These 10 Peter Drucker Quotes May Change Your World

Jeff Shore

My first college business professor was a fanatical Peter Drucker devotee.
He launched our course with a dissection of Drucker’s The Effective Executive and concluded with a thorough reading of The Practice of Management.

Through my professor's tireless evangelism, I developed a keen appetite for the timeless wisdom of this prescient thought leader.

Young entrepreneurs unfamiliar with Drucker would do well to study his insightful commentary on the world of "management." Millennials mired inside a traditional corporate environment and people living life inside lean startups will find his thinking particularly spot on.

Even after all these years, 10 Peter Drucker quotes still bounce around in my head constantly:

1. “Doing the right thing is more important than doing the thing right.”
2. “If you want something new, you have to stop doing something old.”
3. “There is nothing quite so useless as doing with great efficiency something that should not be done at all.”
4. “What gets measured gets improved.”
5. “Results are gained by exploiting opportunities, not by solving problems.”
6. “So much of what we call management consists of making it difficult for people to work.”
7. “People who don't take risks generally make about two big mistakes a year. People who do take risks generally make about two big mistakes a year.”
8. “Meetings are by definition a concession to a deficient organization. For one either meets or one works. One cannot do both at the same time.”
9. “Long-range planning does not deal with the future decisions, but with the future of present decisions.”
10. "Management is doing things right. Leadership is doing the right things"

My cynical side (and my short attention span!) feels especially drawn to number eight on that list.

But the quotes that really excite and ignite my entrepreneurial imagination are numbers two and five.

Which quote resonates most deeply with you? Most importantly, which of Drucker's words will change your world?

Reaching Goals

10 Mistakes You're Making in Building a Sales Team

Sales are the lifeblood of any business. Beating the plan yields optimism. Missing the number could mean a scramble for survival. Without sales, your business literally has nothing.

For this reason, I want sales to be scalable and predictable for our companies. And yet, “art form” is often a phrase used to describe sales. Art is neither scalable, nor predictable. Science is. When it comes to adding science to my sales team, I turn to my friend and advisor Mark Roberge, sales scientist, Chief Revenue Officer at HubSpot, and author of the new book, The Sales Acceleration Formula: Using Data, Technology, and Inbound Selling to Go from $0 to $100M.

Here are the ten mistakes Mark sees many businesses make when scaling sales:

Mistake #1: Hiring salespeople with your gut

Hiring rock star sales people is the most important aspect to sales success. Yet, so many organizations “wing” the entire hiring process. Every sales context is different and, thus, every company has a different ideal hiring profile. Appreciate the uniqueness of your sales context, establish a theory of the hiring criteria that will work for you, and be disciplined about scoring every candidate against that criteria. As you bring on salespeople, this process enables you to learn from your mistakes, iterate, and hone in on the perfect hiring profile.

Mistake #2: Under-utilizing the sales compensation plan

The sales compensation plan is the most under-appreciated tool in the CEO’s toolkit. In thinking back to the major strategic re-directions we navigated at HubSpot, many of them were instigated by aligning the sales compensation plan with the desired strategic change. Whether looking to enter a new industry, gain market share with a particular product line, or expand into a new geography, the sales compensation plan will be the most effective driver of change.

Mistake #3: Mis-aligning sales and marketing

Traditionally, sales and marketing are two groups that have not gotten along. Marketing perceives sales as a bunch of over-paid spoiled brats. Sales feels marketing sits around doing arts and crafts all day. In an age with the majority of buying journey’s starting online, this dysfunctional relationship is the kiss of death for a company.

A properly aligned sales and marketing team is a pre-requisite to a healthy business. Quantify the deliverables that marketing and sales should commit to one another. At HubSpot, we call this agreement the Sales and Marketing Service Level Agreement, or SMarketing SLA. For example, marketing will deliver 1,500 leads per quarter that are contacts from Fortune 5000 companies within the retail, manufacturing, or technology industries. Sales will call these leads within 2 hours and convert 20% of them into sales pipeline within 30 days. Measure the SLA progress and share the report daily with the entire team. You are now empowered to manage your sales and marketing funnel every day!

Mistake #4: Not planning far enough in advance

It takes 2 months to hire a new sales person, 3 months to ramp them to full productivity, and a 4 month sales cycle to close a deal. This situation is not uncommon for a business. If anything, these timeframes may be on the aggressive side. Yet, even with these assumptions, it takes 9 months from the decision to hire a new salesperson to the time when they are fully productive. If you are a sales driven organization, your 2015 results are largely baked with the team on board in Q1. Most of the hiring you are doing now is driving your 2016 results. Plan ahead.

Mistake #5: Making forecasting, rather than coaching, the sales manager’s primary focus

Many sales managers spend the majority of their time managing the sales forecast and pipeline. This is a lost opportunity. Managers should spend the majority of their time coaching and developing their sales people. Effective sales coaching increases sales productivity. The best coaches diagnose the one or two skills that will make the biggest difference in a salesperson’s performance and customize a coaching plan to that skill. They use metrics to conduct the diagnosis. I call this process “metrics-driven sales coaching”.

Mistake #6: Motivating through fear rather than metrics

I always ask candidates why they want to move on from their current employer. Many of them complain about the fear-based, micro-management of their current environment. This type of militant management style does not motivate sales people, especially today’s millennial generation. Instead, automate a daily dashboard stack ranking the team on total dials, total connects, total discovery calls, total demos, total sales, etc. Send the dashboard out every day to the entire sales and marketing team and include the CEO. As a result, salespeople will be able to understand where they are gravitating from the “success blue-print” and self-diagnosis the areas in the funnel where they need work. At the end of the day, the salesperson, sales manager, and the company are on the same team. Enabling everyone with the daily metrics will provide the motivation and discipline you desire.

Mistake #7: Letting new salespeople shadow top performers

“Welcome to our company Bob. Do you remember our top salesperson, Sue? For your training, you are going to shadow her for two months.”

The shadowing approach to sales training is neither scalable nor predictable. In my experience, top salespeople are at the top for different reasons. They all bring a unique “super-power” to the table and lean into it heavily. A ride-along sales training strategy may dissuade sales people from leaning into their super-power. It may also encourage them to pick up bad habits from their peers. Instead, create a sales process. Certify salespeople by quantifying their aptitude with each stage of the sales process. Provide enough detail in the sales process to guide the salesperson but don’t make it too constraining that the salesperson cannot apply their “super-power”.

Mistake #8: Buying technology for management rather than the front-line salespeople

The majority of sales technology purchased over the last few decades has been purchased for the sales leader to conduct pipeline reviews and manage forecasts. The end result? The front-line salespeople do not use the software. Data integrity suffers and the original utility of the purchase is never realized.

In the last year, we have seen an explosion in sales technology that actually benefits the salesperson. It helps the salesperson sell faster by removing admin tasks and streamlines the processes they conduct dozens of times per day. It helps sales people sell better by illustrating the full buyer context to the salesperson at all times. Furthermore, technology that benefits salespeople is the best path toward capturing the data that sales leaders need to run the business. Try Hubspot's free product www.getsidekick.com as a starting point for your organization.

Mistake #9: Not experimenting enough

Every sales context is unique. Who do you sell your product to? How complicated is your product? How expensive is it? Is your product sold direct or through partners? Do most sales originate from inbound leads or outbound calls? Is it 1995 or 2005 or 2015? Varying answers to these questions call for varying approaches to the sale. Establish a baseline funnel. Form some theories on how the funnel can be improved. Devise and execute experiments. Iterate and improve.

Mistake #10: Relying on outdated demand generation techniques

When was the last time you bought something from a cold caller? How about from a piece of direct mail or unsolicited email?

Today’s buyer is empowered by the Internet. They are no longer receptive to outbound calls, emails, or advertising. In fact, buyers invest in technologies to keep these messages out of their lives. Today’s buyer begins their journey online, with a search in Google or question in social media. Yet, organizations continue to poor the majority of their sales and marketing budgets into outbound demand generation. Diversify your efforts with an inbound strategy.

Hire a journalist and team them up with the thought leaders and domain experts at your company. Have the journalist produce an eBook, a handful of blog articles, and a few dozen social media messages every month. Align the content with the questions your buyers have at the start of their journey. Help buyers find you.

Written by

Dave Kerpen

These skills will give you a leg up on your competitors

Rick Spence 

Getty ImagesDisorganized? It's a trait many entrepreneurs share.

 Successful entrepreneurs share many common traits, but they also share the absence of certain traits. And the latter spells opportunity for those who want to get ahead of the competition.

That’s because if you knew that you and your competitors were equally lacking at certain basic skills, you could consciously work to upgrade or delegate those abilities to leave the competition well behind.

Personal-assessment expert Bill J. Bonnstetter  of Arizona-based TTI Performance Systems Ltd. has been studying entrepreneurs for years. In a recent article for the HBR Blog Network run by the Harvard Business Review, Bonnstetter identified four common traits serial entrepreneurs lack. See if you recognize any of these deficiencies in yourself:

Empathy Entrepreneurs often build products and companies to help people meet needs or deal with problems, but their commitment is on an intellectual or market basis — not on a personal level, Bonnstetter says.  “They do this in hopes of a return on investment,” not to make friends or improve their personal relationships. But empathy is a key attribute for effective leaders and coaches. If your business depends on teamwork and individual effort, consider how a little more personal warmth and caring might help you reach your goals faster.

Self-management “Entrepreneurial-minded people are not proficient in managing themselves and their time,” Bonnstetter notes. “Often they need assistance managing everyday tasks and should hire or delegate them to someone who has mastered this skill.”
 

Planning and organizing It’s not that entrepreneurs are more impulsive than anyone else; they are so task-oriented that if they ever spent time planning every task or meeting on their to-do list, they would never get anything done. Once again, consider downloading this job on a dependable aide. Hiring someone to manage your calendar, organize meetings, keep you on schedule and de-clutter your office can help you overcome these weaknesses and achieve greater efficiency, Bonnstetter says. 

 

Analytical problem-solving Entrepreneurs believe in action and fast decisions. “By nature they do not have time to collect and analyze the data,” Bonnstetter says. “They see numbers as getting in their way, and they should — everyone who has told them an idea wouldn’t pan out has used data and logic to illustrate that point.” He suggests entrepreneurs focus on creating and promoting their vision and mission, and hire people to create an executable strategy and follow through on the details.
Bonnstetter’s firms came to these conclusions by comparing the attributes of a group of serial entrepreneurs to a control group of 17,000 people. The group was assessed on its mastery of 23 important job-related skills.

Of course, Bonnstetter notes that the serial entrepreneurs in his study display several key strengths, too. In a previous article for HBR Blog Network, he noted that the entrepreneurs scored well above average in four key skills: persuasion; leadership; personal accountability; and goal orientation. These skills obviously represent key advantages to entrepreneurial types, so you might want to work on upgrading these skills as well.

Anything your competitors can do, you need to do better.

Copy these 10 things one startup founder is doing right

Rick Spence 

 

Wonders never cease. Last week I met for coffee with a startup entrepreneur who’s doing a lot of things right. Maybe it’s because he’s not fresh out of school; in his mid-30s, he has held operating positions at companies big and small, so he’s seen what works and what doesn’t. Or maybe it’s just because he has good instincts and laser focus.

 

I don’t intend to jinx his promising Internet startup by setting him up as some kind of role model — so let’s just call him Bruce. Here are 10 things I think Bruce is doing right, and that other entrepreneurs can learn from. After all, you may have to compete with him one day.

Bruce bootstrapped his business. He created a company that doesn’t need venture capital or angel funding. Too many startups waste too much time trying to attract picky, demanding venture capitalists. Bruce put his energy into getting his low-cost business model into local markets throughout North America. With break-even point already in sight, Bruce seems to have avoided the high cost of selling equity early. If he needs growth capital later, his early success will help him raise more money that most startups do, with less dilution.

He has a plan. Bruce is tackling one under-served vertical market with a unique solution that links buyers and sellers more efficiently. Although he started off with a laundry list of niche markets he would like to disrupt, he is content for now to challenge just one market. If business picks up, he is quite prepared to tackle another market or two — next year.

He knows his business isn’t perfect. He deliberately launched without knowing everything he needed to know, and without working out all the bugs in the system. He figures you learn the most when you’re battling it out in the trenches, so why over-think your startup? Let customers point out the flaws that matter to them. “I’d rather have a pretty good business now,” he says, “than a perfect business that still isn’t ready for launch.”

He understands the paradoxical role of innovative upstarts. At one point in our conversation, Bruce referred to the challenge of “disrupting the industry and helping businesses get stronger.” Innovative entrepreneurs create value for some customers and disadvantage others. If Bruce’s business is successful, the winners will be those market players who adapt best to his model and continually improve their offerings to win over the new prospects he brings their way. As usual in this Darwinian world, those who prefer the way things used to be will find themselves struggling even more.

“I told you so” isn’t in his vocabulary. Like most startups, Bruce met rejection often when he asked target companies to join his referral network. Some of those companies, having seen his initial success, are now knocking on his door to sign up. He welcomes them gratefully, and does his best to help all succeed.

He has a bold, confident revenue model. Bruce’s company takes a commission on every deal that customers and suppliers make on his network. When he told me his pricing policy, I was shocked. He knows he’s bringing his best suppliers new business they wouldn’t have seen otherwise, so he’s not afraid to charge for that, especially on big deals. He knows his solution is much less expensive than hiring sales reps to scrounge for new business. In an era when many entrepreneurs underprice their services, Bruce understands the value he’s creating and isn’t shy about claiming his piece of it.

He’s surrounding his partners with value. Not only does Bruce create new business for his system partners, he also charges customers upfront — taking the responsibility for collections away from his supplier network. It’s just another way Bruce makes life easier for his partners.

He’s in touch with his customers. When working in the evening, or even watching TV, Bruce monitors his site and often jumps in to answer customers’ requests for help. They don’t usually know he’s the boss (although sometimes he says, “Let me escalate your concern to the CEO”). Getting real-time customer feedback helps him identify what’s working well and spot instant opportunities for improvement.

He reaches out to potential advisors and mentors. To stay in touch with fresh perspectives and new ideas, Bruce regularly contacts other technology entrepreneurs for feedback and advice. You can’t build a great business in a vacuum.

He thinks ahead. As we discussed his business’s future expansion into other market verticals, I learned Bruce has already registered an armada of dot-com URLs to cover potential future services. He seemed to have covered all the bases. But when I suggested a market he hadn’t considered, he immediately thought up a cool name to fit his brand, and made a note to buy the URL.

Thoughtful entrepreneurs know how to tell their story. But they also know when to listen.

The Value of Succession Planning

"The value of business succession planning cannot be underestimated given that about one trillion dollars of business assets could be transferred to the next generation in the next decade." [1]

In November 2012, the CFIB released the results of a study on business succession planning that was conducted over the period from March 9 to May 4, 2011.  Over 8,300 Canadian business owners responded to the study. Some of the highlights are as follows:

1. Business succession planning is a long-term process and not a one-time event requiring high investment on behalf of the business owner.
   
2. 51% of business owners do not have a business succession plan (formal or informal).
   
3. 51% of business owners started their business from scratch (as opposed to acquiring the business). As a result, many may not see the value of succession planning since they did not take part in the past.
   
4. Close to 50% of business owners plan on exiting their business in the next five years with more than 75% planning to exit within the next 10 years.
   
5. Nearly 50% of business owners plan on selling the business to a third party with over 33% planning to sell or transfer the business to a family member.
   
6. The top 4 barriers to completing a business succession plan include:
a)  Finding a buyer/suitable successor;
b)  Valuing the business;
c)  Financing for the successor; and
d)  The business being too heavily dependent on the owner's active involvement.

7. The top 4 reasons for not having a business succession plan include:
a)  Too early to plan;
b)  No time to deal with the issue;
c)  Can't find adequate advice/tools to start; and
d)  It is too complex.

Being able to measure the value of the business is a critical aspect of the business succession plan.  Any disconnect between the expected value of the business and the actual valuation will make exiting the business extremely difficult.

In conclusion, the CFIB advises that a well designed succession plan will help ensure the future stability and value of the business and ultimately a smooth transition for the business and business owner.

For those business owners that recognize the importance of beginning the exit planning process early, especially in light of the expected increase in the supply of businesses that will be for sale over the coming decade, but have no time to deal with the issue, can't find adequate advice and think it is too complex, let the trained professionals at VSP assist you through the process (www.vspltd.ca).

  
Posted by Jason Kwiatkowski 

__________________________

1.  Canadian Federation of Independent Businesses (CFIB) Research – Survey Results on Small Business Succession Planning, November 2012. 
http://www.cfib-fcei.ca/cfib-documents/rr3277.pdf

Management Is (Still) Not Leadership

A few weeks ago, the BBC asked me to come in for a radio interview. They told me they wanted to talk about effective leadership — China had just elevated Xi Jinping to the role of Communist Party leader; General David Petraeus had stepped down from his post at the CIA a few days earlier; the BBC itself was wading through a leadership scandal of its own — but the conversation quickly veered, as these things often do, into a discussion about how individuals can keep large, complex, unwieldy organizations operating reliably and efficiently.

That's not leadership, I explained. That's management — and the two are radically different.
In more than four decades of studying businesses and consulting to organizations on how to implement new strategies, I can't tell you how many times I've heard people use the words "leadership" and "management" synonymously, and it drives me crazy every time. 

The interview reminded me once again that the confusion around these two terms is massive, and that misunderstanding gets in the way of any reasonable discussion about how to build a company, position it for success and win in the twenty-first century. The mistakes people make on the issue are threefold:

Mistake #1: People use the terms "management" and "leadership" interchangeably. This shows that they don't see the crucial difference between the two and the vital functions that each role plays.

Mistake #2: People use the term "leadership" to refer to the people at the very top of hierarchies. They then call the people in the layers below them in the organization "management." And then all the rest are workers, specialists, and individual contributors. This is also a mistake and very misleading.

Mistake #3: People often think of "leadership" in terms of personality characteristics, usually as something they call charisma. Since few people have great charisma, this leads logically to the conclusion that few people can provide leadership, which gets us into increasing trouble.

In fact, management is a set of well-known processes, like planning, budgeting, structuring jobs, staffing jobs, measuring performance and problem-solving, which help an organization to predictably do what it knows how to do well. Management helps you to produce products and services as you have promised, of consistent quality, on budget, day after day, week after week. In organizations of any size and complexity, this is an enormously difficult task. We constantly underestimate how complex this task really is, especially if we are not in senior management jobs. So, management is crucial — but it's not leadership.

Leadership is entirely different. It is associated with taking an organization into the future, finding opportunities that are coming at it faster and faster and successfully exploiting those opportunities. Leadership is about vision, about people buying in, about empowerment and, most of all, about producing useful change. Leadership is not about attributes, it's about behavior. And in an ever-faster-moving world, leadership is increasingly needed from more and more people, no matter where they are in a hierarchy. The notion that a few extraordinary people at the top can provide all the leadership needed today is ridiculous, and it's a recipe for failure.

Some people still argue that we must replace management with leadership. This is obviously not so: they serve different, yet essential, functions. We need superb management. And we need more superb leadership. We need to be able to make our complex organizations reliable and efficient. We need them to jump into the future — the right future — at an accelerated pace, no matter the size of the changes required to make that happen.

There are very, very few organizations today that have sufficient leadership. Until we face this issue, understanding exactly what the problem is, we're never going to solve it. Unless we recognize that we're not talking about management when we speak of leadership, all we will try to do when we do need more leadership is work harder to manage. At a certain point, we end up with over-managed and under-led organizations, which are increasingly vulnerable in a fast-moving world.

 

John Kotter

Dr. John P. Kotter is the Konosuke Matsushita Professor of Leadership, Emeritus at Harvard Business School and the Chief Innovation Officer at Kotter International, a firm that helps leaders accelerate strategy implementation in their organizations.

You Need to Grow Your Business… So What’s Stopping You?

Posted by Kathbern Associates. 

Time, cash and people. That’s it.

Most companies want to grow, and to grow profitably, but they are often hampered by a few critical weaknesses in these three key areas and the lack of a clear plan to grow over the next 3 years. This is very typical, particularly for more entrepreneurial organizations where owners find it difficult to look around corners and peer into the future.

So what does it take to grow?

Time
Time is the great equalizer. No matter who we are, each of us has only 7 x 24 hours each week. We can waste our time or be efficient in its use, but the amount available is constant.

With the right strategy, most businesses will grow at some rate (as the population increases for example) but time alone is not a means of distinguishing how fast one business can grow versus the next.

Cash
Growing companies eat cash. As sales expand – so do accounts receivable and inventories. This “working capital” need is often misunderstood and underestimated by business owners and can really limit their ability to grow. If the rate of growth is modest, then the cash generated by the company may be sufficient to meet these increasing working capital needs, but many owners don’t want to have their growth limited to the rate at which the company can self-finance.

The problem is usually solved by increasing a bank line of credit or by the owner (or other investors) putting more cash into the business, to the extent that they can.

People
Having the right people on board is really where any business can exert a strategic advantage over its competitors. With the right people, the right things get done and get done effectively. With the wrong people, even if their activities are effective, the goals may be wrong.

It has often been said that investors would prefer to invest in a great management team that has a mediocre product or service, than to invest in a mediocre management team with a great product or service. The great team can be relied upon to make the best of a weak product or service, or migrate away to one that is superior, whereas the mediocre management team will likely bungle their stewardship of the great product or service that they have.

Getting the right people on board (or “on the bus” as we like to say) doesn’t happen by accident. It requires a dedicated determination on behalf of owners to search widely and with great patience to find “the best” members for their teams and then to create an environment in which “the best” will feel that they can make a worthwhile contribution, be recognized for their achievements and receive above average rewards if they are successful.

Take Action
If you are serious about growing your business, follow these steps:

1. Identify and address any immediate barriers to growth or threats to survival.
2. Develop a clear vision of the future, including a workable 3 year growth plan along with the means to achieve it.
3. Develop a basic organization structure that will support the 3 year plan.

Without this kind of planning you may find yourself hampered by the day-to-day focus on driving revenue and controlling costs without proper direction.

Posted by Kathbern Associates. 

If you would like guidance to move forward on this, Kathbern’s Accelerator Program has been designed address this critical need. Contact us at accelerator@kathbern.com to schedule a free 90 Minute Starter Session which will help you to see your goals more clearly and to identify the major issues that may be preventing you from reaching them.

Six Tips for Forcing Yourself to Tackle a Dreaded Task

141

 

It’s a Secret of Adulthood: Happiness doesn’t always make me feel happy. Often, I know I’d be happier if I do something I really don’t feel like doing. Making that phone call. Dealing with tech support. Writing that email.

Those dreaded tasks hang over my head, though; they make me feel drained and uneasy. I’ve learned that I’m much happier, in the long run, if I try to tackle them as soon as possible, rather than allowing myself to push them off.

Here are some strategies I use:

1. Do it first thing in the morning. If you’re dreading doing something, you’re going to be able to think of more creative excuses as the day goes along. One of my Twelve Commandments is “Do it now.” No delay is the best way.

2. If you find yourself putting off a task that you try to do several times a week, do it EVERY day. When I was planning my blog, I envisioned posting two or three times a week. Then a blogging friend convinced me that no, I should post every day. As counter-intuitive as it sounds, I’ve found that it’s easier to do it every day (well, except Sundays) than fewer times each week. There’s no dithering, there’s no juggling. I know I have to post, so I do. If you’re finding it hard to go for a walk four times a week, try going every day.

3. Have someone keep you company. Studies show that we enjoy practically every activity more when we’re with other people. Having a friend along can be a distraction, a source of reassurance, or just moral support.

4. Make preparations, assemble the proper tools. Clean off your desk, get the phone number, find the file. I often find that when I’m dreading a task, it helps me to feel prepared. There’s a wonderful term that chefs use: mis-en-place, French for “everything in its place.” It describes the preparation done before starting to cook: gathering ingredients and implements, chopping, measuring, etc. Mis-en-place is preparation, but it’s also a state of mind; mis-en-place means you have everything at the ready, with no need to run out to the store or begin a frantic search for a sifter. You’re truly ready to begin to work.

5. Commit. We’ve all heard the advice to write down your goals. This really works, so force yourself to do it. Usually this advice relates to long-term goals, but it works with short-term goals, too. On the top of a piece of paper, write, “By the end of today, I will have _____.” This also gives you the thrill of crossing a task off your list. (See below.)

6. Remind yourself that finishing a dreaded task is tremendously energizing. Studies show that hitting a goal releases chemicals in the brain that give you pleasure. If you’re feeling blue, although the last thing you feel like doing is something you don’t feel like doing, push yourself. You’ll get a big lift from it.

The right way to sell a family business

JACOLINE LOEWEN

The Globe and Mail

Published Thursday, May. 02 2013, 5:00 AM EDT

Family business owners who are thinking about selling their companies and want to tilt the process to their advantage should start planning immediately.

“One reason our family business had a successful succession was because we started the process early,” says Laura McNally, part of the third generation at McNally International Inc., a leading Canadian tunneling and marine contractor.

Ms. McNally says her father and uncle decided to bring in an outside adviser and embrace the creation of a family forum to plan for succession. One of the tools introduced was a “three circle” decision-making model that directed three questions: Is this a decision for the family? Is it for the shareholder? Or is it a challenge for management? Each circle involved different stakeholders, which added complexity to the process, but it worked.

Even though the third-generation family employees were not shareholders, it was decided that it would be sensible to include them in ownership transition discussions because they held important positions in the company. As Ms. McNally’s father and uncle started to step back from day-to-day operations, they needed a plan to do it in an orderly way. Ms. McNally played a key role as change agent working closely with other senior managers.

Many owners underestimate the effort needed to prepare a company for ownership succession and the scrutiny of a buyer. They often think a fresh coat of paint is all it takes or that the business will sell itself. “However, this may not get you the best price or the right buyer,” Ms. McNally says.

Based on first-hand experience, the McNally story shows that a team effort is required to prepare a business for sale. Here are key actions to think about:

The classic chestnut – strategy
Regardless of timing, a business will be more attractive to a buyer if there is a defined strategy. Not only did McNally’s senior management understand the segments of the market that were most attractive, they developed a plan to capitalize on these opportunities and they had a proven track record that demonstrated credibility to buyers.

Figure out what drives profitability
Management realized that as the company grew it needed to focus on its systems and processes and bring them to a higher standard. This required them to extract information from Ms. McNally’s father and uncle and to institutionalize their knowledge into procedures and training that would be in place when they were ready to step away.

Hire your experts early
The shareholders wanted all of their advisers – lawyers, tax planners, family succession and investment bankers – to work as a cohesive team. This required all parties to have an understanding of each other’s roles and required effective communication within the team. The advisers were brought in early and they were given ample time to meet management, assess the go-forward leadership team, and become intimately familiar with the business and where it was headed so they could address the key questions that buyers would no doubt have.

“Selling a business and planning for succession is emotional,” Ms. McNally says. “It creates not only work stress, but family stress as well. That’s when you need to lean on your advisers.”
By 2010, the family forum moved into the final stage. All the preparation by management and advisers provided the family and shareholders with the ability to set realistic expectations regarding value and business fit in the event of a sale.

Ms. McNally and her husband Colin Brown now run a consulting practice called McNally Brown Group, which specializes in preparing family businesses for a sale.

Jacoline Loewen is a director at Crosbie, which focuses on succession advice for family businesses and closely held small to medium-sized enterprises. Crosbie develops customized strategies, particularly in relation to M&A, financing and corporate strategy matters. Ms. Loewen is also the author of Money Magnet: How to Attract Investors to Your Business. You can follow her on Twitter @jacolineloewen.