Shownotes
At some point, business owners are responsible for the people that they’ve engaged because their livelihoods are dependent on their ability to run and to lead that business. Kevin Kays, president of The Alternative Board Denver North, helps business owners increase revenue, improve profitability, and lead their companies more effectively. Kevin shares what he does at The Alternative Board and how they help business owners run their businesses more effectively. He also touches on transitions, working with a business coach, behavioral assessments, critical success factors, and more.
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How To Increase Revenue, Improve Profitability And Run Your Business More Effectively with Kevin Kays
We have Kevin Kays. He’s the President of The Alternative Board Denver North. Kevin, thank you so much for taking the time on this episode.
Thanks for having me.
Kevin, tell us a bit about your business and who you serve.
I own The Alternative Board Denver North and I work with entrepreneurs. I target folks who own and operate and actively involved in running their businesses that do gross revenues of about $1 million up to the $50 million range and larger. What I do is work with them to run their businesses more effectively so that they can identify their personal goals and translate them into their company goals. Use that to develop their strategy and implement it to get them where they want to be both personally and with the business.
I’m going to pretend I’m a business owner. I’ve been successful. I know everything I think that there is to know about my customer. I’ve been running the business for twenty years. I’m successful by almost everybody’s measure. You walked through the door. What should I expect?
What you should expect is for me to start asking you about where you are with your business and where you are with your life. What plan do you have not only for running the business but for leaving the business and monetizing that asset that you’ve spent your life building?
For many of the business owners, they think about leaving the business, “I have zero plan to leave my business. I’m going to work here until I die.” Why would that be of interest to the guy that says, “I’m never going to leave my business?”
The guy that says he’s never going to leave his business is deluding himself because he’s either going to leave it on his own power or leave it first. If he’s got a family that’s depending on him, he’s got a responsibility to make sure that that asset serves them one way or another after he’s gone. If he doesn’t plan for his exit and doesn’t plan for that asset to be of value to the folks behind him, he’s going to leave a colossal mess for them.
I saw a statistic that said after 2008 declined crash that two-thirds of the jobs created in the country were created by small business owners. Some of the business owners that’s been successful is interested in as employees as well.
One of the things I look for the individual that runs his or her business is to help them lead more effectively. I help them deliver on the plan that they need to make so that not only is the business doing well to meet their needs but meets the needs of their employees. At some point, you are responsible for the people that you’ve engaged because their livelihoods are dependent on your ability to run and to lead that business.
For the business owner, they might say, “I’m not going to take and sell my business. I want to transition it to my kid.” For that particular person, what types of things do you see that you bring to the table that help those folks?
Have the family members worked in the business? What responsibilities have they had? A particular case I worked with was where the entrepreneur who founded the business was transitioning into a daughter and he was becoming less and less able to interact with the business on a daily basis for some health reasons. I stepped in and coached and mentored the daughter as we grew the business and then moved it to an eventual successful sale. Those are the types of things where someone in my position as a coach can come in and help on a change of control to a new generation who may not necessarily have all the insight that I’ve gained in 40 some years of a professional career.
Sometimes the transition is not elective.
One of the things I work with individuals on is do we have the right mechanisms in place should something happen? If you get hit by a bus tomorrow, what’s going to happen in the business? Is there a continuity plan? Is there a partner? Is there a buy-sell agreement? Even as basic as, “Mr. or Mrs. Business Owner, do you have a will? Do you have a trust? Do you have an estate plan in place? All those things even down to do you have a durable power of attorney? Do you have a medical power of attorney to take care of your affairs if you’re not competent or you’re not around to do it so that the people who have to pick up the pieces and the business or with your family affairs are able to do that?”
Run Your Business More Effectively: Business owners should better prepare for some of the things that they need to face in running and in exiting their businesses.
It sounds intuitive that you would think that this has done all the time.
One would think that, but I find in working with entrepreneurs is that you’re so busy in the day-to-day making sure I’m getting the sale that you need. Making sure you’ve got the right people and the right seats on the bus. Making sure the cashflow is there and that it’s the forest for the trees syndrome. A lot of my job is pulling them back and giving them the ability to take a bigger picture to look at their business. As well as the other piece of what I do along with the business coaching and exit planning which is running peer advisory boards. I get these individuals in with groups of other noncompeting business owners that they get to know with and they get to know well and work with on a monthly basis to help back each other up with, “What do I do when this happens? Has anybody ever had this experience? What do you think about this situation or that situation?” That’s just an invaluable tool for helping business owners better prepare for some of the things that they need to face in running their businesses and in exiting their businesses.
I think about the business owner. Let’s say that you’re in your mid-40s and you’re operating your business by your measures with many others. You’re successful. Why would that particular demographic or age range be interested in a coach?
The realization that they don’t know at all at some point is going to be critical. What I see frequently with people in that demographic is that they may have started the business by accident or may have just stumbled into starting the business because they left a job. They needed a job and they had a particular skill set. They started doing whatever it was they knew how to do and gradually it grew and turned into not only a livelihood for them but an actual business with employees, budgets, staff, in addition to the people on the front line. All of a sudden someone who’s good at carpentry or good at plumbing or good at writing software has a fair-sized business and they’re not sure what to do next. A big step for someone like that is when they realize the business is stagnant or the business is getting ready to grow and they’re not sure what their next steps should be.
The business owner’s perspective is from the business operator. I don’t think the business owner typically puts himself in the place of the business buyer.
A large part of what I do both in the exit planning and as a business coach is work with my client’s members to make the business less dependent on you as an individual. If they were hit by the proverbial bus, what happens? Is there a business continuity plan in place? Is there a buy-sell agreement in place with a partner or with the investors? A worst-case scenario would be if you have a partner in the business and you’re suddenly incapacitated. Your partner is in business with your heir whoever is responsible for your affairs whether they know anything about the business or not. If you’ve been working responsibly and you’ve developed either a continuity plan or a buy-sell agreement so that the partner is able to take control and run the business in your absence. That the business can survive as an entity that has some value. Trying to get it to the point where the business is not dependent on you as an entrepreneur, you as the person that’s there day to day managing it is a key part of what I work with my clients to do.
I’m a business owner. You walked through my door and we agreed that we’re going to engage your services. As far as the amount of time it would take and the initial first process, what should I expect?
The first thing that’s going to happen if you engage me as a business coach is I’ll do a behavioral assessment. It helps me understand what your motivators are, and it helps me understand your communication style. I happen to use DISC, which is one that I like. We use it system-wide and it’s very helpful. It helps me understand how to best communicate with you. Along with that, the next thing we’ll do is a personal vision. I’ll work with you to complete a fairly extensive set of questions as to what your wants are, what your needs are, what are the things that you can do in the business that would make a big impact on it? What do you like to do in your free time? How much free time would you like to have? If suddenly you won the lottery what would you like to do? What would you do with your time? What would you do with your family?
Moving farther down the road, what is your exit plan or do you have an exit plan? Those are all pieces that go into that. I work with you as a hypothetical client to determine what your personal vision is to develop a roadmap. It’s one thing to take some time off, jump in the car with your significant other and say, “Great. Now what?” As opposed to knowing where you want to go when you’re ready to leave. You have a plan. You’ve made the plan, you work the plan and you get where you want to go. I apply that same logic to people that I work with. It would be a matter of putting together your personal vision. Using it to develop the vision you have for your company that supports what your vision is because the company is your creature there to serve you. From there, we develop a strategy to get you where you want to go, to get the company doing what it needs to do to meet your personal vision. It’s basic blocking and tackling. What are your critical success factors? Small business long-term planning is three to five years. A lot of what we do is even shorter-term than that. What do you need to do in the next 90 days?
Make sure you know where you want to go and what you want to do.
How do you prioritize? Let’s say there’s a laundry list from soup to nuts. I don’t have the patience to work. I don’t have an intellectual property or whatever it is.
We take a look. What are your critical success factors? This is a good time to be planning what you’re doing next year. Let’s take a look at what your strategy is for the business or what your desire is for the business. What needs to happen between now and this time next year to get you in the direction that you want to go? Let’s pick three or four most important things and let’s start working on those and break them down into pieces. There’s the strategy. Let’s start planning. Let’s start to develop the strategy and then the tactics. What do you need to accomplish this month? What do you need to accomplish in three months? What do you need to accomplish in six months?
I come in as a coach and not as a consultant. It’s a very different thing. The consultant comes in and tells you what they think you should do and leaves a report, takes their check and say, “Thank you very much,” and they’re gone. They come back in six months or a year. You won’t have done much that they recommend if any. A coach is there day in, day out every month or more often and works with you as the business owner to develop what the strategy should be. In that way you have ownership. In that way, you have accountability not only to me as a coach. If you’re part of a peer advisory board, you’re accountable to several other business owners every month as to what it was you said you were going to do to fix an issue to achieve a goal. That is going to be important in getting you to where you want to go.
You got the consultant-coach issue. You have an assessment of the owner where he wants to go. You have an assessment of the company and where there’s the vision. How do you interact with some of the key members of the team that’s not the owner?
It’s at the option of the owner as to how we choose to do that. In cases where it’s a small team, I’m dealing directly with the owner and that’s an hour sometimes more of individual time once a month, as well as a morning or an afternoon spent with other business owners who serve as an informal board of directors. If it’s a team and I’m engaged to come in in that area, I work with them as far as setting the actual company strategy. I’ll do strategic reviews. I can come in and do quarterly reviews, but I also am sometimes retained to coach the individual managers, executives or department heads. Even within a smaller business on their leadership skills, their management style, their planning and their implementation.
In the ideal circumstance, you’ve got a business on bringing you on board and it burned out a little bit. They start seeing the company be congruent with their vision and then it starts to grow, and the fund starts to come back in the business. What types of things do you see those types of owners do when they rediscover the joy of their business?
They’ll re-engage with the business and they will find new avenues to outlets for their creativity in the business. Maybe they’ll take it in a new direction. Sometimes they choose to like, “I’m engaged with the business, but the business is doing what I needed to do. Let me explore some other avenues. Maybe I want to start a new business on the side. Maybe I want to spend more time with my family.” I look back at some of the success stories I’ve had. I worked with an individual who when I started working with them was easily clocking 60-plus, 70 hours a week. He had a couple of small kids.
After I’d been working with them for about a year, in one of our sessions, he said one of the most important things that had happened to him over the course of the year was instead of just taking Sunday afternoon off, he was taking the full day. As well as half day during the week to spend time with his two small boys. Eventually, he sold his business for a significant multiple. One of the biggest wins in that whole process was making it so that he felt comfortable walking away from the business for a little more time during the week to get some family time with small children. You don’t get that chance again.
I’m the business owner and I get an unsolicited offer to buy my company. Is it typical or atypical for you to get brought in that case to help them evaluate or maybe consider?
I’m going through that with an ongoing TAB member of mine that I had been coaching for a little over a year who’s dealing with a couple of unsolicited offers through his business. Are they the right offers? We don’t know. It’s early days yet but I had the advantage. They’re already being involved as a business coach and helping through my connections and through the other people that I work with. I’m getting the right people in place to help advise him. What do I need to do? How much do I disclose? What is the agreement need to look like as far as nondisclosure? What are the questions I need to ask? What are the things I need to do on the financial side to make the best representation of my company? What do I need out of the business from the financial side to make it worthwhile for me to sell it and what’s my walkaway point? Those are all issues that we’re addressing in present. If business owners are thinking strategically even if they haven’t engaged someone to help with that, they have someone on tap that they can go to if it happens. It’s always better to be prepared and be proactive than it is to be reactive in a situation like that.
Run Your Business More Effectively: It’s always better to be prepared and be proactive than it is to be reactive.
How would you characterize their understanding of the various avenues to sell the company that is available to them?
I would say that it’s fairly limited because they’ve spent their lives developing business and they know more about that particular business than most other people do. They don’t necessarily know the best way to maximize the value in their business and prepare it for sale. That’s why the specialties have developed an exit planning and investment banking and mergers and acquisitions. There are people who focus on doing the best deal possible. That’s not something your average business owner knows. He or she is only going to deal with that one to maybe a handful of times in their life as opposed to professionals who have dealt with it on an ongoing basis. It’s very different. You’re not going to perform surgery on yourself. If you’re smart, you’re not going to write your own legal agreements. You’ll find a professional who works with that thing. You may be the best there is at running your particular business but it’s not reasonable to expect that you’re going to be an expert in doing something that you’ve never seen before.
I think about the chagrin of the business owner that says, “I don’t need outside advice. I’m going to sell the business. I’ve got an offer.” In review, they have no idea whether it was under market, at the market or above market. They just have no idea.
One of the situations that we see is asking a business owner, “How much do you think the business is worth?” They’ll give you a figure. You’re like, “How did you get there?” They’ll say, “The last time I went into to renew my line of credit with the bank, they asked me how much I thought it was worth. I said X and they said okay. They didn’t question it.” Of course, they didn’t question it. They were looking at your financial statements. They knew what they needed to know. The next time you go in somewhere like, “What’s your business worth?” “My banker thinks it’s worth X,” or “My neighbor down the street...
