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April 10, 2001
Q: I am the principal in a small professional services company. Though my firm is small right now, my plan is to build it to a substantial level and then sell it at a tidy profit. Frankly, my business’s exit strategy is a critical part of my personal retirement plan, so I can’t afford to make mistakes on this one. My question focuses on the name of the firm and its relation to how easily the company will sell later on. My thinking tells me that it would be better to have a corporate name which does not link me to the firm forever. That is, when someone else buys the company with my name on it, will others expect that I’ll still be there? Can it have value even when I’m not around?
A: Thanks for this question, as it is one I hear nearly every time I speak to any group of people in the professional services. The fact is, your name could well be one of the essential and most valuable parts of the deal when you sell the firm. On your way to building the company into one that someone else would want to buy, your organization will develop its own culture. That culture will reflect your values, your style, and your approach to delivering your service. That culture is also an essential feature distinguishing your firm from other excellent providers in the marketplace.
The fact is, as you grow an organization, its culture flows from but goes beyond you, the principal. The trick is ensuring that everyone in the organization, regardless of its size, understands and is committed to the company’s culture. To be successful, it must be an intentional culture, not one that is haphazard or accidental. When this happens, you not only grow a business with everyone on board and looking at the same prize, you also create one where everyone, employees and customers alike, knows what the business stands for. And that feature has enormous value in the marketplace. It’s called niche. Systematically developed, it includes but transcends you.
Moral of the story: Yes, your name stays even when you go.
Q: We have been in business for several years and have a client base that I have heard described as awesome. As with so many other businesses, these last several years have been pretty much a party. We’ve added new clients regularly and never been at a loss for business. Until now, that is. With the economic slowdown, it’s pretty clear we aren’t going to be adding many new clients and we’re already thinking seriously about re-trenching and laying off employees. I know you aren’t an economist or trying to replace Alan Greenspan, but I’m wondering if you have any suggestions for keeping the company afloat while business seems to be going down the tube.
A: You’re right. I’m not an professional economist, nor am I eager to take Mr. Greenspan’s day job. He can keep his niche. However, what I know without reservation is that recession-proofing your business is something you have as much control over as he does, probably even more. Based on the little information you’ve provided, it appears you have the makings for recession-proofing right in front of you.
That magic bullet may well be your existing awesome client base, not all those new ones you want to add. Too often, companies forget that it’s a lot easier to develop more business with existing customers than trying to generate new ones. And you’ve already said you have great clients and great relationships. So, I strongly suggest you refocus your attention on ways you can serve your existing client base even better. Think about new products and services which are logical extensions of what you have already provided. Consider different ways of delivering those services, especially internet and Web-based solutions. Of course, as you plot your course of action, be sure that you stay obsessively close to your knitting. You know what I mean. Don’t veer from your niche as you plumb your existing customer base even deeper.
Q: We are a well-established architectural firm located in the Puget Sound area. Over the last year we have been gradually shifting our focus to one we believe will be more profitable and stable in the years ahead. Our problem is one that will probably not surprise you. As we’ve shifted focus, we are having trouble figuring out what to do with many of our existing clients who don’t fit the profile we are going after. Additionally, I confess that we are really nervous about turning down business, especially now. Some of my associates have gotten very anxious, expressing concern that it is important to hang onto every bit of business we can get right now given the economic scene. Your comments will be much appreciated.
A: First off, congratulations on the courage to re-niche. It is important to always stay ahead of your niche, ensuring it doesn’t run out before you do. The issue, however, of what to do with those clients who shouldn’t be on your plate is pretty straightforward: take them off. Do it gracefully but firmly. Find another firm that meets your high standards and give them away. Do it quickly. Doing business with the wrong clients can only take your business in one direction: downhill, fast.
Now that I’ve told you to reduce your client base, I want to acknowledge that this is often scary for many people. What I can also tell you is, you have no other choice. I call it “No Plan B.” You don’t need or want back-up. In fact, the mere thought of “back-up” can be devastating. When he arrived on Mexico’s shores in 1519, Cortes’ commitment to this principal was very clear. Once his crew was safely on dry land, he ordered his ships burned. No turning back. All resources were pointed toward the future. Yours should be, also.
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