The end of broad based support for business is in sight
All around the globe, including my local state of Queensland, governments are planning to rebuild an economy upended by COVID-19 and the ancillary business lock down and border closures.
Most governments have protected business collapse through blanket support mechanisms - in Australia its been Jobkeeper; other countries have similar schemes. This much needed initiative was much broader than just for keeping people in jobs. It was clearly intended to prevent businesses losing capability that would be hard if not impossible to rebuild.
This broad based government support will come to an end. The consequence will be that those businesses that have not used 2020 to re-arm and strengthen their position are at a significant disadvantage. There will be business failures and job losses will move from industries directly COVID affected to those businesses that didn’t get ready.
2021 will be a year of paradoxes. We will see strong economic growth; at the same time we will see significant business failures and restructuring. It will be a bumpy ride.
It’s time to back the winners.
The Queensland Government Treasurer Cameron Dick announced an investment of $500m into the “Backing Queensland Business Investment Fund” This is similar to other rebuilding funds in other states and countries.
The fund will target investments in businesses that are small and medium sized based in Queensland, will create Queensland-based jobs that have a proven product and defined market opportunity, but requires significant capital to aggressively build scale or grow market share," Treasurer Dick told a press conference this morning.
He said target businesses would need to be relatively mature with proof of concept, either profitable or approaching profitable, and have reputable owners who are committed to growing their businesses in and from Queensland.
The fund's managers will look for such businesses that are seeking capital to expand or restructure operations into new markets or make significant acquisitions.
I am sure that, like any investor, the fund’s managers will look at potential financial return. But if its that good a return, the public sector needn’t be involved. Its the strategic dimensions that count.
Does Not Include:
Listed companies
Start ups
No future plan or competitive position
Basket cases or needing handouts
The old boys club
Government Focus
Mid-sized Queensland based business
Proven product
Defined market opportunity
Either profitable or approaching profitable
Reputable owners
The tell-signs
Bill Sahlman, who ran my Entrepreneurial Finance course at Harvard wrote, a few ears later, the definitive article on “How to write a great business plan” for the Harvard Business Review
In this he highlighted four key areas
The People. The men and women starting and running the venture, as well as the outside parties providing key services or important resources for it, such as its lawyers, accountants, and suppliers.
The Opportunity. A profile of the business itself—what it will sell and to whom, whether the business can grow and how fast, what its economics are, who and what stand in the way of success.
The Context. The big picture—the regulatory environment, interest rates, demographic trends, inflation, and the like—basically, factors that inevitably change but cannot be controlled by the entrepreneur.
Risk and Reward. An assessment of everything that can go wrong and right, and a discussion of how the entrepreneurial team can respond.
To tell that story - business leaders need to have a Joined-Up approach to link Hearts and Minds (Clarity) to Action (the operating model)
CLARITY - “Hearts and Minds”
Clear Purpose - “why does this organisation exist?”
Some version of Jim Collins famous Hedgehog concept - What are we truly passionate about?, What can we be the best in the world at? and what drives our economic engine?
A growth story told simply. I use the Ansoff Matrix (my favourite 2 x 2!) to describe the elements of growth in terms of new products and new markets. This is critical in that it links the opportunity to the practical steps to achieve a realistic goal.
A Strategic Directions Statement clearly stating the Strategic Objective followed by 5 to 7 Critical Success Factors - leading to achievement of the purpose. Ideally this is translated into another Collins model - a flywheel showing how the capabilities and activities of the organisation interlink to create a sustainable and ever increasing momentum.
ADAPtable OperAting Model - Action
A clear methodology for how the organisation will deliver results and how decisions will be made as the situation evolves Most mid sized organisations that do this successfully have a variation of Patrick Lencioni’s models captured best in his book The Advantage. Frequent, targeted meetings with a clear purpose in mind and a devolved decision making capability.
Of all these the one an investor will look at most closely is the Thematic Goal, a relatively short term goal clearly identified as the first and most important next step to achieve the longer term strategy.
Bill Sahlman says that when he receives a business plan, he always reads the résumé section first. I’d agree with that but I’d be scanning for the elements listed above. Without them, none of the other parts really matters.
