Solving The Value Equation

Management Tactics from today’s football coaches

New Hire Orientation best practice:

Is everybody ready? LET’s GO! Get your chin up. SMILE! SMILE! Or I’m not talking. Let’s get rolling!

YouTube Video link = http://youtu.be/m-nQLd6z9OU

 

The importance of social media:

I don't Twitter, I don't MyFace, I don't Yearbook.

Don’t be afraid to confront teammates:

Video link- http://youtu.be/EB5-yJM3vJc

Go with your Gut:

Stats are for losers. The final score is for winners.

 

Presentation Q&A best practices:

Video link = http://youtu.be/TGSEKKVh7SU

 

Like Barkley said, sports celebrities are not always the best role models.

2013 Planning and Growth Strategies

From the Ephor Group eNewsletter:

As we approach the end of 2012, and initiate our planning for calendar 2013, there are a few salient factors that we must keep in mind as we proactively plan.

1. It is well known that the failure/bankruptcy rates of small business will continue to escalate. Over the past 3 years, our peers, who unfortunately had businesses that failed, have taught us that their mistakes included not changing and adapting fast enough to the “New Economy” and not proactively attacking increased competition as well as they should have.

 

2. Government, Education, and Public service will account for > 6 of 10 jobs in the new economy, therefore we will have to provide a “superior work-life” experience to attract the human capital to be successful.


3. Small businesses will be less of a factor in the growth of GDP and job creation, therefore we will enjoy less B2B small business trade, therefore requiring us to provide goods and services to large organizations, including government.


4. We must adapt to the changing demographics in the consumer base including baby boomers, millenials, and the increased diversity of consumers including the Latino and Asian immigrants.

As we prepare for 2013, we our asking the following questions:

• Does my team have the skills required to meet the challenges we will face? How will we overcome the gaps?
• Is my business model adapted, economically efficient and proactive enough to meet our near-term challenges?
• Is our team able to perform at the level of success required?

The Presidential Election’s Impact on Useful Capital for Growth

There is a lot of speculation and uncertainty regarding the impact of Mitt Romney versus Barack Obama in the impending 2012 presidential campaign.  While the political and socioeconomic policies will be impacted, I’d like to take this opportunity to focus on the ramifications for useful capital growth strategies.

There has always been confusion regarding tiered structures of private equity such as the pros/cons and benefits of venture capital versus growth capital versus mezzanine and other.

Growth companies create jobs and tax revenues.  And without a doubt, private equity’s growth capital has provided crucial liquidity to facilitate growth and generational transfer of small and mid-sized business.  Here are a few growth capital facts:

• More than half of private business revenues is sponsored by private equity.
• Private equity backed companies outperform the rest of the market in terms of both sales and job growth. Did you know that from 1995- 2009, private capital backed companies grew jobs by 82% while all other companies grew by 12%?   Companies supported by private equity growth capital investments demonstrate sustained growth over time, especially in companies with employment size 10 to 499.

A more robust economy requires a healthy capital sector that is actively investing in middle market companies as well as small business in growth industries such as information services, health care, SaaS software, and technology. 

As the business landscape has changed, resource constraints such as higher operating costs today versus last decade, makes the availability of useful capital critical to growth. Beyond incenting growth companies to create jobs the deployment of growth capital is key to economic growth.

And regardless of party affiliation, strong effective leadership is needed at the company operating level to succeed and attract useful capital for growth.

Useful Capital Strategies Recap: The Economic Landscape for Growth in Texas

From the Houston TeXchange August 16th event recap:

Question: What is the economic landscape for growth?

It is forecast that in 2013, small businesses will represent the lowest percentage of the GDP at 55% since the great depression. 

Today, government, education, and law enforcement account for 5.5 out of every 10 jobs created in the economy (6 out of every 10 jobs by 2013).

• The IRS recent announcement to hire approximately 6,500 new agents into training to enforce Obama Care illustrates just a small example of this trend.
• The Labor CMS department hired 1800 inspectors for healthcare compliance to attack the offshoring of jobs.
• The majority of businesses started since 2007 will have failed (3 million businesses will fail in 2013 alone).

The reality for small business today is highlighted from the findings of a recent survey conducted on behalf of the National Federation of Small Business which found that in addition to the fact that growth for the first two quarters of 2012 was flat that:

• 84% responded that they had not hired or expect to hire until 2013 (and most new hires would be temporary or part-time).
• 89% responded that they will not increase Capex anytime soon (Capital expenditures, or Capex are expenditures creating future benefits. A capital expenditure is incurred when a business spends money either to buy fixed assets or to add to the value of an existing fixed asset with a useful life extending beyond the taxable year).
• 91% responded that they expect no increase in sales and new customers, in the near-term.

Clearly the economy for the small business sector slowed in the 1^st half of the year. Job growth fell far short of expectations, with inventory and Capex levels reverting back to the Q3 2009 all time lows. Political uncertainty and the effects of the social engineering efforts of the past 4 years have clearly taken its toll.

Here in Texas we reflect in a more precise manner what our country has experienced over the past 50 years and will be experiencing in our current new economy including the significant redistribution of wealth that has and will continue to occur at least in the near-term.

From the 1950’s thru the 1990’s we were a resource driven economy in Texas like the rest of the entire country. As in this case of Texas as oil and gas went so went the Houston economy and it wasn’t until the 1990’s that we started to diversify. At that time we started to take boom or bust out of the economy by diversifying into information technology, service industries, and healthcare sectors.

The facts are that personal household wealth increased 2x from 1948 thru 1988 and then 2x again from 1988 to 2008. Now that has all changed.

Now we have an economy that has changed from resource driven to information driven.

 

The truth is in Texas we are a society of migrants and immigration heritage and we must prepare our businesses to migrate and adjust to change.

• In 2014 we will have more Hispanics then there are Angelo’s (40% will be Hispanic and 36% Angelo).
• Other diversified nationalities represent nearly 25 of our workers and consumers (Chinese and Indian being the largest).
• Couple that with nearly 76m baby boomers nationwide rolling thru the economy of which of our 27m in Texas people nearly 5m are baby boomers.

 

Download the full Houston TeXchange recap on Useful Capital Strategies for Growth here:

http://www.ephorgroup.com/download/UsefulCapitalStrategiesforGrowth-August2012.pdf

Useful Capital Strategies Recap: Attracting Useful Capital

From Houston TeXchange August 16th event recap:

Equity comes in a lot of flavors. My three (3) requirements for attracting useful capital include:

1. A sizable market opportunity is defined. Depending on whether you are a “Blue
   Ocean or Red Ocean” opportunity dictates available capital sources and terms.
   
2. Differentiation is more compelling than alternatives for both the product and leadership team.  The single biggest failure is the inability to build the right team. The right team includes a professional CFO, CPA, and legal advisor. Also, founder’s most overcome the founder’s dilemma. If you want to have capital, you must be willing to give up control.
   
3. Can you see the results/differentiation in the KPIs?

Every business faces inflection points. At each inflection point the business plan and capital plan must be re-aligned. It’s hard for founder’s to migrate from a bootstrapped mentality to a growth mentality. My advice: Don’t be a one-man band. Don’t be too focused on one employee or one product. Constantly bring in better people and create a portfolio.

• Focus on your business model attributes which are illustrated/demonstrated to investors via KPI metrics beyond financial reporting ratios and cash flow and EBITDA.
• Focus on attracting leaders and outside resources for assistance in developing the company before capital is required.

Download the full Houston TeXchange recap on Useful Capital Strategies for Growth here:

http://www.ephorgroup.com/download/UsefulCapitalStrategiesforGrowth-August2012.pdf

Useful Capital Strategies for Growth Recap

From Houston TeXchange August 16th event recap:

Question: What are the hallmarks of effective financial management?

Know where you are at on the S-Curve and plan your capital use, growth, hiring, and sales and marketing spending accordingly. Without management to the S-Curve your company will decline. Capital options and their availability are directly dependent upon where you are on the S-curve. The cost to shift to a different trajectory requires capital so planning in advance is required to efficiently attract capital.

Once you now where you are at on the S-Curve, the hallmarks of effective management includes having an accurate budget and forecast and managing to them. Failure to do so is why companies don’t scale.

Download the full Houston TeXchange recap on Useful Capital Strategies for Growth here:

http://www.ephorgroup.com/download/UsefulCapitalStrategiesforGrowth-August2012.pdf