A fast break play in basketball occurs when a team races down the court and scores a goal as quickly possible. Loosely translating that to business, fast break strategy means an approach that maximizes an owner’s goal (i.e. like running up the score), or achieves a desired goal as quickly as possible.
Many of our clients are high growth companies with the potential to grow 20% or more per year in revenue or earnings. People often think such growth is only possible for companies blessed with a hot product or hot industry like what is appearing in the world of social networking and technology applications for the iPad, but many of our clients come from boring old industries and the data suggests our experience is not unique.
A lot of things have to come together for a company to achieve anything significant, but two driving forces behind the companies that achieve success are a desire to grow, and a willingness to explore “What if”, especially when it comes to corporate financial planning.
Just like the legendary basketball coach John Wooden would tell his own team, here are four ways to find your own Fast Break Strategy.
Expand Your Playbook – The more plays you can run, the more ways you have to score. Most business owners only consider strategies (plays) they can execute (run) with their existing capital. High growth companies consider strategies given available capital. Even in our sluggish economy, there is an over abundance of capital available. There are numerous financial providers and products out there that allow owners to both grow and keep control of their business.
By understanding and applying these financing alternatives, companies can ‘dial up’ new strategies (plays) like acquisitions, buyouts, capital investments, consolidations, joint ventures, or any number of creative strategies that can generate great financial returns. Some years ago I worked with a small 20 year old software firm that used capital to change their revenue model from a licence to a “software as service” (SaaS) approach. Within a year that new strategy helped drive 40% annual revenue growth and within five years they sold for over $90 million in cash to a public company.
Understand Key Stats – At halftime and the end of every game, a stat sheet is passed around to the coaches and fans lucky enough to have floor seats that details each player’s points, minutes played, rebounds, turnovers, and assists. Those stats tell a story that looks beyond dazzling dunks and no-look passes. In business, your key financial stats tell what’s working, what’s not working, what you are likely worth, and what financing options you have (or don’t have).
While entrepreneurs don’t have to be accountants, they do need to understand how the key information (like cash flow, relevant add backs, and recent trending, for example) illustrates the likelihood that their goals will be achieved. These key stats also provide clues for finding your own fast break strategy.
Play to Your Strengths – NBA teams are great at making sure their best players shoot the most shots. In fact, the whole team and franchise is built around them. The same concept is true for high growth businesses. While they may have a variety of customers, high growth companies are usually built to serve their best customers. A great example is a fashion client of ours that most people ‘don’t get’ but their target customers sure do and they pay dearly for it. Narrowing your focus to your best customers can create a roadmap to faster growth and higher profits.
visualise Your Goal – Elite players use visualisation before big games or big shots. They say the more vivid the picture the better. Entrepreneurs can get caught up in the euphoria of growing and lose sight of what they want out of their business. A smarter strategy is to identify your own personal objectives as an owner and stick to it. If, like most good entrepreneurs, you don’t want to lose control of your business while growing it, make sure you get to explore financing options that don’t put that at risk. In the long run its better to grow slower while maintaining control, than lose ownership of the thing that gets you up in the morning.
Conversely, if getting capital out of the business can ‘set you up for life’ than try to address that along the way. Lantern recently had a client that decided not to sell their company to a strategic buyer, but asked us to help them get a $4 million loan to finance a one-time special dividend. We found a bank that was willing to provide such financing at 6.5% and without personal guarantees. Strategies like this better position the owner and business to achieve what they want over the longer term. It’s a great place to be!
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