Article : Ten Lessons Learned Over Ten Years

By David W. Kellogg, Spring 2010

In the year 2000, I left Fleet Boston Financial Group (now part of Bank of America Merrill Lynch) after an 18 year career in the banking industry. Since then, I've been providing many of the services that a CFO provides, on a part-time basis, to small and mid-sized companies. The skills and contacts that I developed in the banking industry have certainly served me well with my clients, but I have also learned a great deal from each of my varied engagements over the years. As I approach the tenth anniversary of the founding of Kellogg Associates, I wanted to reflect on what I've learned. Here are the "Top Ten Lessons":

  1. If you think your company has a problem, don't panic but don't ignore it. Hoping that things will get better without taking action is not a strategy. Focus on diagnosing the causes of the problem, and develop solutions. Then execute! Too often, I have seen companies wait too long before taking decisive action. The result can be substantial financial losses, and more limited options open to the company going forward.
  2. Seek perspective, support and solutions from others who can help. First you should of course seek support from those that you know and trust. However, if the specific skills are not available within your existing group of "trusted advisors", you may need to seek help from outside your normal circle of contacts. The clients that I have found which are most successful at moving their companies through challenging and changing environments are those that actively seek out resources that can complement internal capabilities.
  3. Communication is essential. This applies internally within a company, as well as with customers, suppliers, lenders, etc. Open communication is necessary in order to avoid negative surprises. Open communication also builds credibility with all stakeholders.
  4. Think like a Contrarian. Going along with the conventional wisdom will only result in you staying in the middle of the pack in terms of performance. It could also result in you going over the cliff, as many did in the 2008 financial crisis. Only if you think "outside the box" can you identify unique opportunities and solutions for you and your business. All great business leaders have a strong contrarian streak in them.
  5. Strategic planning is an ongoing and evolving process. As the market and needs/capabilities of your business change, the strategic plan must change as well. Formal periodic review and updating of the strategic plan will ensure that the process stays dynamic.
  6. Strategic planning is critical, but so is execution. Too many times, a good strategy is developed but execution of the plan is lacking. Accountability and a formal follow-up process are essential in order to get the most out of the strategic planning process.
  7. While all economic cycles are somewhat different, there are many common elements to all downturns or upswings in the economy. Be careful when you hear about the "New Economy", or the current buzz word: "New Normal". Back in the late 90s during the dotcom bubble, many pundits espoused the concept that earnings didn't matter, but only revenues or "eyeballs" mattered. That was clearly wrong, and was an important contributor to the dotcom bubble. Yes, we have recently experienced an especially nasty economic downturn, but most of the characteristics of it are quite similar to previous recessions. With that in mind, plan for the economic recovery that is already underway.
  8. The strongest companies plan for negative developments by building a strong balance sheet. This allows the company to ride out the inevitable down-cycle. A liquid and moderately leveraged balance sheet also gives a company the ability to proactively prepare for the inevitable economic up-cycle. Recessions can actually be good for financially strong companies, because their weaker competitors are either eliminated or severely compromised.
  9. Family owned business succession planning is difficult, but essential to the long-term viability of the company. There may be family members who have the ability and desire to lead the company to the next level of corporate development. However, I have seen many situations where the best solution for the family is to sell the company. An objective analysis of the family members' skills is required. The process of developing the best plan may take years, but it is never too soon to start.
  10. Financial fraud is a major risk at all companies. Unfortunately, I have seen numerous instances of fraud at companies over the years. In most situations, embezzlement is actually quite easy to accomplish. The perpetrator is often a long-term trusted employee that "no-one suspected". Fortunately, a few simple procedures can be put into place that will greatly reduce the chances of the business owner being stung.

© Copyright David W. Kellogg 2010. All rights reserved.

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