If you are in survival mode, should you still consider the long-term?

Few companies survive. Avoiding survival mode and getting out of survival mode requires the talent which can develop and execute a competitively differentiated business plan.  The foundation for survival is competitively differentiated talent on the board and in the C-Suite. The core reason few companies survive is because there is a shortage of talent.

 Overview

  • Few companies survive.
  • How can you tell if you are in survival mode?
  • You may not realize you are in survival mode.
  • You might be in survival model from day one.
  • You might enter survival mode at some point.
  • How do you get out of and stay out of survival mode?

The purpose of this article (supported by a one-page slide) is to provide a framework, process, and facts to enable discussion and action planning among owners/shareholders, boards of directors, CEOs, and advisory boards. There is no one-size-fits-all answer.  The approach and action plan will be unique to the specific situation of each company.

Few companies survive.

Three quarters of venture capital backed firms in the United States do not return all of the investors capital.1

Half of the S&P 500 will be replaced in the next 10 years.2

 How can you tell if you are in survival mode?

Each day is a firefight (get a customer, get some capital, etc.) in order to stay in business. If the current profit trends continue, the business will fail. If current external trends continue, the business will fail. There is no time to think about the future. You may be losing market share, have declining customer satisfaction scores, or be close to breeching financial covenants. Cashflow is declining and may even be negative. You feel you have no time for planning.

You may not realize you are in survival mode.

  • You are hoping things will change. What are the facts?  Are the facts showing that you’re are in survival mode?
  • You’re not tracking your achievements relative to the milestones in your business plan, or you don’t have milestones.
  • You have not validated the assumptions in your business plan. You have little or no customer confirmation of your assumptions.
  • You don’t know what is happening or the trends in your ecosystem e.g. is the market growing or shrinking? What is the competition doing and how are they changing their companies? How are customer needs changing?
  • You have not updated your business plan, or may lack a plan.

You might be in survival model from day one.

  • You lack a business plan and the management talent needed for your business.
  • Your strategy reflects hopes and dreams rather than a range of scenarios. As a result, future events surprise you or you say that you they are black swan events.
  • Your business plan is not achievable. But you don’t realize this.
  • You lack the quality and quantity of resources (talent, processes, technology and capital). But you don’t realize this.

You might enter survival mode at some point.

  • Unanticipated changes to your ecosystem.
  • Unanticipated changes to: customers, their needs, or the competition.
  • Your business plan becomes outdated.
  • You discover internal issues with resources (talent, processes, technology, capital).

How do you get out of and stay out of survival mode?

  • Have a documented business plan, which includes an easy to understand picture of what future success looks like. Peter Jensen, Olympic athlete coach, writes “People can’t do things they can’t imagine.”3 Your business plan must be clear on how your company will create value in the future.
  • The plan has actual results for the past three years, the current year, plus forecasts for the next three years.
  • The world is rapidly changing, with regular surprises (No-one can accurately predict the future 100% of the time). Every month revisit your business plan required improvements.
  • Regularly assess and revise if necessary your board, C-Suite, and advisory board talent.
  • The plan must answer 6 sets of questions
  • Who are the target customers and what are their needs? Do the customers know they have a problem? Why are the characteristics of an customer?  What are the characteristics of inappropriate customers?
  • How will you meet their needs? Why will the customer buy from you?  How does the customer perceive your competitively differentiated value proposition?  What will be the customer experience as you’re meeting their needs?  Who are your competitors?  How are your competitors better than you?  How are you better than your competitors?  Why have past customers bought from you?  What does analysis of past customers reveal?
  • How will you sell to your customers? Are the customers seeking a solution or will you have to find customers?  Will the customers buy from you via a mobile device or direct face-to-face sales calls?  Do you have a range of sales prices e.g. freemium?  What are your distribution channels and who are your partners?
  • What are the key metrics? Net promoter score?4  Customer acquisition costs?  Customer support costs?  Lifetime customer value?  What are you revenue and cost drivers? Margins?  Free cash flow forecast?
  • What are the trends in your ecosystem and the implications for your business plan?
  • What is the board, C-Suite, and advisory board talent needed to achieve the above? Do you have the talent to create a business plan and successfully execute .

What do you if you are a SME (Small Medium Enterprise)5

The availability of talent may be the greatest challenge faced by a SME.  Create an advisory board with the talent to challenge your thinking, and provide insights from their experience, skills, and networks.  An advisory board is not feasible until you have: a strategy, strategic plan, financial plan, and management team.

Conclusion

Few companies survive. Avoiding survival mode and getting out of survival mode requires the talent which can develop and execute a competitively differentiated business plan.  The foundation for survival is competitively differentiated talent on the board and in the C-Suite. The core reason few companies survive is because there is a shortage of talent.

Your next steps

To enable discussion with your board of directors, C-Suite, and advisory board, download the following one-page slide.

If you are in survival mode, should you still consider the long-term?

 Footnotes

1 Deborah Gage, “The venture capital secret: 3 out of 4 start-ups fail”, Wall Street Journal,  https://www.wsj.com/articles/SB10000872396390443720204578004980476429190, September 19, 2012

2 Scott D. Anthony, S. Patrick Viguerie, Evan I. Schwartz and John Van Landeghem “2018 Longevity Report” by Innosight Consulting, 2018 page ,  https://www.innosight.com/insight/creative-destruction/

3 Peter Jensen, Igniting the third factor, Toronto, Performance Coaching Inc., 2008, page 105

4 The Net Promoter Score concept was initially developed by Bain.  The following is a link to the Bain website homepage for Net Promoter Score, which contains several short articles.

http://www.netpromotersystem.com/about/why-net-promoter.aspx

The following is a quick overview of using Net Promoter Scores.

https://www.forbes.com/sites/shephyken/2016/12/03/how-effective-is-net-promoter-score-nps/#1b1391b423e4

5 Industry Canada definitions (2018 May 9): Small business: < $5 million in revenue, < 100 employees; Medium business: between $5 million and $20 million in revenue, 100 to 499 employees.

Further reading

BDC (Business Development Bank of Canada) has a business plan toolbox with samples and templates you may download.  You must customize the business plan to your specific situation and ensure it has the answers to the questions from the above section “How do you get out of and stay out survival mode?”  https://www.bdc.ca/en/articles-tools/entrepreneur-toolkit/templates-business-guides/pages/business-plan-template.aspx

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