This blog was posted on LinkedIn last week and received nearly 9000 views, 325 likes and 33 comments. It’s important we understand and share this stuff.
- There are 27.3 million enterprises in the US. The following breakdown should be understood to give you perspective:
- 21.4 million are one man bands.
- 5.3 million employ 19 or less.
- 526,000 employ 20 or more but less than 100.
- 109,000 employ more than 100.
- 141 million Americans are employed by three main buckets of companies:
- 21 million are employed by 21 million one man bands.
- 42 million are employed by 5.8 million small companies, who employ less than 100 people.
- 78 million are employed by 109,000 larger firms, who employ 100 people or more.
- So depending on where you draw the small company line in the sand, let’s say small companies are defined as employing < 100 people, we can say 45% of America is employed by small businesses. By stretching that definition to less than 500 people we could easily claim that 55% of America is employed by small businesses.
- Building a company for sale and retiring on the proceeds is highly unlikely. The majority of company sales are under $200,000, which would give you at 5% a retirement income of $10,000!
- There are only around 6000 companies sold a year for $10m or more.
- The acquisition of another company is mostly a failure according to the research but the most important point is not the failure rate it’s the reason. Its not price, its not diversification, its not geography, IT IS integration planning AND execution. Cass Business School, concluded from detailed research covering 12,339 deals including 2917 acquisitions of distressed companies from 1984 to 2008 that price was not the determining factor for success but that post acquisition integration was the key.
- The chances of raising capital are so slim you need to create a business that can make money out of the gate.
- Monthly cash flow forecasts are too blunt to run the balance sheet of a business. Cash flow forecast should be done weekly with all bank balances reconciled to the bank statement and reconciled to the penny.
- Scaling a private company crushes margins almost all the time. The scaling paradox happens because as costs are added they are not ALIGNED to sales e.g. machinery is purchased with no visibility of sales orders to fill those machines, sales staff are hired with no evidence the market needs your product, marketing teams scales with no connection to the type of sales leads needed, software features are added to your product at considerable cost with no chance of building these enhancements into your pricing. You get the picture. Cost increases with little sales alignment will kill your margins.
- Hiring new staff is not about the money it’s about telling your story and reconciling that cause to the prospective candidates job – purpose. Secondly it’s about explaining how the candidate will be allowed to master their craft – mastery. Finally it’s about clarifying how the candidate will be managed to allow the employee to have power over their job – autonomy.
- Sales is never about you, its about them. It’s about having a diagnostic set of skills that allows sales professionals to understand the relevant, fundable projects that will improve the performance of the prospect (defined as person not company).
LIke the way we think? The Portfolio Partnership is currently focused on two main areas of entrepreneurial activity. We assist clients acquire and integrate relevant targets and we assist private companies scale by performing the role of chairman on ambitious private company boards. Reach out to Ian using this brief form.