Lev Cap Dec01

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Quote Of the Month:
"This time, like all times, is a very good one, if we but know what to do with it."
Ralph Waldo Emerson

Investment Hindsight:
"There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain
in its success, than to take the lead in the introduction of a new order of things. Because the innovator has for enemies all those who have done well under the old conditions, and lukewarm (indifferent, uninterested) defenders in those who may do well under the new. "
Niccolo Machiavelli

Our goal is to provide you with timely and informative articles about growth and strategy issues effecting entrepreneurs and small to medium sized companies. Each month Leveraged Capital will deal with issues affecting your business. You will be able to read topics ranging from finance, human resources, buying companies, selling your company, and technology. In coming months you will read profiles about other entrepreneurs and current decision makers. We will keep timely content levels high, advertising content low, and welcome your feedback.

Are you interested in contributing articles? Or, do you have an interesting and unique story to tell about your company? We would like to interview you.
Please contact us by Email at: editor@GrahamFinancial.com

IS YOUR BUSINESS A TURN-AROUND CANDIDATE?

If you think a turn-around is only for receivership, chapter 11 and bankruptcies, think again. Your business may be a prime candidate for turn-around thinking. Ask your self these two questions. Did your company under-achieve any of it’s objectives, goals, and actions that you set out to accomplish this year? Have key areas of your business been stagnant or declining for more than a quarter? If you answered yes, you should be adopting turn-around thinking and strategies.

Four Stages Of A Turn-Around Situation.

Our experience has shown that turn-around situations occur well before a receiver or bankruptcy lawyer is ‘asked’ to review the company. These four stages occur within any industry and typically in a predictable sequence. Although it does happen, rare is the case where a company suffers a catastrophic event that sends the company into the most severe and final stage. What most often happens is a slow spiral into each stage, with management failing to recognize and act at each stage. With earlier recognition and action, many companies that failed could have been saved. A turn-around situation can be defined in these stages.

Stage 1. Cash Crunch. Typically a short-term problem that can occur over a month or two. Management typically tends to ignore these warning signs, often refusing to accept there is a significant problem at this point.

Stage 2. Cash Shortfall. Usually occurs over a fiscal quarter. Typically management continues to leave the problem largely un-addressed. There may be a lot of reasons given for the shortfall, but little if any strategy is developed as to how the problem will be arrested.

Stage 3. Declining Profits or Increasing Losses. Typically occurs over 6 to 12 months and starts to attract more serious attention of management. Certainly gets the focused attention of your banker.

Stage 4. Serious Deterioration of Profits that has occurred over 9 to 18 months. A culmination of problems is usually present at this time resulting in the need for drastic and immediate action. The survivability of the company may come into question.

The Four “P’s” Of A Turn-Around.
Just as the stages of turn-around are consistent in any industry, so are the Four P’s. As in many business situations, Pareto’s 80/20 law can be applied. That is, 80% of your problems will come from 20% of the indicators. In other words, your ability to recognize and deal with the most significant problems will generate the most dramatic and efficient correction. The four P’s in any turn-around situation are:

People: specifically i) ownership and management and ii) planning vs. process
Products: specifically i) price, ii) efficiency and quality and iii) marketing and Distribution
Profits.
Plant: Specifically i.) real estate, ii) equipment, and iii) technology.

TURN-AROUND WARNING SIGNS.
There are a number of warning signs, the severity of which depends on the turn-around stage the company is in. This is not an exhaustive list but will give you some key indicators that you should apply against each of the 4 P’s.

Cash Flow Indicators.

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Five Focused Steps To Your Strategic Plan.
It’s an old axiom but a good one. If you fail to plan, you plan to fail. If you haven’t undertaken any sort of strategic planning process find out why. There are many reasons why so few companies effectively adapt this type of planning. One primary reoccurring reason that we see in companies we have reviewed is time; or the lack of time more specifically. The importance of taking time for strategic planning is so critical that the future value (your wealth) and long-term sustainability of your business depends on it.

I use a five stage planning process that, once implemented, naturally becomes a part of your business thinking and corporate structure. It is a proven process that has helped many of our clients move onto new levels of growth and success. The process is simple but requires two things from you to be successful. Time and the commitment to execute the plan once you have developed it.

Stage 1: Discovery – (Re?)Evaluate your business.

First look at what’s important to you and decide where you want your company to go. Take an honest assessment of what your company is doing today to ensure that your current operations are consistent with your vision for the future. Define your primary purpose and objectives. This is the key to strategic planning.

Identify the most significant areas that are the most critical for the success of your business. This should be done for internal factors such as cash flow, employees, finance, investment, and technology for example. External discovery should also be reviewed to consider environmental forces, industry trends and practices, and key competitors.

With each internal and external factor that you identify, articulate a clear vision of how your company will relate those key areas to the direction you are headed. Start putting down thoughts in writing, not only for the expectations that you have for each of these areas but also how you will deal with each of these areas. What’s possible? What happens when you reach each of these expectations. What would prohibit you from achieving these goals and what can be done to offset any such limitations? The more clarity that you have for your business the better those around will understand your goals to help you get there.

Stage 2: Business Needs Review.

Stage two helps bring your vision into greater focus but demands the most honesty about the reality of your current situation. It is in effect a gap analysis between your existing business model and the reality of expectations of the marketplace, industry, and the capital markets. Identify your greatest need and then apply additional needs to the internal and external issues you discovered in Stage One. Then assess what people, and systems you require to make the most progress in each of these areas in the coming one, two and three years of your vision. Identify your personal and organizational strengths and weaknesses and develop a ranking system to identify those areas that need to be addressed immediately. Independent assessment will be critical to provide you with an unbiased, unemotional level if input , ideas, and options.

Stage3: Define A Strategic Posture - Establish Your Priorities.

This third stage will develop a framework from which you will build your actual strategic plan. Encompass the aspects of the first two stages and incorporate the key elements of strengths and weaknesses to help you select priority areas. For example, will you grow though internal growth, acquiring other companies, or a combination of these? What systems do you need to implement, or key people to hire? Where will you get these systems and people? What will be the areas that will make the most significant impact to your company and your goals and objectives? What benchmarks do you want to reach to consider your plans a success? Utilizing the ranking system you developed in Stage 2 will help you define your priorities and strategic posture.

Stage 4: Develop A Portfolio Of Strategies – Your Action Plan.

By this stage you should be very clear about where you want to go, how you will get there and who you need to enable you to get to your goal. If you are not clear at this point, go back as far as you need in the previous three stages to ensure that nothing of your plan is ambiguous.

Your plan will need to define action steps that you need to take with regard key areas of finance, marketing, production, distribution, and employees required to achieve your goals. Additionally, and very importantly, you should have clearly identified the persons responsible and accountable for completing each element of the plan. You will not be able to do this on your own. Find people around you who understand the vision, then empower and motivate them to meet the expectations for success.

Stage 5: Execute and Actively Manage Implement the plan.

We firmly believe the time you invest to creating strategies is simply the first part of what we call the growth equation. The growth equation is only complete when your strategies are executed and measured . The single largest performance gap in many companies today is found when ownership/management neglects to provide the leadership to execute developed strategies. Your strategic plan has no value or merit until you start implementing it. Only by following through with your plans will you achieve the growth that you envision for your company.

So you have spent the time developing your strategy and have taken steps to implement the plan. What next? Quite simply, don’t stop here. The strategic planning process is intended to be dynamic and fluid just as your company is. Once any process or company becomes stagnant, it dies. By developing a cycle of review and strategic planning for both short-term and long-term goals and objectives you will be able to quickly adapt to changes that you face within your company and within the marketplace that you serve.

Paul Graham is President of Graham Financial Corporation. For many small to medium sized companies, there may be limitations on the resources of time or key employees needed to develop growth strategies, let alone the time to execute and measure the success of strategic plans. Graham Financial Corporation adds value by filling this gap and helps you meet your goals and objectives.
Contact Paul at dpgraham@grahamfinancial.com

The 2001 Rotman Canadian Woman Entrepreneur of the Year Awards (CWEYA)
www.cweya.com was recently held in Toronto. These awards help to encourage the
kind of innovation and risk-taking that will help Canada to compete in the new millennium.

The Dean of the Rotman School, Roger Martin said "We are proud to be celebrating ten years of entrepreneurship. Tonight the Canadian women entrepreneurs we are honoring have relentlessly pursued innovative and unique business strategies to create value in the economy and for their customers. They have combined attitude, creativity, risk-taking and ambition to become industry and global leaders. We truly believe that these Awards help encourage and inspire the kind of integrative thinking that will help Canada compete in the new millennium."

Nominations for 2002 can be made starting November 23, 2001. For more information go to the website at www.cweya.com.

Start-Up Award
Kim McArthur, McArthur & Company Publishing Ltd., Toronto, ON.
Presented by Deloitte & Touche.

Kim founded her company when Time Warner announced it was closing Little Brown Canada, the company she had started and run since 1987. It was a risky venture given unstable state of the Canadian industry , but many of the Little Brown staff returned to work with Kim in the new company.

Started in 1998, McArthur & Company now the second largest Canadian-owned publisher of Canadian fiction with sales of over $10 million. McArthur & Company has published 20 bestsellers, including 6 Giller prizewinners. For the last two years Kim’s company has published the top selling adult fiction novel in the country with Mave Binchy’s novels Tara Road (1999) and Scarlet Feather (2000). Other authors include Joanna Trollope, Bryce Courtney, Rosie Thomas, Lady Henrietta Spencer-Churchill, Barry Callaghan, Nancy Huston, and Lisa Appignanesi to name a few of the international and Canadian authors published by McArthur.

Lifetime Achievement Award
Doreen Braverman, President, International Flag & Banner Inc., Vancouver, BC. Presented by Women's Television Network.

Leaving 10 years experience as an elementary teacher and an associate professor at Simon Fraser University, Doreen has been manufacturing flags and banners for the past 25 years .The Flag Shop is the first full service shop of its kind in North America, and is considered to be first in the small $7.5 million flag market place.

But there is more to Doreen's company in that she has found a niche for herself in the billion dollar banner market by specializing in short runs of printed and sewn banners. Scott Paper went to Doreen after searching all over the world for someone to make a quilted banner. The Flag Shop has also received requests from the film industry because of her willingness to deal with any number of unusual textile requests.

You may have had one of her flags when the Department of Canadian Heritage gave away one million free flags to anyone that asked for one. Those million flags represented 7 years of retail sales and the company is still recovering! Her work has also been at the Calgary Winter Olympics (1988), the Calgary Stampede (1982-2001), Expo 86 in Vancouver, the Royal British Columbia Museum’s Leonardo di Vinci Exhibit in Victoria (1998) and the G7 Summit.

Innovation Award
Jody Steinhauer, President & Chief Visionary Officer, The Bargains Group Ltd., Toronto, ON. Presented by Ford Motor Company of Canada.

In 1986, Jody graduated from the International Academy of Fashion, Merchandising & Design where she received awards as the most promising student and in academic excellence. Keeping true to such promise, Jody has been described as "one part entrepreneur and one part innovator".

Jody created her company, The Bargains Group, which provides wholesale deals on men’s, women’s and children’s clothing for national, local retail chains, and small independent stores. With The Bargains Group, Jody seized on a unique opportunity within a special market niche that provides clothing for the needy.

Declining financial resources within the social and non-profit sectors have inspired more corporations to make a greater commitment to community giving. The Bargains Group acts as the intermediary by taking the corporate donations and delivering them to the non profit organizations. Through The Bargain Group, Jody has increased the company’s buying and giving power by almost 400%.

Impact on Local Economy Award
Linda Knight, CEO, CarePartners, Belgrave, ON. Presented by Bank of Montreal.

Growing up in rural Huron County, and as Connestoga College graduate and Registered Nurse, Linda had lived with the dynamics and challenges of a small community. Recognizing a niche, she started her own home-based nursing agency, Community Nursing Services in 1983.

Following great success, in 1991 Linda opened McKeeva, a second home nursing agency in Owen Sound. At that time, Government changes to home health care forced Linda to fold her private sector business and register the agency as a non-profit. To survive, she became an employee of McKeeva.

A new government and more changes in 1996 allowed Linda to re-privatize her business and build a new company which she named CarePartners. Linda felt this corporate name was a better reflection of the nature of the patient and client relationship. In the last five years CarePartners has grown generate to revenues close to $12 million with a staff now manage over 500 registered and practical nurses from a number of support offices in the region.

Export Award
Rosemary Marr, President & CEO, Transera Group of Companies, Calgary, AB. Presented by Export Development Corporation.

Moving from working as a bank teller to a temporary Girl Friday position gave Rosemary a taste of freight forwarding business. It was a taste that she enjoyed. Her first company did not promote non-university educated women so Rosemary left for a more forward thinking competitor in Vancouver and eventually took the challenge to head a new office in Alberta. As a one-woman show, Rosemary worked around the clock to increase sales while maintaining low overhead. Under her charge the Alberta office soon outpaced it’s Vancouver counterpart in total sales. She faced yet another decision when she could have purchased this company.

Instead, Rosemary started Transera in 1985, handling all modes and types of cargoes but carved its reputation managing project logistics in the mining and oil industries. Since then, revenues have grown from $1 million to $42 million. An industry leader in freight logistics to the former Soviet Union, Transera has generated more than 40% of it’s sales abroad, Rosemary expects to double sales in the next five years through acquisitions and global expansion.

As competition becomes increasingly global in nature, there is escalating demand for North American manufacturers to develop and adapt productivity enhancing manufacturing techniques. Strategis has designed a guide that provides relevant and up-to-date information useful for Canadian and US manufacturers in finding the tools, people and resources they need to improve manufacturing performance.

What is High Performance Manufacturing? High Performance Manufacturing (HPM) is an inclusive term incorporating many existing theories and approaches on productivity and waste reduction (e.g. Lean Manufacturing, Theory of Constraints, Total Quality Management, Value Stream Mapping, and Kaizen).

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