How To Return To Growth in 2010: A Blueprint For Profitability & Improvement

How to Return to Growth in 2010:
A Blueprint for Revenue Growth, Increased

Profitability, and Operational Improvement
Presented by: John Soter, Principal

ZweigWhite Strategic Advisory Services
Boston Washington, DC Chicago

321 Commonwealth Road 1025 Thomas Jefferson Street IBM Plaza
Suite 101 Suite 105 211 West Wacker, 18th Floor
Wayland, MA 01778 Washington, DC 20007 Chicago, IL 60606
1-508-651-1559 1-202-965-3390 1-239-280-2300
Agenda
1. A framework for business lifecycles
 Why and How companies evolve, grow, or “age”
 Attributes and predictable risks at each stage of growth
1. 2010 Outlook – Trends and markets

2. Business Growth Planning Template
 Revenue? Profitability? Operations?
 Scenario and contingency planning
Visit us at www.zweigwhite.com
Business Growth and Evolution
Business Evolution Model
 6 primary stages
 Not every firm passes through all 6
 Can go forward or backward, get stuck, or die
 Predictive model – attributes, needs, risks,
Prime Stable
Adolescence
Bureaucracy
Go-Go i ng Ag
in
row g
G
Infancy
Courtship Death
Growing vs. Aging
g Ag
in in
ow g
Gr
Balance maintained at Prime

Growing Aging
Improving performance and capability Doing the same things year over year
Success to those who take risks, flexibility Success to those who avoid risks, control
Function > Form Form > Function
Kept for contribution despite personality Kept for personality despite contribution
Cash Poor, sales orientation Cash Rich, profit orientation
Expectations > Results Results > Expectations
Need Consultants Need Insultants
Leader Attributes
 To lead = make good decisions, implement effectively

 4 leader attributes
 P – Producing results
 A – Administrating of the business
 E – Entrepreneuring the future
 I – Integrating the efforts
 Expressed as PAEI, paei, pAeI, P eI, etc
 capital = dominant, lower case = secondary, = absent
Leader Attributes
 P  A
 Focus on What needs to be done  Focus on How – by the book
 Lone ranger, Fire fighter, task at hand  Bureaucrat, compliance & mistakes
 Arrives early, Leaves late  Arrive on time, leave on time
 No meetings, desk is a mess  Loves meetings, neat desk
 “I don’t have time”  “They’re not doing it right”
 E  I
 Focus on Why - New Ideas - if it’s exciting  Focus on Who – Who said what, what does it mean
 Arsonist  Politician
 Arrives & leaves, “Who Knows”  Arrive and leaves when others do
 Meets if has an idea, no desk  Loves meetings, Desk is large conference table
 “They’re not following my priorities”  “Tell me where you want to go”
The Right Blend
 We are a mix, develop & morph over time
 PAEI is very rare, textbook manager
 None are perfect, all are different, pos/neg based on stage need
 Each growth stage needs unique strengths
 Management team needs the right balance
 Solution – work together, find common language
 “Think Yiddish, act British”, mutual respect
Polling Question
 Which styles do you rely on predominantly in your

current position?
P
A
E
I
Business Evolution Stages
g Ag
in Prime in
row Stable g
G PAEI
PAeI
Adolescence
pAEi
Bureaucracy
pA i
Go-Go
PaEi
Infancy
Paei
E P P E paEi Death
Courtship Affair Infant Mortality Founders Trap Peter Pan
paEi
Normal vs. Abnormal “Growing
Pains”
Stage Normal Abnormal
Infancy Cash shortage Chronic negative cash flow

Too much to do Loss of commitment
Go-Go Lack of delegation Founder’s Trap

Lack of focus Unrealistic decisions
Lack of consistency Major crisis
Adolescence Infighting Partner divorce

Leadership crisis Loss of flexibility, Premature “aging”
Not enough trained people Back to Go-Go
Yo-Yo delegation
Prime Not enough trained managers Complacency
Acquisition Considerations
 Acquisitions can fuel growth & replace E
 Make sure M&A growth fits the plan
 Due diligence needs to include manager assessment
 What will combined leaders’ styles look like?
 How to rapidly blend for success
 Need to focus on P for clients
 While combining the A
 Where is the E, and will it remain?
 I is critical to effective integration
 All are necessary for successful integration
Question
Infancy
Go-Go g Ag
w in Prime in
Stable g
ro PAEI
Adolescence G PAeI
Adolescence
Prime pAEi Bureaucracy
Stable pA i
Go-Go
Bureaucracy PaEi
Infancy
Paei
Courtship Death
paEi
2010 Consensus Outlook
2009 & 2010 Revenue Changes
Estimate for firm revenue: 2009 vs. 2008 Estimate for firm revenue in 2010 vs. 2009
Up 10%+ Up 10%+
Down 50%+ Down 10%+
Up 5%-10% Up 5%-10%
Up <5% 6.8%
7.5%
7.5% 19.2% 30.3%
Down <5% 21.9%
5.4%
7.9%
23.3%
9.3%
15.2%
25.8%
Down 5%-10% 19.9%
Down 25%-50%
Down 5%-10%
+/- 5%
Down 10%-25%
Source AIA Work-on-the-Boards Survey, November 2009
Six Trends to Watch in 2010
 Economic Uncertainty
 Unemployment and health care
 ARRA and other government intervention
 Mixed merger and acquisition activity
 Globalization
 Green building
Source: 2010 AEC Industry Outlook
2010 AEC Outlook by Market
Market Segment Outlook Market Segment Outlook
Government/Municipal 4 Brownfields Remediation 2
Health Care 4 Solid/Hazardous Waste 2
Transportation 4 Residential – Single Family 2
Water & Waste Water 4 Residential – Multi Family 4
Education 3 Retail 4
Energy/Power 3 Office 4
Environmental 3 Mixed Use 4
Alternative Energy 2 Amusement / Recreation 4
86% - “2010 economy will not get worse”

52% - “2010 economy will be better” Source: 2010 AEC Industry Outlook
Business Planning for Growth
“A problem well defined is half solved”
How to Compete - 2010
 Deliver highest possible quality & client satisfaction at
the lowest practical cost
 Balance expense management with revenue pursuit
 Position for advantage

 New products & services, delivery capability
 Plan paths to growth

 Markets, partners, M&A
“You can’t change the wind, you can only change the sail”
Keys to Planning for 2010 and
Beyond
1. Build muscle – effectiveness and efficiency
2. Possible & probable scenarios with contingency plans
3. Strengthen and manage tactical implementation
Potential
Current Markets New Markets

New Products New Products
2010 AEC Outlook Business Trends Survey
Products
New Services to existing markets = 76%
Pursue more public work = 72%
Teaming = 67%
New markets = 59% Current Products Current Products
and Markets New Markets
Current Potential
Markets
4 Step Business Growth Planning
Process
1. Accumulate data
2. Deliberate and refine into information
3. Accommodate to generate knowledge
4. Finalize for wisdom
Step 1 – Accumulate
 Establish your baselines honestly & objectively
 What would a buyer think?
 Include gap between you & peer best
 Benchmarks (Growth, Profit, Util, Overhead, DSO)
 and $ potential
 Include client/market study
 Include employee input
Measure Twice, Cut Once

Operating Gap Analysis
Peer group benchmark analysis shows magnitude of potential opportunity
Figures are for illustrative purposes only, based on a $10MM Firm
Target Company Top Gap Annual $
Baseline Quartile* Opportunity
A Revenue Growth (1 yr) -7.3% 2% 9.3% $939,000
B Operating Profit Margin 10.6% 16.6% 6% $605,000
Effective Multiplier 3.48 3.41 -.07 (660,316)

Utilization 51.3% 60.8% 9.5% $538,000
C Overhead rate 210.1% 179.7% 30.4% $883,000
Avg Collection Period (Days 114 82 32 $885,000
of Gross Revenue)
(One time savings)
Marketing Spend (% NSR) 11% 7.4% 3.6% $363,000

D
* Top Quartile from 2009
ZW Financial Performance Survey
KPI Peer Comparison
Revenue Growth
150%
Mkt Spend 100%

Profit
50%
Top Q
T/O 0% Util
Firm
DSO Multiplier
OH
Top Quartile from 2009

ZW Financial Performance Survey
Client Input
 Clients can help, and they will if you ask
 Market study reveals how you are perceived
 Segment customers
 Where are emerging & expansion opportunities
 May not be able to continue with some existing clients
Who are Customers

1. Capability matches customer
need – our bread and butter
2. Customer needs not currently
4 2 1 3 4 satisfied
3. Emerging markets
ID by Needs 4. Not our business
Employee Input
 Involve entire firm, solicit input, gain insights

 Use survey, focus groups, open polling box…
 Communicate purpose to gather contributions
 Craft questions to support assessment
 2 functions
 Generate ideas and get points of view
 Energize employees for new strategy, prepare for participation
Scenario Planning
 Brainstorm probabilities, best case, worst case for drivers
 Economy’s impact on clients
 Emerging markets
 Severe downturn in business, pipeline forecasts
 Key personnel staffing / competency challenges
 Cash Management and credit lines
 Think through and create contingency plans
 Set trigger points for key actions
 Establish calibration cycles within Strategic window
Growth Planning –Phase 1
Stay the
Base Case Course
External Opportunity $
(New Markets + Expand Markets)
Strategic Agenda Delivery Opportunity $ Required Investment $

(New Products + New Services)
Risk Assessment
Operational Improvement $ & Contingencies
(Productivity + Cost Savings)
Net $ Impact
Strategic Direction
Step 2 - Deliberate
 Individual review by team members

 Review market & operational findings
 Follow up as needed for clarification
 Digest and prepare for team discussion
 Refines scenario and contingency plans
Step 3 - Accommodate
 Review Phase 1 findings
 Assess scenario plans
 Risk assessment, success probability, expected impact
 Rank scenarios and prioritize risks
 Outline contingency plans
 Craft direction statement

 Create Strategic Agenda items
 Raise & address individual concerns and P.O.V.
 Reach binding consensus
 And commitment to direction and main agenda items
Step 4 – Finalize The Plan
 Set driver goals for new strategy
 Create implementation WBS, assign key tasks
 Design accountability process
 Tied to compensation
 Design communication and roll out plan
 Create management process
 Key measures, Key check points
 Recognition and recourse plans
Implementation
 Implementation must address tactical means and ends
 Communicate strategy and company driver goals
 Create the strategic performance environment
 “Translate” Expectations, engage vs. impose
 Address Capability gaps & required investments
 Align reward and recognition practices
Customers
Stakeholders Expectations
Vision
Strategic Direction
Tactical Plans
SMART Goals
Capabilities
Process Design
Reward & Recognition Use of Technology
Training
Income & Security Structure
Challenge & Growth Mgmt Process
Participation
Retention
Incentives & Rewards
Business Growth Plan
Components
 Internal & Market Analysis 5 Vision
 Vision and Mission

4
 Driver Goals
Value Potential
 Marketing Plan
 Financial Plan 2
3
 Operational Plan 1
 Key activity accountability Value Delivery
 Communication Plan 1 Assessment:

• Internal opportunities
3 Align the company
• Translate, engage, involve
• Market Opportunities
 Implementation schedule 2 Strategic Direction:
4 Implement
• Consensus on Agenda 5 Achieve Vision
• High level Action plans
Summary
 Where is your firm on Grow – Age cycle?
 Assess leader attributes
 2010 Trends and market forecasts

 Moderate growth prospects, good not great
 Growth and Planning Template

 Benchmark to ID gaps / opportunities to build/refine capabilities
 Create scenarios for economic & market opportunities
• Growth areas, investments, teaming, M&A
 Set Strategic Direction with strong tactical focus
Closing Thoughts
 Start or re-visit planning routines
 Assess your firm’s Growth stage
 How balanced is your team?
 ID & Capture internal opportunities
 Benchmark, grow operational capabilities
 Look ahead to get to next stage
 Markets, services, regions, international, teaming, M&A
 Planning is journey, not event
Submitted Questions
g Ag
in in
o w g
Gr
Contact Information
John Soter
(508) 651-1559 Ext 211
jsoter@zweigwhite.com
Click on the below link to purchase this webinar:

http://www.zweigwhite.com/p-886-how-to-return-to-growth-in-2010-a-blueprint-fo

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How to Return to Growth in 2010:

A Blueprint for Revenue Growth, Increased

Presented by: John Soter, Principal

Boston Washington, DC Chicago

1. 2010 Outlook – Trends and markets

Balance maintained at Prime

Function > Form Form > Function

Cash Poor, sales orientation Cash Rich, profit orientation

Expectations > Results Results > Expectations

Need Consultants Need Insultants

 To lead = make good decisions, implement effectively

 Which styles do you rely on predominantly in your

Infancy Cash shortage Chronic negative cash flow

Go-Go Lack of delegation Founder’s Trap

Adolescence Infighting Partner divorce

Prime Not enough trained managers Complacency

Source AIA Work-on-the-Boards Survey, November 2009

Source: 2010 AEC Industry Outlook

86% - “2010 economy will not get worse”

“A problem well defined is half solved”

 Position for advantage

 Plan paths to growth

Current Markets New Markets

2. Deliberate and refine into information

3. Accommodate to generate knowledge

4. Finalize for wisdom

Measure Twice, Cut Once

A Revenue Growth (1 yr) -7.3% 2% 9.3% $939,000

B Operating Profit Margin 10.6% 16.6% 6% $605,000

Effective Multiplier 3.48 3.41 -.07 (660,316)

Marketing Spend (% NSR) 11% 7.4% 3.6% $363,000

Mkt Spend 100%

Top Quartile from 2009

Who are Customers

ID by Needs 4. Not our business

 Involve entire firm, solicit input, gain insights

Strategic Agenda Delivery Opportunity $ Required Investment $

 Individual review by team members

 Craft direction statement

 Vision and Mission

 Key activity accountability Value Delivery

 Communication Plan 1 Assessment:

 2010 Trends and market forecasts

 Growth and Planning Template

Click on the below link to purchase this webinar:

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