[THIS IS THE SECOND OF TWO PARTS!]

At Covenant Family Wealth Advisors I work with a number of highly successful business owners and founders across Canada who generate annual revenue from $10 million and up to $300 million per year.  These entrepreneurs often face the following six challenges to company growth. Three were mentioned in the first post; here are the final three challenges.

Key Hires

Fourth, another challenge is to hire key people, especially at the senior leadership level.  This can be quite disruptive.  This is a situation where an advisory board can assist a company owner.  It is challenging for a company owner to discuss with his leadership team that he wants to bring in a new team member and potential displace one of them.  The existing team may be threatened by a new person, the team culture may be disrupted.  This may mean the rearranging of key responsibilities within the team.  The owner, however, needs to do what is best for the company.  So, the search process for the new hire may need to go on in private. 

Then, when the new hire is announced, the process must be carefully managed.  There may be some people who are relieved and there are others who may resign on the spot.  The right new hire can be invigorating for a leadership team.  They may also be impressed by the level of talent attracted to the company.  New hires are also prone to look at the company today and what can be achieved in the future, rather than dwell on the past (which they weren’t part of) and marvel at how far the company has already come.

Acquisitions

Fifth, depending upon the particular industry there may be opportunities for acquisitions.  The default mechanism for entrepreneurs may be to grow, build and add—more revenue to the top line sounds good.  There may be a chorus of encouragement from people within the existing organization at the prospect of a bigger entity with expanded opportunities.  The challenge for the entrepreneur is that an acquisition may be a case of messing with a good thing.  You may have a stable, successful business that is profitable.  An acquisition can open a can of worms, be disruptive and cause the company to takes its eye off the ball.  Further, not all acquisitions go well. 

Advisors can provide a sober second opinion.  There are other things to watch out for.  This may be like looking for Waldo.  Where are the hidden challenges?  Has the other party not disclosed everything?  There are often challenges with integrating company cultures.  One client with an enterprise value of $300 - $400 million was looking to acquire a company doing $40 million per year.  He already knew the owner, some of the key staff and that the location would fit in nicely with the rest of the network.  That deal was easy to do, but it is not the norm.  The bottoms line is that the acquiring company needs to have a dominant culture that can absorb a business rather than the diluted by it.

Life:  What’s It All About?

Sixth, for many company owners, once they achieve a certain level of success then they wonder, “what’s it all about?”  One Christian entrepreneur told me that he achieved all his financial goals by age 27.  For others it may come later, such as in their 40s or 50s.  After a successful company has been built, and it is functioning well without their direct involvement, and they have enough assets, then they wonder—as many people do—what’s it all about? 

The company owner may have sacrificed various other commitments as they built their business, such as family and vacation time.  Or, at a certain point in their life, the constant thrust and parry of the marketplace has lost its appeal.  Have they been building the business to do good?  A number of our clients have set up foundations—they have spent enough time building wealth and now they may be more interested in disbursing the fruits of their labour.  Often clients will then reconsider their life’s vision and mission, their personal calling. 

Or, perhaps the owner should keep the company—in effect, safeguarding the goose that is laying the golden eggs.  If the owner can get his company operations being run on autopilot, and focus on strategy alone, then keeping the company may be sensible.  This discussion is often best had with an advisory board that is committed foremost to the individual owner, rather than the company. 

Conclusion

How company founders and owners face these challenges will determine the future of their companies.