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CEO Advisor® Newsletter
March 2017

Growth Strategies to Maximize Profits in 2017

CEOs and business owners of small and mid-size companies must plan for the growth of their businesses to increase sales and profits and build value. There are strategies that companies use for implementing a growth plan. The strategy a company uses to expand its business is largely contingent upon its size, industry, financial situation, the competition and specific goals of the CEO, as well as other factors. The most common growth strategies in business include A) Market Penetration, B) Market Expansion, C) Product Expansion, D) Diversification and E) Acquisition. CEO Advisor, Inc. works directly with CEOs on creating and implementing the proper growth strategy for each of its clients.


Market Penetration
One growth strategy in business is market penetration. A small or mid-size business uses a Market Penetration strategy when it decides to market existing products and services within the same market or industry. The only way to grow using existing products and markets is to increase market share. Market share is the percent of unit and dollar sales a company holds within a certain market vs. all other competitors. Gaining market share requires a strong, well-defined sales strategy, and CEO Advisor, Inc. specializes in formulating and implementing sales strategies for small and mid-size businesses.


Market Expansion

A Market Expansion growth strategy involves selling current products and services in new markets. There are several reasons why companies consider a Market Expansion strategy. First, the competition may be such that there is little room for growth within the current market. If a business does not find new markets for its products, it cannot grow or increase sales or profits - in fact, profits will decline over time. Additionally, a Market Expansion strategy is needed when a company serves small, niche markets or the growth of these markets stagnate. A small or mid-size business may also use a market expansion strategy if it finds new uses for its product and services.


Product Expansion
A business may also grow by expanding its products or services or by adding new features to increase its sales and profits. When small or mid-size companies employ a Product Expansion strategy they increase products or services, while continuing to sell within the existing market. A Product Expansion growth strategy often works well when technology is rapidly changing. A small or mid-size business may also be forced to add new products as older ones become obsolete.


Diversification
Growth strategies in business also include Diversification, where a small or mid-size company will sell new products to new markets. This type of strategy can be very risky and companies will need to plan carefully when using a Diversification growth strategy. Market research is essential because a company will need to determine if customers in the new market will potentially want, need and purchase the new products at profitable pricing and at sustainable and forecastable volumes.


Acquisition
The above strategies focus on organic growth, and most CEOs and business owners of small and mid-size companies focus solely on this strategy. Growth strategies in business can also include mergers and acquisitions. With Acquisitions, a company purchases another company, or purchases the assets of a company without taking on the liabilities to expand and grow. A small or mid-size business may also use this type of strategy to expand its product line, enter new markets and gain expertise and intellectual property.


An Acquisition growth strategy can be risky, but not as risky as a Diversification strategy. One reason is that the products and markets are already established with an acquisition. A company must know exactly what it wants to achieve when using an Acquisition strategy, mainly because of the time and investment required to implement it.


CEO Advisor, Inc. specializes in advising and implementing growth strategies to grow small and mid-size businesses to the next level. Contact Mark by email at MHartsell@CEOAdvisor.com or visit us at www.CEOAdvisor.com for more information.


What Every CEO Needs to Know About Mergers and Acquisitions

CEO Advisor, Inc. has decades of experience in mergers and acquisitions (M&A). The following are some need to know factors about valuation and M&A.


EBITDA Multiples Drive Acquisition Deal Prices
Most acquisition deals are valued off of financial metrics and completed deal comparables. EBITDA, or Earnings Before Interest, Taxes, Depreciation and Amortization, is the key metric for applying a multiple to derive the value of a company. Corporate mergers and acquisitions (M&A) departments (strategic buyers) and Private Equity firms (financial buyers) value deals based on EBITDA multiples. The EBITDA multiple is affected by the company's industry, size of the market, revenue growth rate, recurring revenue, gross profit margin, management team, intellectual property, EBITDA, EBITDA growth rate and other factors.


You Have to Stay On
M&A isn't a one-time cash-out, at least not anymore. Most acquisition deals have a 2-3 year retention of the owner(s) or CEO, seller notes and potentially a 2-3 year earn-out. Assume if you get acquired, you're committing to a minimum of 24 months with the acquiring company in a specific role. This is critical to getting a transaction done, and you should show a world of enthusiasm to help the buyer grow the combined business after closing the deal.


Acquiring Companies Don't Buy Low or No-Growth Companies
A ten year old company that is growing 10% per year is of little or no interest to strategic buyers. A financial buyer, such as a Private Equity firm, may be interested if a strong fit, but at a depressed valuation. It is critical to fix your deficiencies and excel in all aspects of your business to optimize your value and attract buyers. CEO Advisor, Inc. works with CEOs to accelerate growth, as well as, create an exit strategy and provide M&A advisory services to facilitate the entire sale process.


Companies Don't Buy Startups or Small Companies
There are 1,000 companies that Apple, General Electric, Microsoft, Google, Salesforce or Facebook could buy and all could make strategic sense. But that's not how M&A deals happen. It's when a CEO sees a strategic gap, or a SVP sees a gap in what he/she can get done in the next 12-18 months - and fills that gap with an acquisition, right or wrong. In the end, corporate M&A departments have limited time and a very specific M&A strategy.


Smaller companies clearly enter the radar screens when they approach $10 million in sales. Your goal is to reach $10 million in sales in a profitable manner as soon as possible through organic growth or acquiring a company. The great majority of the time M&A deals actually happen when a CEO, president or business owner has an experienced team of advisors (M&A advisor like CEO Advisor, Inc., corporate/transaction attorney and tax advisor) behind him/her working extremely hard for 6+ months to seek out a buyer and get a transaction to closing.


Knowing the "Value Drivers" is Critical
Once a Letter of Intent (LOI) is signed, the acquirer will spend a substantial amount of due diligence effort to identify the sources of value (Revenues, Gross Profit, Gross Profit Margin, Quality Customers on Contracts, Recurring Revenue, Technology and other Intellectual Properties, Management and Personnel, Brand, EBITDA, EBITDA Growth) from the deal. It is essential for you to maximize these value drivers and present them to potential acquirers clearly and distinctly.


CEO Advisor, Inc. provides mergers and acquisitions advisory services to CEOs, presidents and business owners of small and mid-size companies. Contact Mark Hartsell, MBA, CEO of CEO Advisor, Inc. at (949) 629-2520, by email at mhartsell@CEOAdvisor.com or visit us at www.CEOAdvisor.com for more information.

Testimonial  


"As a President of a mid-size technology company, I have been very pleased with the services provided by CEO Advisor®. He contributed in many areas, but identified marketing and sales as our primary need. His guidance and contributions have been invaluable in establishing and maintaining a meaningful marketing and sales program for the company. He is a knowledgeable business advisor and a pleasure to work with."
CEO/President, Engineering Services/Manufacturing Company

"Mark Hartsell and CEO Advisor, Inc. provide a unique advisory service for CEOs. He not only tackles high level strategic issues to assist CEOs navigate through challenging times, but Mark also gets very involved in actually addressing important issues head-on by performing the work to achieve tangible results.


Whether it is growing a business to the next level, turning a distressed company around or preparing a company for an exit, Mark's firm, CEO Advisor, Inc, provides a broad range of services and Mark is there for the CEO every step of the way."


Partner, Haynes & Boone, LLP


"Mark Hartsell and CEO Advisor, Inc. provide a unique advisory service for CEOs. He not only tackles high level strategic issues to assist CEOs navigate through challenging times, but Mark also gets very involved in actually addressing important issues head-on by performing the work to achieve tangible results.


Whether it is growing a business to the next level, turning a distressed company around or preparing a company for an exit, Mark's firm, CEO Advisor, Inc, provides a broad range of services and Mark is there for the CEO every step of the way."

 


Partner

Haynes & Boone, LLP

Words of Wisdom


"You've got to say, 'I think that if I keep working at this and want it badly enough I can have it.' It's called perseverance."


Lee Iacocca



"Yesterday does not equal tomorrow. Forget the past and move towards your goals."

Tony Robbins
Motivational Speaker

"Yesterday does not equal tomorrow. Forget the past and move towards your goals."
Tony Robbins
Motivational Speaker
"Yesterday does not equal tomorrow. Forget the past and move towards your goals."
Tony Robbins
Motivational Speaker



Prime Minister of the U.K.