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Efficiency or Expansion – STRATEGIC Succession Planning !

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Efficiency or Expansion – STRATEGIC Succession Planning !

By , March 8, 2011

Often we work with clients whose uncertainty about which phase their business is actually in ( or should be in ) – expansion or efficiency – causes difficulty and confusion. One of the most difficult aspects of strategic business planning, especially around succession or exit transition planning, is this aspect of efficiency or expansion. In my view, businesses simply can’t do both effectively – that is you can’t successfully grow and expand whilst building within the business, systemised processes and efficiencies. The two require a different mindset, different focus from team members and deliver vastly different business outcomes. In many cases, where businesses have been able to focus only on expansion they can actually achieve that phase of the business, only to find customer complaints increase, staff turnover becomes an issue simply because they haven’t built any efficiency into the system – there are no structured policies and procedures, the processes are not documented. As the business grows it actually becomes more and more inefficient, this combined with the fact that growth requires funding often causes cash flow and financial difficulties within the business.

A good strategic succession plan must combine and manage timing of the phases between expansion and efficiency and ensure the business is never doing both at the same time. I have one client who has an entirely different management style (for example the agenda at monthly management meeting changes) depending on which phase the business is in. When the business is in expansion phase the focus must always be on sales and marketing – new clients, new contracts, new-product development, new networking relationships, new referral agreements et cetera et cetera. In efficiency phase, whilst we don’t ignore any of these we certainly don’t focus our attention on those areas – our attention must be focused on building systems, documenting policies and procedures and ensuring every aspect of our process is as efficient as possible. The board’s role is to advise the CEO / management team on which phase they should be in and how to transition between the phases over time. Effective management of this aspect of strategic succession planning alone can dramatically improve the business outcome and value.

Craig West

Craig West

Managing Director | Succession Plus

Craig West is a strategic accountant who has over 20 years’ experience advising business owners. His background as a CPA in public practice, provided invaluable experience in the key issues of concern to business owners. Following 6 years of study to gain two masters degrees, Craig focused on Capital Gains Tax (CGT) for business sales advising on strategic management of tax issues. This experience formed a very strong view that business owners (and often their advisers) were unprepared and unaware of the steps required to prepare a business for exit.

Craig now acts as a strategic mentor for mid-market business owners and has written four critically acclaimed books on employee incentives, succession planning, asset protection and exit strategies. Craig has conducted numerous seminars and keynote presentations throughout Australia & internationally, including adviser education programs for the Institute of Chartered Accountants and CPA Australia.