May 2006
Is A Merger The Way To Grow
Your Business?
How To Land A Business Angel
Improve Your Training ROI
Selling Services
— It's About
Relationships
 
Is A Merger The Way To Grow Your Business?
Most smaller businesses grow slowly. They
acquire new customers, add more products to
their range, and expand into new territories as
their resources permit. However, increased
competition can mean that this slow rate of
growth is inadequate to retain existing
marketshare. Or a business can simply reach a
plateau where further growth isn’t possible
without finding new sources of capital and
increasing the company’s risk exposure.
At times like these, business owners may well
consider the possibility of merging their
company with another business. A simple
definition of a merger is: “A joining
together of two previously separate businesses
when both businesses dissolve and fold their
assets and liabilities into a newly created
third business entity.” The two
organizations can be similar to each other or
they can be complementary to each other, but at
the end of the process they become a totally new
business with new leadership and a new culture.
There are benefits to merging
Why might you want to merge your business with another
business? You might want to extend your
geographical reach or simply acquire a large
number of new customers. You may need to
diversify your product range into higher profit
areas, or you may require the capacity to fund
the development of new products.
However, it’s estimated that about half of all
mergers fail to achieve their projected goals.
This means that great care needs to be taken
before beginning the often expensive and
time-consuming process of merging two
enterprises
What to look for in a merger
prospect
The ideal business to merge with is one that will
complement your organization. Their strengths
will offset your weaknesses and the merged
entity will be synergistically stronger than the
two firms were individually. When evaluating a
potential merger partner:
-
Look
at their management and decision making
methods – are they similar to yours?
-
Look
at their culture. Is it positive? Is it
compatible with yours?
-
Is
their marketing effective and well targeted?
-
Is
their approach to IT up-to-date?
-
What
is their risk profile – do they take too
many chances or are they too risk averse?
The aim of the merger is to retain the best aspects and
eliminate the weaknesses of each party. A
dominant party seeking to retain a bad practice
or product can easily create the foundations for
a later failure of the merger.
Steps to merging
The two companies must recognize what's good about each
other and what needs to be changed, and then
determine jointly how they will face the future
as a unified force. Before a merger can take
place there are several steps that each party
must take:
-
Extensive
due diligence must be conducted on both
businesses
-
Conduct
a SWOT analysis on both businesses
-
Decide
which products will be retained and which
will be dropped
-
Prepare
a comprehensive model showing how the new
entity will operate
-
Know
which employees are essential and which will
be let go
-
Agree
on a management structure including who
makes decisions and how they are made
-
Agree
on a system of remuneration
-
Pre-negotiate
issues of ownership and responsibility
Invest whatever time and funds are necessary before the
event, verify all financial data and get
financial and legal advice before proceeding.
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How To Land A Business Angel
A ‘business angel’ is a private investor who provides
capital for a start-up or growing business in
exchange for equity in the company. Business
angels are the second most common source of
capital for small businesses and represent the
largest pool of capital worldwide. The range of
investment angels generally make is from $20,000
to $1 million, although higher amounts are
sometimes available. Angels usually develop a
personal relationship with the owner of the
business they finance, and want some sort of
ongoing involvement with the organization.
Angels sometimes work behind a screen of agents or brokers;
they can be referred by accountants, lawyers or
other business owners. They generally expect a
business to offer them a fairly comprehensive
package before they’ll commit to providing
capital, including:
-
A
comprehensive and realistic business plan
-
A
timeframe for achieving business goals
-
An
equity stake in the business representing
their risk
-
A
high rate of return on their investment
-
And
quite often, a seat on the board of
directors
Angels are similar to venture capitalists but tend to fund
smaller deals and to place their funds for
longer periods of time. Angels are usually
individuals, often from entrepreneurial or
executive backgrounds, whereas the venture
capitalists of today are mostly managed pools of
funds. Most business angels tend to invest
their money close to where they live. Some
networks of business angels exist, but these are
mostly local or occasionally regional in scope.
Angels can be intrusive
Angels tend to be more intrusive than venture capitalists.
It’s important that you and your angel share the
same objectives for the enterprise as well as a
similar timeframe for these objectives to be
realized. You need to check out the angel in
much the same way that they’ll perform due
diligence on you, to ensure that you will be
compatible for the term of your relationship.
The ideal angel will bring more than just money
to the table. They can introduce valuable
contacts, provide strategic assistance, or serve
as contributing board members.
Tips for dealing with angels
Acquiring a business angel will probably mean several
changes to your way of doing business and even
to your personal life. There are a few rules
that entrepreneurs should be prepared to follow
if they’re going to acquire finance from an
angel:
-
Personally finance your enterprise as long
as possible, until there’s a positive case
for obtaining external finance to develop
and/or grow the business.
-
Be certain you can work with a business
angel before beginning the search for one.
-
Have realistic expectations of the money
you’ll need and the amount of equity you are
willing to give an angel in exchange for it.
-
Be selective in the kind of business angel
you approach; look for one with particular
skills or abilities that will benefit your
business.
How to attract an angel
Business angels are looking for capital growth and sound
indications that your business will be able to
provide them with a good return on their
investment. Prepare a business plan with the
most up-to-date information, realistic financial
projections, and sustainable valuations. Support
it with as much research as you can gather. The
business plan is evidence of the competence and
knowledge of the entrepreneur who prepares it.
Locate business angel investors by approaching the
established networks in your area, by indicating
your interest to your accountant and legal
adviser, and by searching on the Internet. You
should also check the financial pages of the
newspapers where they often advertise. It’s not
just about money. Look for an angel with
business skills that can complement yours and
who will be able to share your vision for the
organization.
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Improve Your Training ROI
Training is expensive, and businesses need to ensure they
receive the maximum benefit from the training
they pay for. The value of too many training
sessions and seminars is lost because of a lack
of pre-training and post-training support, or
because what is learned during the training is
never fully implemented or becomes unused.
Whether you’re training a member of your clerical staff in
the operation of a new computer program or a
factory worker in the use of safety equipment,
there are several principles that will help you
obtain the maximum return on your training
investment. If the training you pay for doesn’t
make a positive contribution to your business,
it’s usually because these principles aren’t
being followed.
Training must be worth the
investment
Training has a cost, and it should also have a value to the
business. It should have a measurable result
that translates into a quantifiable outcome.
Some typical examples of training outcomes are:
more efficient use of equipment, reduced risk of
accidents, better management practices and
enhanced productivity.
What savings will result from the equipment’s being used
more efficiently? This should mean time savings
and/or more productive use of staff time, both
of which can be measured in financial terms. If
the potential savings can’t be quantified the
training could represent a poor investment of
the organization’s funds.
For best results structure
your training
It’s insufficient to simply send someone off to a training
course and expect them to come back with
magically improved performance. All training
should be conducted in a three-step process that
prepares the person for the training, trains
them, and then supports the implementation of
what’s been learned.
1.
Preparation - The person being trained needs a
complete understanding of the purposes of their
training and what it’s expected to achieve. They
should be given a clear picture of what they’re
being trained for and how the training will be
conducted. They should also be told the cost of
the training to give them an appreciation of the
investment the business is making in their
development.
2.
Training - It’s your responsibility to see that
the content of the course fully meets the needs
of the business it is meant to address. If, for
example, the business plans to upgrade its
credit management software, personnel will have
to be trained in the use of the new program. The
selected course must be specifically tailored
for this software and also must be compatible
with the equipment in your office on which it’s
going to be installed.
3.
Implementation support - When the person returns
from their training, review with them what
they’ve learned. Be sure they have all the
support needed to implement their new knowledge
and that they can apply their newly acquired
knowledge as soon as they return to their
workplace. This can mean some form of IT
support, assistance from other members of the
team, or additional resources such as manuals or
equipment. Follow-up to ensure the learning is
correctly applied and that the anticipated value
is received by the business.
Get your money's worth
It’s important that you have an agreement with the employee
that the training they undergo will be used to
benefit the business as much as possible. Some
possible elements of this agreement that can be
summarized in your company’s policy and
procedures manual are:
-
That what they have learned from their
training will be applied to help them better
perform their job responsibilities
-
That what has been learned from the training
will be shared with other members of the
team if it will help them perform in their
roles
-
That you will support them in their
implementation of what they have learned in
the training
-
That they are encouraged to request any
additional materials or equipment needed to
ensure the successful application of what
they have learned
Training is a management
responsibility
Successful training requires management to have all the
necessary elements in place including a way to
identify the needs of the business and select
the training that best meets those needs.
Training must also satisfy the needs of the
individual as well as the organization.
Management must follow-up after the training so
that the knowledge is fully implemented and
creates the intended value for the business.
Only when training is appropriate, conducted
correctly, and well-implemented will the ROI to
the business be optimized.
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Selling Services — It's
About Relationships
Because service businesses can’t talk about products on
shelves, they often make the mistake of talking
about themselves with messages like ‘the best
car service in town’ or ‘speedy appliance
repairs’. These may sound good to the owner
of the business, but they leave out the most
important person of all – the customer.
Most services operate through
relationships
In general, services are more complex to price, to deliver
and to evaluate than products. Defining the
quality of service delivery is very difficult
but it boils down to whether the customer feels
well-served or not. So the key thing for a
business that provides a service to do, is to
build strong personal relationships. To do that
you need to keep three things in mind.
1.
Know what customers want - Giving customers what
they want is the basis of your personal
relationship as well as the most critical factor
to address in your marketing. What value do they
want to receive from you? What problems do they
want you to solve for them? What are the
benefits they want to enjoy after spending their
money with you? Customers often expect your
service to be delivered in a specific way or by
a specific person. These considerations must
also be taken into account when you’re trying to
determine exactly what your customers want.
2.
Give it to them - Are you meeting all their
needs or just some of them? Are you delivering
your service the way the customers want? Compare
what you give your customers with what they
really want and you’ll identify areas that need
attention and see where you need to make changes
to your offering to make it more attractive to
prospects and build stronger customer
relationships.
3.
Know what your competition is doing - Make a
point of monitoring the businesses that compete
with you. Ask these same questions about them
and compare the answers with what you’re now
doing. It’s a good way to discover areas of
opportunity for your company and to identify new
services that can be added to your offering to
build your revenues.
Market services with
testimonials
Someone buying a service from you won’t know how good it is
until after they’ve actually bought it. To
successfully sell your services you need to
convince prospects that they’ll receive the
value and benefits they are after, and the best
way to do this is to use the experiences of your
existing customers. Testimonials are the most
powerful means of overcoming any doubt in
prospects’ minds about using you to provide the
service they need.
Ask your existing customers to speak about their
experiences with your business and how you’ve
helped them. Concentrate on the points that are
key issues for most or all of your customers.
Use these testimonials in your marketing; even
hang them on the wall in your reception area.
When a customer comes to you for a particular
service it is generally because they don’t have
the expertise or ability to do it themselves. If
they can see testimonials as to the quality of
work you’ve done for others they’ll be a lot
more confident that they too will have a
positive relationship with your business.
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