The Five Challenges
We have seen CEOs and owners struggle to meet the challenges to building sustainable value in their companies. These challenges are shown as a progression from low value at the survival stage to a high value exit plan at the top of the stairs.
Challenge Number One—Fighting for Survival
Between 2008 and 2011, 11,740 significant middle-market companies filed for Chapter 11 bankruptcy. Whole industries related to residential and commercial construction were decimated. Businesses that depended heavily on state or federal discretionary spending saw revenue streams disappear. Retail book chains closed from loss of sales to Internet retailers like Amazon. Empty buildings were everywhere.
Many of the companies that comprise these statistics did not see what was coming. Then, and now, middle-market company leadership and management often fall into a trap of working in the business but not on the business. They continually fail to ask the question “what if?” and do not properly plan for the contingencies they might face.
Survival challenges are both external and internal. External challenges come from economic changes, marketplace dynamics, competitors’ actions, government policies, customer departures, or pricing challenges. Internal challenges usually involve poor strategic direction, weak teams, high employee turnover, inadequate systems, poor decisions and lack of financial resources.
People challenges involve hiring, firing, retaining the management team, and improving workforce efficiency.
Systems challenges come from the cost of keeping up with technology changes and designing a knowledge-based infrastructure that can give management actionable information.
Internal decision-making processes are often weak. The complexity of the business environment has outpaced the owner’s ability and his company’s processes to manage effectively and efficiently.
Financial challenges may be shrinking margins, deteriorating balance sheets, or inability to generate working capital. The evaporation of working capital will sound the death knell of a business. Running out of cash means you are “out of options.”
Any of these challenges, when coupled with a weak economy and aggressive competitors, can kill a company.
How to Meet the Challenges
Overcome the challenges with a strong internal team supported by an advisory board and the governance process it brings to the company. The authors have created an effective advisory board process called the professional advisory board process or PABoard process. Learn more in Game-Changing Advisory Boards, available soon on Amazon.