Late Second Quarter Assessment
June 2005

Last year about this time I presented a positive outlook for renewed prosperity of privately-owned businesses. The difficulties and challenges of the economic recession brought out the best of business owners and managers. Many seized the opportunities to position their businesses to take advantage of the economic recovery. Having regained confidence, although a cautious confidence, they are again excited to move from the challenges of short-term survival planning and cost-cutting to thinking strategically for longer term growth and increasing the value of their businesses. This is the absolute right thinking, and not surprising, since for most owners and entrepreneurs, their businesses represents nearly all, or at least a significant portion, of their net worth. However, we can assure you that regaining financial stability and good times has not materialized for every middle-market, privately-owned business. Some financially distressed businesses may have stabilized, but they are not positioned to take advantage of today’s opportunities and enjoy even moderate growth and profitability. But it is never too late to get started.

Getting started begins with a careful evaluation and definition of the owners’ objectives for themselves, their families and the businesses. The strategic, operational and financial elements of the plan for the business then evolve. Both the owner’s objectives and the plan for the business are heavily influenced by the size of the business, its capital structure, the family members employed in the business, lifestyle issues, and, ultimately, the owner’s views on transition of leadership and ownership. It must be an ongoing evaluation and defining process. It must be written and documented, even if crudely done, and it must be communicated. Business today is fast-moving and complicated. Intense competition in the marketplace for customers and resources, and pressures to deliver just in time at prices that yield only marginal gross margins, push the manager to make choices among seemingly equal poor alternatives. Then how can a business possibly be successful without continual assessment of its position by monitoring performance to the strategic, financial and operational components of its plan?

I’ll leave you with a word of caution as you dust off that plan or embark upon a planning effort. Be careful not to “think outside of the box” so far that the plan is little more than a hope or a dream. Accurate assessment of your markets, your resources, your capital and infrastructure, and your leadership and management are essential. In addition, you only need to listen to news headlines to understand that there is an awakening call to strong principle-based leadership in an era of increasing accountability. Thinking "inside of the box" brings reality and credibility to your plan. Then it can be presented confidently and convincingly and be received and understood by those interested in your success.

- Dave Hamernik

317-684-1550

djhamernik@hamernik.com