Scaling Up Magazine Scaling Up Magazine April 2018 - Page 25

SPRING 2018 Align5 Advisors is an independent investment banking firm that provides strategic advice to growth company entrepreneurs and family enterprises. We take pride in building long-term relationships and are dedicated to the needs of our clients. The outcomes we deliver are our reputation. For additional information, please email either chad@align5advisors.com or john@align5advisors.com The emphasis is on the cultivation of effective systems and processes that enable Execution. Buyers want to see that companies can execute independently from a dynamic founder/entrepreneur. Cash: Cash is the lifeblood of a rapidly growing business. If you are attracting and retaining world-class people who are focused on efficiently ALIGN5 ADVISORS executing a dynamic strategy, you need to ensure that your business has the fuel to keep the engine running! As Verne Harnish loves to say, the first law of entrepreneurial gravity is “Growth sucks Cash.” During the growth phase, most important Cash decisions revolve around mastering your cash conversion cycle (CCC), which is simply your ability to reduce the time between when you spend a dollar (e.g., on people, R&D, equipment, acquisitions or other investments) and when that dollar comes back, preferably with a healthy return. If your CCC is negative, every dollar of sales depletes cash. If your CCC is positive, every dollar of sales increases cash. Beyond the growth phase, mastering Cash decisions also pays enormous dividends 25 at exit. Most buyers believe that they can bring greater efficiencies to the companies they acquire, and therefore, a business that is already generating more cash the faster the business grows will earn a premium valuation. Buyers know they will be able to ensure a return on their investment much sooner than with a target that is sucking cash. Many of you have seen the fruit of the investments you’ve made in mastering the 4 Decisions as you grow your business. However, there is another, even bigger benefit. Your commitment to mastering the Scaling Up principles in your business today will also result in a premium valuation when you’re ready to sell your business. That’s a good reason to put in the work now to get the 4Ds right.