth companies. So what has gone wrong?
In the case of Starbucks, the general consensus among the business blogosphere is that the company, eager to appease investors, embarked on a path of overly-ambitious expansion. Shifting their focus away from the customer and toward the bottom line, Starbucks abandoned their thorough location-finding talents to map out several hundred new stores.
A new Starbucks cafe can have a tremendous impact on a local real estate market. The arrival of the white-green-and-brick facade in a neighborhood represents a "stamp-of-approval" for the neighborhood, and has nearly become synonymous with modern gentrification. This being the case, landlords began to make attractive deals with new storefronts, sometimes offering several months in free rent to a Starbucks willing to open its doors on their property.
Rushing quickly to fill these locations with baristas and customers alike, Starbucks began to take advantage of such real-estate perks. It appears such perks started to motivate location selections more than the high-quality demographic research the company is known for, as over 70% of the proposed store closings will be locations opened within the last two years.
As the markets suffer uneasy fluctuations, it also becomes difficult for landlords to continue such “sweetening” efforts for the coffee juggernaut, as well as for other large retailers.
Another such company is Steve & Barry’s. Though the retailer has experienced annual sales over $1 billion and solid performance in their newest stores, it still suffers from small margins due to their discounted pricing strategies. Their rapid expansion became dependent upon such real estate perks, which have all but frozen in the current market.
There are numerous ways out of the frying pan for Steve & Barry’s, including possible acquisitions. And Starbucks is only predicted to take a short-term media and investor relations hit from the news of the store closings. But still, the question remains: Is it possible to grow too fast? And when is aggressive expansion a bad idea?
Expansion is a bad idea when it is more opportunistic than strategic. That’s not to say that companies shouldn’t take advantage of opportunities they spot, as that would be counter to the nature of entrepreneurial business growth. What it does mean, however, is that they should approach any expansion with a careful and well-mapped out plan. Once the business has documented their vision, it should ask if it is pursuing growth in the best interest of the company, or whether it is growth only for the sake of growing.
Both Starbucks and Steve & Barry’s took advantage of market conditions to fuel expansions that were ultimately unsustainable.
From the entrepreneur’s perspective, growing “too fast” would seem like a great problem to have. But if the growth is more opportunitistic than strategic, it can be unsustainable and carry unforeseen risk.
Has your business experience rapid growth?
What were the pitfalls, if any, that you encountered in the process?
Written by Growthink on Wednesday, July 2, 2008
Growthink is very excited to announce our
sponsorship of Twiistup 4, a networking conference that will take place on July
17th at the Viceroy in Santa Monica, CA.
Twiistup events bring together entrepreneurs and investors from the areas of media,
entertainment and technology, and give startups an opportunity to showcase themselves.
Twiistup conferences are quickly becoming “must-attend” events for those
interested in learning about what's new in the Southern
California tech community.
Twiistup 4, which sold out
immediately, will feature presentations from 11 exciting startups, 7 of whom are Southern California locals, plus 4 "crashers" from Texas, Vancouver and the San Francisco Bay Area. Read more about the "Show Offs" here.
information, visit the Twiistup site here.
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