Dont lose sight of the needs of your cash cow..
When people have been in business for a while, and achieved some success, some get bored. Same old..same old.
They want to try new things. The aim is still to grow, all too often the result is disaster.
There’s nothing wrong with trying new things, it’s how you go about it that makes the difference.
Twenty years ago I was running my own business, an international marketing consultancy. We were 30 strong and growing. I took a surprise call from an M&A guy. Might I be interested in buying one of our major competitors, he asked. They had financial difficulties and were looking for help.
I was interested just to go and have a look around. Nosey. To validate that we ourselves were on the right track. This company was older, more established and had a great reputation. Nothing to lose in looking.
What I discovered was a mess. One of the three partners, the maverick, had convinced the others to develop new products and services. Nothing wrong in that. But the new toys had become the total focus of the sales, marketing and senior teams. At the cost of the mainstream design business.
Their 40 man business was turning over £400,000 a month 24 months prior. When I visited it was struggling to make £200,000 and there was already a £750,000 hole in the balance sheet. It clearly wasn’t working.
But the senior team just didn’t get it.
I couldn’t believe my ears when the maverick asked me for an additional £45,000 to make a video to promote the new services. I thought that he, and his senior team, were away with the fairies….and 40 people’s livelihoods were in the balance.
I made clear it wasn’t for me and beat a retreat.
Years later I met the industry grandee who did eventually back them. He told me he started by sending the maverick to Australia to run a – inconsequential – 5-man team. Out of harm’s way. He then went back to basics. Back to its design led roots. Three years and many redundancies later they turned it around. Very painful.
The moral here is that the potential to innovate is only permitted by the financial strength provided by the established business. It’s madness to bank on the innovation supporting the business….until it does! After all, 80% of innovation fails. Whatever you do you must maintain your focus on, and protect, the main money spinner. The cash cow.
As a parallel, I have a good friend over in the US. A spine surgeon. A very successful spine surgeon in fact. Once he’d established himself by getting some post Med School experience behind him, he opened his own clinic.
As the clinic grew he used the cash he was generating to acquire a chain of six Ford car dealerships that needed some financial help. He got the right senior help in and used his cash to get the business back on its feet. Three years later he sold at a good profit. Through the whole process he was still the busiest spine surgeon in the state.
His next venture was to go in with a hospitality investor to buy 26 Pizza restaurants. Once again his involvement did not stop him, and his team of spine surgeons, fixing backs. Once again, he sold after 4 years for a tidy profit.
He then invested $6m to borrow $20 and built 200 apartments. Which he still owns and rents. He’s completed the development and has refinanced for a long term hold with excellent rental income. And you guessed it, he’s still fixing backs.
The difference between these stories is that my US friend never lost sight of the engine for his financial growth. As a result of his ongoing focus, his spine surgery became an ever more efficient operation, a self contained spine hospital, the biggest in the State. It was the cash cow that provided him the opportunity to build his capital base.
His next development is 500 apartments which will follow the same pattern as the last.
What a difference, one guy was sent, like a convict, to Australia, while the other is on his way to his first half a billion dollars. Simply by remembering to look after the knitting.
Adrian Collins
Exit Planner, NED, Mentor and Business Strategist
Adrian runs his own Business Advisory consultancy.
AdrianCollins.co.uk
“..I have been in business for 40 years. The scars on my back are real. I successfully grew a 6 man 2nd tier UK business into an international leader employing 49 people servicing some of the world’s biggest consumer brands. I’ve worked with people in the biggest corporations down to the smallest entrepreneurs. The common factor was that they came to me seeking success. Success for their brand, their company, for themselves. For over 25 years I was a multi award-winning talent shop for gifted creatives, strategists, project managers and production specialists. Now I’m working with CEOs of SMEs as a mentor, NED and advisor, leveraging 40 years experience. In the end, it’s all about people. Getting out from the Covid mess presents us a challenge. Smart, driven people will be required. If I can impart any of my experience to help what will be the biggest challenge of a lifetime, please let me know.. ..check out my Linkedin profile….drop me an email, give me a call…”
