EMERGING CORPORATES
EMERGING CORPORATES
Emerging Corporate businesses start to become increasingly valuable as earnings grow and earnings multiples increase. The business owner’s wealth becomes highly concentrated and dependent on this single business entity.
To fully maximise the value of the business, the owner needs to commence the process of delegating control and responsibility to unit managers. The ability to make this transition is more difficult than most business owners appreciate and it often leads to the phenomenon known as the “Founders Trap”.
This is an unhealthy mutual dependency, meaning the business is unable to function without the owner, induced in part by the owner's struggle to successfully let go of the day to day control of the business. This is also combined with a lack of appropriate systems, processes and controls.
A business caught in the “Founders Trap” ultimately suffers destruction in business value. STRATOSFEAR seeks to eliminate issues that destroy value ……. because greatness is difficult to achieve on your own.
PROFILE
REVENUE
$15- $100m
EMPLOYEES
35 - 150
Organisational Challenges
- Increasing business complexity – The business owner often feels that the business controls them rather than them controlling it.
- There is often a lack of clear reporting lines, as none were established as the business has grown and evolved – everyone has a role but job grading’s, position descriptions and performance reviews may not be clear and often have not been established.
- The lack of clear organisational hierarchy means that meetings and communications are unstructured – Decision bottlenecks evolve and staff can become frustrated.
- Client segmentation is generally unstructured and unsophisticated.
- Divisional reporting and overhead costs allocation makes assessing divisional profitability and accountability a challenging and complex exercise.
- The business struggles with the transition from a “Tax Minimisation” focus to one of “Enterprise Value Maximisation”.
- This change in purpose entails considering and shifting to a new set of core values to support a different vision. The strategic goals, objectives and tasks shift more to appreciating the business as an investment and business planning is adjusted accordingly.
- The business may have achieved "Large Proprietary" status, meaning that the annual financial statements will be subject to a statutory audit. The accounting systems typically therefore require a greater degree of sophistication.
- Financing arrangements become more complex as the size and exposure of Bank facilities increase – mistakes and missteps can prove to be terminal.
- Acquisitions and other corporate activity becomes a realistic option but the organisation has little or no experience with such matters.
- Business owner’s attention begins to focus on a sale or exit at value.
STRATOSFEAR Service Solutions
The service solutions for Emerging Corporates include, but are not limited to:
- Board of Advice – Regular meetings to review and assess business performance and KPI’s.
- Three-Way Financial Forecasts (Profit & Loss, Balance Sheet & Cashflows)
- Business Modelling with detailed ratio and benchmark analysis.
- Working Capital and Balance Sheet analysis.
- Job Costing and Pricing Analysis.
- Financial Literacy Training Programs.
- Client Tiering, Segmentation and Product and Service diversification.
- Business Development and Pipeline Management.
- Human Capital Optimisation – Organisational Charts, Job Grading’s, Position Descriptions, Performance Reviews.
- Enterprise value assessment including the identification of constraints holding back planned exit strategies and timelines.
- Enterprise-wide Risk Management addressing corporate structural issues such as over-expansion and trading (under capitalisation).
- Conflict resolution, dispute arbitration and negotiation strategies.
- Investment Banking and Corporate Finance – Acquisitions, Divestments, Management Buy-Outs, Management Buy-Ins, Capital Raising.
- Systems review to identify areas for automation and improved efficiency.
CASE STUDY
A business owner contacted us to enhance the strategic direction of their business. The business was well-established with a long history, but experienced marginal profitability and had no core strategic advantage in the industry within which it operated. A plan was established to acquire a distressed business which controlled a key strategic asset.
$15M - $50M TURNOVER
GENERAL INDUSTRIAL
STRATOSFEAR negotiated the acquisition price and terms and developed an innovative funding structure to finance it. We also co-ordinated and project managed all the legal and accounting due diligence on behalf of the client. The businesses were consolidated on one site. Duplicated overheads were eliminated and surplus assets sold off to pay down debt.
STRATOSFEAR hired in a high quality accounting team to improve financial reporting. Other key functions such as HR and Marketing were contracted in and project managed by STRATOSFEAR to accelerate the turnaround, without bloating the business with overheads.
A series of business improvement strategies were initiated to enhance financial performance. Policies and procedures were put in place to improve cash flow while reducing risk. The business was soon in a position to capitalise on a series of additional corporate finance and acquisition opportunities, also project managed by STRATOSFEAR.
THE STRATEGY AND OUTCOMES
This business was transformed from a marginal operator to a strong, profitable, well diversified key player in its industry sector. The business owner always had a terrific blue sky strategic thought process but lacked the capacity to execute some of those ideas. STRATOSFEAR temporarily augmented the management team, allowing significant value to be unlocked, realised and created.
This transaction was the origin of one of our tag lines…When ambition meets capability, special things happen. Businesses often talk about Blue Sky vision as though it’s a fantasy. We need to constantly remind ourselves that big picture thinking realisation is achievable, when you have the skills and resources to assist you to execute on them.
CREATE ASPIRATION
STRATOSFEAR harnesses the knowledge and experience of our staff in order to help clients transition from each of the various stages in their Corporate Lifecycle evolution. If clients conquer the transition points in the business lifecycle, they often go on to achieve something truly special.
This is what makes STRATOSFEAR one of a kind. Very few advisory firms can successfully help businesses grow to become large corporates as STRATOSFEAR does. If you have the desire to become an aspirational business, we want to hear from you.