February 9, 2009

Getting “More Strategic” in Difficult Times

We live and work in the IT sector of the business world, and ‘our business’ is helping owners and entrepreneurs with the sales process for the most important business asset they have: the IT business that is ‘their baby’. The most strategic decision to be made in the life of the business is often “How do I turn my business into cash, or stock in another company, such that I can not have all of my eggs in one basket?” In other words “What is my exit strategy?” What is the strategy that will successfully monetize all of your hard work, and reward the risks you have taken through the years?

First things first. In the economic environment which we are experiencing now, the most important step in getting to the decisions around a sale of your business asset is taking the steps to immediately and successfully manage it in a downturn. If you don’t do this first-there may be nothing left to sell. In this blog, I will address several of these ‘must dos’:

  1. Be sure you can articulate your business proposition in terms relevant for today’s challenging economy. Is your value proposition clear, unambiguous, and to the point? More importantly, if you are stating it the way you did last year, and the year before, is it still relevant today? Given the importance of providing a clear ROI on the IT spend that will be made with your company, can you ‘prove the value’ of your business offerings. If you cannot prove the ROI in an understandable way, you are less likely to continue to ‘get the order’.
  2. What can be done to create some rapid sales improvements? Conduct an account assessment by the relative profit contribution made to the bottom line of your company…a novel approach. This requires an understanding of the margin and costs by account. But then-you can refocus your limited sales and support resources on those accounts that are more profitable and faster growing. And you know what to do with those that are marginally profitable or producing losses. No free rides!
  3. Instead of short term cost reductions, take the opportunity to see if there are ways to dramatically change the real structural look of your costs. Can you use contractors and make the labor expense variable? Can you use voice systems to connect support calls directly with the person who can solve the problem (reduce the layers)? Can you use offshoring for certain of your business processes? What business owner do you know in your area who has lead the way with new and innovative best practices in the area of structural cost improvement? Meet with them-and ask for help.
  4. What has the devaluation in assets over the past months, created in terms of business opportunity for you-if you reframe the question into ‘how do I take advantage’ rather than OMG! Buyers of products and services want to know they are getting best value to meet their requirements. What tools can you create today to be the best at proving the business value in choosing your business and your solution? What can you say about the longer term value of a relationship with your business?

The reality is that there will be more competition for fewer dollars across the spectrum of IT and software service and solutions companies. This means that margins will be under pressure. There will most likely be a decline in IT spend for some period of time. How do you put your business in a position to take market share and gain more of the limited spend? How will you meet the challenges of tight credit and receivables that are extended beyond normal? There are answers—but the questions need to be addressed head on and without delay.

The truth of the matter is that in a downturn of the magnitude we are facing: “Strategy” is “Execution”….precision execution of your business operations is where the rubber meets the road. And, it is the requisite step in creating the road ahead; the road to successful monetization of your business asset, at the appropriate moment.