ITB Partners – Management Consultants
Our Business is Your Success
Prior to forming New Century Dynamics Executive Search in 1999, Jim Weber spent 22 years with Fortune 500 companies in the Food Retailing Industry where he developed a broad-based portfolio of “hands-on” line and staff experience in growth and turnaround situations. A proven executive with exceptional leadership skills, Jim has a strong financial background and heavy operations experience in specialty retail stores, quick-service restaurants, manufacturing, and distribution.
It was my kind of week! I was busy, but I enjoyed a lot of variety and entertainment. I had a productive meeting with one of my consultants, Paul, over cigars and brews; a conference call with my Latin America Managing Director; coffee meetings with two prospective new consultants; and a luncheon meeting with a potential client. I even had time to complete a few administrative tasks and worked on strategic issues. My visit with Paul took an unexpected turn (it became even better) when Jeff, an alumni buddy joined us at the bar. What a lucky break! I couldn’t have been happier to see him. Jeff is a master licensee developing a non-food franchise concept in the state of Florida. He is an excellent connection for Paul, given that Paul is selling an integrated project management software package for franchisers. It was great to catch up with Jeff, and even better because Paul was able to make an excellent new connection. Connecting great people is my favorite part of work.
The highlight of the week was meeting with my turnaround client to discuss the next phase of our work. The first item of discussion was her update on the remaining contract in Florida. She told me she had successfully ended that contract and helped her employees land jobs with the new contractor. She said that she secured the equipment and supplies at a Lakeland, Florida-based storage facility. She went on to say that she plans to move this equipment to Atlanta when she finds an appropriate local storage facility. This last point gave us an excellent opportunity to talk about coordinating Strategy with operations. I reminded her that the equipment left in Florida was purchased to support her employees. And, she has no further need for that equipment as she will be using subcontractors going forward. I applauded her for successfully extricating herself from her expiring contract. However, I advised her not to spend anything further on that equipment except as required for its sale. She took my recommendation to heart and will work with her attorney to ensure compliance with the bankruptcy court to dispose of that equipment. Resolving that issue, we moved on.
The first phase of this assignment resulted in clarification around my client’s business strategy going forward. Now, the client will use subcontractors to execute her contracts, to minimize her reliance on full-time equivalents. Making this change will increase margins, reduce risk, and result in the more effective use of her time. The client also agreed to move away from the public sector (State and Local Government Accounts) to focus on the private sector, both business-to-business and the consumer market. The next phase of my work is to rebuild the client’s business development function. This change in strategy requires an updated positioning statement and value proposition, key tools for generating new business. My responsibility is to help her grow the business through new channels, promoting existing products and services.
During our meeting, we discussed the importance of leveraging our efforts to ensure that we are generating the maximum benefit for the time allotted to that effort. We discussed following the Pareto Principle to guide our work. In other words, to concentrate on the 20% of the activity that generates 80% of the output. To transition out of Chapter 11, one cannot waste their time. My client must ensure that she is getting the maximum payback from her work.
One of the most significant benefits provided by outside consultants is to use us as sounding boards to work through issues big and small. As we have vast experience in various situations, we help our clients make sound decisions in real-time. For questions requiring further consideration, we understand the analysis needed to find the answers. The most important benefit we pass along may be our knowledge of the fundamental principles for setting priorities and managing time.
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Last week, one of my clients filed for Chapter 11 Reorganization. Now, two of my clients are in Chapter 11, working to find a path back to solvency. In April, I was engaged by a new client to help them find a way out of Chapter 11. In the case of the two former clients, I can honestly say that I wasn’t responsible for the circumstances leading to their demise. In other words, I didn’t place any executives who caused these problems, and I haven’t been involved in consulting projects that resulted in adverse consequences. To the contrary, I placed an executive to help one client navigate through Chapter 11. Regarding the other client, I placed an executive to help them avoid business failure. Regrettably, Senior Executives sometimes fail to heed sound advice. In each of these situations, failure was predictable. Management failed to adequately penetrate their home markets before moving into new territory.
I’ve witnessed the results of many crazy decisions during my career. Some noteworthy situations include an ice cream brand selling franchises beyond their distribution capabilities. Or a California-based brand that tried to move into the Southeast with a single location. I’ve seen Southeastern brands sell franchises on the West Coast, thousands of miles beyond their management reach and distribution network. A Northern barbecue chain leap-frogged into Georgia with a few restaurants placed across the state. That decision was funny, in a sad way, as barbecue has a distinct regional appeal. Another brand added drive-throughs to dogs with the hope of turning them into profitable restaurants. Sadly, they created dogs with a drive-through. From my perspective, the most egregious yet consistent mistake is the urge for start-ups to enter new markets before adequately penetrating their home base. To be sure, many of those mistakes were made by rookies, entrepreneurs lacking experience or solid advice. However, these mistakes continue to be made by experienced leaders who should know better.
The fundamental axiom for success as a traditional retail brand is market penetration. Achieving optimal market penetration, also known as market share, conveys significant leverage to the brand. Greater penetration yields more efficient deployment of supervisory personnel, purchasing and logistics, marketing expenditures, and employee recruiting and selection, among others. Developing an understanding of one’s customer profile becomes more accurate with more stores as well as an appreciation for drive time customers are willing to endure. Additionally, the development learning curve leads to a more efficient use of capital. And, greater penetration increases brand awareness on the street. This is retail 101. The leverage provided by following this strategy results in a healthy cash flow to be deployed in new markets when appropriate.
I can speak with authority on this subject as I spent most of my career working on retail expansion. I began my career as a financial analyst assigned to the new store development group. In this role, I performed analytical work on capital expenditures for new stores and other investments. I learned how to evaluate the prospects for a new store, and the penetration required to optimize the return from a larger market, i.e. city, SMSA, or region. I became a strategic analyst and planner shaping retail store development strategy for several national brands. Finally, I held general management positions where I was accountable for return on investment. In fact, one of my first assignments as a senior executive was to identify and prioritize markets for focused development. As a result, I am confident in my ability to build a retail brand, especially, food-service brands. I appreciate the value of achieving significant market share before developing new markets. Believe me, engaging in the development of a new market, before adequately developing a home market can be fatal to a business, especially so for a start-up.
So, if significant penetration of a home market is fundamental for success, why does management continue to violate this well-established rule? Over the years, I have asked this question of countless CEOs, CFOs, and Chief Development Officers. The only consistent response is “sometimes, management becomes so enamored of expansion that sound business practices are ignored.” Imagine, human emotions getting the better of Senior Executives. Who knew? The only solution is to hire accomplished retail development executives, among others, who won’t hesitate to tell the “Emperor that he has no clothes.”
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I hope you enjoyed our point of view and would like to receive regular posts directly to your email inbox. Toward this end, put your contact information on my mailing list.
Your feedback helps me continue to publish articles that you want to read. Your input is very important to me so; please leave a comment.
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Contributed by Leslie Kuban, President of FranNet in Atlanta
Michelle and Ryan Kinsley are a dynamic young couple who always envisioned themselves as business owners. They were focused on finding a business that would be right for their newly growing family but overwhelmed with so many options. With Ryan’s background as a government analyst, he knew how to do the research, but decided he needed someone with the right franchising experience to help.
In just four months’ time, Ryan moved to a new city, bought a new house, welcomed his first child and invested in his family’s future through franchise ownership. How DID he do it?
What drove you to make the leap from a seemingly secure career position to the entrepreneurial unknown?
Ryan: My wife, Michelle, and I had been married for about a year. We were still living in a 1-bedroom apartment in downtown Atlanta when we found out that we were expecting a child. We realized that we needed to make some life decisions quickly so that we would be ready when our child arrived. At the time, I was extremely burned out in my position with the government. I had been reading books for over a year on franchising and small business. After talking with my wife, I decided to reach out to FranNet to explore franchise opportunities.
What were the most important factors in deciding on the business you ultimately chose?
Ryan: With a child on the way, Michelle and I knew we wanted to get out of the hustle and bustle of city life. We both grew up in medium-small cities in Georgia, so we wanted to raise our child in a similar environment. Finding a business that would work in one of our desired areas was a major factor. I also wanted to find a business that would allow me to attend my child’s activities and life events. Finally, finding something with somewhat traditional work hours so that I was not always working when my wife and child were at home.
You and Michelle just welcomed your first child…how did you think about the timing of starting your family and the timing of going into business for yourself?
Ryan: We bought our first house, started a business, and had a child all within four months. We joke that if our marriage survived that, we can make it through anything. As I mentioned, the baby was a driving factor in getting this business started so I wanted to get everything up and running as far in advance of the baby coming as possible.
How are you managing so much change at once – a new business and a new family member?
Ryan: As the owner of Monster Tree Service of Athens, I tell everyone that all my time is now spent with either the big monster or my little monster. I put a lot of time into running my business and raising my child, but I don’t do it alone. I made sure to hire experienced, driven employees who are self-sufficient and can troubleshoot many of their own problems. Because of this, I am able to focus on the most important issues in growing a company. It goes without saying that I couldn’t do any of this without Michelle and the support of our friends and family.
What advice would you give to young families like yourself wanting to start their own business?
Ryan: Be sure to do your research! I can’t stress that enough. Read books, talk to business owners, contact a franchise consultant, and find the end of the internet before you commit to starting your own business. The right franchise consultant will help you find the right fit for you and your situation. I reached out to Leslie Kuban at FranNet of Atlanta because she has many years of experience in the industry, knows my local market and is a franchisee herself. She took my wants and needs and generated a short list of opportunities that she felt would fit my goals. She never pressured me in any direction, and she was always available to help with any concerns I had.
“You will be scared,
but you will also know when you have found the right opportunity for you.”
Do you think he was talking about franchising, new home ownership or the joys of his new family? Perhaps all of the above. Happy Father’s Day from FranNet!
If you’d like to explore whether business ownership is right for your family, give us a call today at 770-579-3726 or take our free Readiness Assessment at frannet.com.
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Leslie Kuban is a nationally recognized franchise industry expert, CFE (Certified Franchise Executive) and Market President of FranNet in Atlanta; a locally owned and operated franchise consulting firm.
Leslie and her team have helped close to 500 individuals and families achieve their dreams of business ownership through a no-cost, extensive educational and coaching process. Her personal experience as a franchise owner provides a unique perspective to help her clients assess their real opportunities, risks, and timing to make sound decisions.
Connect with Leslie online or call 770-579.3726 to start the conversation today.